by Steven Nyland, OrganicCrops. Posted on 30 March 2017, 16:42 hrs
Peru has become a major player in the world of agricultural exports. It is one of the world's fastest-growing economies and one of the most stable economies in Latin America. Consumers from all over the world have discovered the wide range of delicious and healthy products that the Peruvian Andes and the Peruvian jungle have to offer, and more and more companies opt for importing products from Peru. Demand for products such as quinoa, raw cacao nibs made from Criollo cacao beans, dehydrated aguaymanto, camu camu powder and sacha inchi oil have put Peru on the map as a country that produces quality organic food products.
As an exporter of Peruvian superfood products we receive a wide variety of questions regarding the export process, commercial transactions, samples, quantities, certifications and other (required) export paperwork. Although every export situation is different in one way or the other, we have put together information that answers the most common questions.
Peru is the third largest country in South America and one of the richest in natural resources. Its three natural regions: the coast, the highlands and the jungle have a combined estimated population of 31.2 million (2015). Approx. 80% of the population lives in urban areas of which one third lives in Peru's capital city Lima. The official language is Spanish, but in many regions of Peru the Quechua language is still spoken widely. The currency is the Nuevo Sol (‘the Sol’), which has PEN as its currency code and the shortcode is "S/". Peru’s exchange rate, left free to non-speculative market forces, is one of the most stable in Latin America.
Committed to free trade, Peru has been one of the fastest-growing Latin American economies: GDP (US$ 181 Billion, 2016 est.) has grown by an average of 5.6% over the past five years and was just over 5% in 2013. Peru has had the highest growth rate and the lowest inflation in Latin America over the last decade. As the economy has grown, poverty in Peru has steadily decreased. But, although Peru is one of the regions’ leading growth powerhouses, its per capita GDP still ranks below that of neighboring countries.
Peru is committed to free trade. More than 80% of trade is covered by Free Trade Associations (FTAs), including with the European Union, The United States of America, Canada and most Asian countries. Peru had a founding role in the free trading Pacific Alliance bloc and has an active participation in the Trans-Pacific Partnership negotiations.
Peru is one of the ten most biodiverse countries in the world having 84 of the 117 planet life zones. Due to its ecological diversity, Peru has the advantage that most crops can be planted year-round. With more than 8 million hectares available for crop cultivation, Peru has become a major player on the global agriculture stage.
Doing business with Peru is not much different from doing business with other countries. Some small private sector companies speak English but most companies speak only Spanish and therefor it can take some time before they reply. Peruvians like tradition, also in doing business. They are not very open to new developments.
Ask for a copy of the organic certification documents issued by an international quality control/certification bodies/organization such as Control Union, EcoCert, Ceres or Kiwa. Most international certification organizations have an office or representation in Peru. As an importer, for a small fee, you can request a transfer certificate. Additionally, we suggest you always ask for a batch specific certificate of analysis (COA). OrganicCrops uses GroenAgro (Netherlands) for extensive testing against all know pesticide markers. Testing, including an extensive report/certificate takes approximately one week and costs USD 200-400.
The MOQ varies from product to product. The cost of exporting (besides the product cost) lies mainly in the local cost of the exporting harbor. In Peru’s case this is often the port of Callao (Lima). Freight agents and Callao handling companies charge by the hour or by (part of a) day. Callao is one of the most expensive harbors in the world.
A lot of dry agricultuaral products such as cacao powder, maca, powder, sacha inchi powder, etc, undergo an extensive customs and narcoticsinspection. This usually adds USD 200-500 to the cost of exporting as the pallets need to be unpacked and the bags/boxes need to be placed in a specific area for inspection. Often product samples are taken for laboratory testing. After inspection the boxes/bags are repacked/closed, pallets are re-packed and returned to the warhouse. The operation takes from 2-3 hours up to a few days to complete.
In case of a small shipment, say 100 kg, the cost of clearing, transport, storage, loading, etc. can amount up to USD 1000. A 20 foot container with 10000 kg on pallets usually adds up to approx. USD 2000. So the difference between 100 kg and 10000 kg is only USD 1000 in port and handling cost. Add to that the cost of getting the required export paperwork and your per kg product price is going through the roof. See below example calculation:
Above example is when exporting using ocean freight. In case of air freight the cost of exporting is lower but the actual freight cost is a lot higher. With small quantities it often pays off to use air freight.
The best way is to ask for samples. Usually Peruvian exporters can send samples of their products. If you require 100% quality assurance, you could contract someone that carries out a quality assurance check/process for you. Most companies that issue organic certification can do this for you. The quality assurance company visits the production site, the processing plant/facility and warehouses to inspect against terms/regulations that you dictate/advise. The process usually takes 1-2 weeks, including a COA.
Like OrganicCrops, most companies also have internal quality control/quality assurance. You can inquire about an internal QA certificate. The certificate is signed and stamped and therefor holds some legal baring.
Most often you do not know the Peruvian exporting company. Besides a professional website, email correspondence it is difficult to establish a relationship on first order. Most exporters work according to the INCO terms as set out by the International Chamber of Commerce. INCO terms define commercial transactions and procurement processes.
Besides INCO terms, most exporting companies define payment terms in their offers. Some exporters require full prepayment, others accept payment terms such as documents against payment, (partial) prepayment, letter of credit, etc. Always ask for payment terms when inquiring about products and prices. A professional exporter will always define them in their quotation/offer. We at OrganicCrops work with terms based on order value (FOB):
Advanced financial tools such as a letter of credit reduce risk for both the exporter and the importer. There is a lot of information about import/export financial transactions:
Most prices are issued as either EXW (Ex-works) or FOB (Free On Board). FOB means “the seller delivers the goods on board the vessel nominated by the buyer at the named port of shipment or procures the goods already so delivered.” FOB applies only to ocean freight. Sometimes you get quotes a price which mentions FOB Lima or FOB warehouse. This is incorrect usage of the term FOB as in case of FOB the goods are always delivered on board of an ocean vessel.
When the price does not mention an INCO term such as FOB or EXW then always assume EXW. In case of EXW the price is ex-warehouse or ex-production facility. Often the price excludes (bulk/export) packaging. When unsure, always inquire if the price is EXW and what additional costs there are to clear and export the shipment.
OrganicCrops offers most prices as FOB. Though we publish a monthly price document where prices are stated as EXW, and FOB can be manually added to combine products as per your buying requirements.
Please note that most exporting companies do not include local destination (terminal) charges in their quotations. Contact your local freight agent for a quote for local cost, customs, duty, unloading, clearing, documentation, transport, etc.
FOB prices can be ‘upgraded’ to CFR (Cost and Freight) or CIF (CFR + insurance) by adding the ocean freight component.
If you have imported from Peru before and you have your own freight forwarding company contracted, you can opt for FCA (free carrier) Incoterm. The exporting company will package the product so it is ready for export (by ship, airplane or truck), organize all required export paperwork and drop off the cargo at the warehouse of your freight forwarder in Peru.
The ‘product export lead time’ varies per product. The lead-time is the time it takes to get the product cleared and loaded onto the vessel/airplane.
Some products are packaged in bulk/export packaging and stored in warehouses, waiting for export. Other products are processed to order, sometimes at facilities that are a 2-3 days drive away from Callao, Lima. As an importer it is important to ask about the lead-time. Like most exporters, OrganicCrops maintains a minimum of 8-10 days lead-time for all orders. This gives us ample time to organize all required export papers, certifications, inspections, etc. In case of a COA you may add an additional 5-7 working days to allow the samples to be tested in The Netherlands.
For ocean freight, port of Callao freight operators use a cut-off time of three to five days. This means that the shipment has to be present in the port of Callao three days before the ship’s scheduled departure. This allows for ample time for customs inspections, SENASA phytosanitary inspections, loading, planning, etc. In some case, customs orders additional inspections which may result in shipping delays.
With air freight shipments the procedure is the same as with ocean freight shipment except that loading/clearing is faster. Airlines tend to prioritize fresh produce shipments over dry-goods shipments and quite often dry-goods shipments get bumped from a flight to be re-scheduled for another/next flight. We’ll always keep you up-to-date regarding the shipping progress.
Peru’s government is very active worked to reduce trade barriers. More than 85% of Peru’s trade is covered by Free Trade Agreements (FTA’s), including Europe, USA and most countries in Asia.
OrganicCrops issues the following documents with each export order:
Additionally the following optional documentation can be issued at additional charge:
The 'Servicio Nacional de Sanidad Agraria' or 'National Agricultural Health Service' (SENASA) is part of the Ministry of Agriculture and controls and regulates all matters regarding food safety, agricultural safety and organic production. It is more or less the FDA of Peru. SENASA takes its inspections, advice and regulation very seriously. Almost every agricultural raw material import or export is checked by SENASA. On request, SENASA can carry out a phytosanitary inspection and issue a phytosanitary certificate. For raw material exports such as quinoa and chia, a phytosanitary inspection is mandatory.
If your country requires specific documentation, OrganicCrops will try to comply as much as possible. Quite often importing countries have specific requirements regarding labels, export letters, responsibility statements, etc. Please notify us in advanced to give us enough time to organize additional required documents.
Orders that have a FOB value of USD 50,000 or more, the paperwork is send by courier separately. Orders with a FOB value of less than USD 50,000 the papers are emailed (PDF copies) to the importer. Note that in case of air freight shipments, the papers are always send alongside the shipment.
OrganicCrops is an agricultural trading company from Huanuco, Peru that specializes in cultivation, marketing and exporting organic products such as Quinoa, Maca and Cacao.