Contracts & Shipping

Green Coffee Glossary

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A

Advice of Shipment

This section of a contract requires the seller to advise the buyer as soon as possible of the date of embarkation of the shipment and other relevant shipping line information.

Afloat

An informal term indicating coffee is on an ocean vessel heading towards its destination.

B

Bill of Lading

Often abbreviated BL, B/L, or BOL, this is a document provided to green coffee buyers demonstrating the exact contents of their order as it is shipped. This important document is necessary for clearing customs and its receipt by the buyer is often the trigger for a transfer of funds.

C

CFR – “Cost and Freight” / CIF – “Cost, Insurance, and Freight”

These Incoterms for shipping indicate transfer of risk and ownership once the coffee is on the ocean vessel, similar to FOB. However, in these cases the seller – not the buyer – is responsible for contracting and paying for the oversea transit. In the case of CIF, the seller must also provide minimum insurance coverage. In both cases, the location will be listed as the destination port (e.g., CFR New York).

Commitment to Buy

A farmer or exporter may request a signed commitment to purchase from the buyer well in advance, with varying degrees of legal binding. This can enable the supplier to secure credit up-front for the costs of processing and overland shipments, for example. Coffee growing and processing is often seen as a risky investment by bankers, thus financing options can be limited for farmers without a committed buyer.

Container

The usual, standard shipping box for international trade moved by truck, train, and steamship line. In the US, commonly used 20-foot full container loads averages between 275-325 bags at around 40,000 lbs., (though numbers may vary slightly depending on the organization or persons “stuffing” (loading) the container).

Credit

Financing options, allowing for receipt of goods before payment. Credit terms typically cover two things: the amount to be paid and the timeframe for payment. A common example might be “Net 30” where the buyer has to resolve the unpaid balance (the “net” sum) within 30 days. Credit may be extended by an importer to a roaster for their purchase, or by a bank to a coffee producer in advance of their harvest or delivery of produce, for example.

D

Delivered

A shipping term where the seller relinquishes risk and ownership at the port terminal or another specified location (“at place”). The buyer must then arrange for any fees not covered at the docks, plus overland shipment and insurance.

E

EXW – “Ex Works” or sometimes “Ex Warehouse”

A common shipping term that indicates the buyer takes responsibility for overland transport from a specified location. EXW does not include fees for palletization, loading, or other warehouse-related fees. Many domestic coffee sales from a third-party warehouse will transfer ownership this way. For example, a roaster will buy spot coffee from an importer EXW from an independent warehouse, and then must pay the additional cost of trucking it to their facility. In casual conversation, a trader might say “Ex Oakland” or “Ex Continental”; this indicates that the coffee is coming from a warehouse in Oakland or Continental Terminals in New Jersey, respectively.

F

FAS – “Free Alongside Ship”

An incoterm indicating that the seller relinquishes risk at the dock rather than on the ship (FOB).

FOB – “Free on Board”

An incoterm, one of the most common for international buyers, indicating that the seller must deliver the coffee onto the ship at the port in the country of embarkation. Any overland transportation costs from mills or warehouses to the port of origin must be paid for by the seller. The buyer agrees to book and pay for oversea shipping, insurance, and any drayage/transportation, customs, and overland freight costs incurred on arrival to the port of destination.

FOT – “Free on Truck”

A common incoterm indicating that the buyer, not the seller, is required to organize and pay for overland transport to the destination. The transfer of risk occurs when the coffee is loaded onto a truck from a given warehouse. FOT may be used at both origin (where the buyer must arrange to get the coffee to the dock and account for any loading and drayage fees at the port as well as overseas shipment) or domestically. Royal usually sells FOT to roasters, which means our cost includes the fees for loading the truck and palletization, among other fees, as opposed to EXW where those fees would not be included.

Full Container Loads (FCL)

Indicates that the shipping container is filled but does not indicate a specific bag count or weight.

I

Incoterms

International Commerce Terms. These are a set of terms defined by the International Chamber of Commerce; these are used broadly throughout commodity trading markets. They clarify who is responsible for ensuring the coffee (in our case) gets to a predefined location and who assumes the ownership and risk.

J

Jute

A type of plant fiber used to make the bags used to hold and transport coffee and many other products. Synthetic and natural alternatives exist, but jute remains the most common option. Sizes vary but the most common for coffee are 60, 69, and 70 kilos.

L

Less than Container Loads (LCL)

This imply indicates that the container is not filled. Coffee shipped this way will have an increased cost per pound, due to shipping charges both for space and by weight. Partial containers may also be more susceptible to damage during shipment because the contents are loose, rather than packed solid.

Liner

A bag for holding coffee placed inside the jute, intended to preserve the integrity of green coffee by preventing moisture damage and oxidation. Common brands include EcoTact, Grainpro, Vidaplast, and AZ bags.

N

NANS – No Approval No Sale

A contract term which indicates that a sample of the coffee must be approved by the buyer before the sale is finalized.

O

Offer Sample

A representative or stocklot sample of coffee that is “offered” for a quantity available for purchase. This sample type is not associated with an existing contract. However, if the buyer likes it, it might be considered a pre-shipment approval for purchase.

P

Pre-Shipment Sample (PSS)

Typically offered as a “fulfillment option” for existing agreements, this is usually the point of no return for a buyer. The coffee in question may already be milled and ready for transporting, or the sample may have been specially prepared in advance of dry milling. In either case, an approval of a PSS is taken as an agreement to move forward with preparing and exporting the finished coffee to the buyer.

R

“Replace” (or “Repeat”)

A contract term allowing a new pre-shipment sample to be offered in place of a rejected sample.

Representative or Stocklot Sample

This sample type corresponds directly to a quantity of coffee in a specified location. Representative samples typically draw from multiple bags of the same stocklot to provide a holistic and accurate depiction of the coffee. However, standards vary from warehouse to warehouse.

S

SAS – Subject to Approval Sample

A contract term wherein fulfillment of that contract is dependent on the buyer’s approval of a pre-shipment sample.

Spot

Coffee that is located domestically, usually in a warehouse and available for purchase.

T

Type Sample

This is a non-representative sample, meaning it does not directly correspond to a specific lot of coffee for sale. It may be used as an introduction to a new relationship (i.e., “This is the type of coffee we often carry”) or as a substitute for many representative samples in a long-term, high-trust relationship (e.g., “Here’s the type sample for the 10 containers we will sell you this season”).