By Araya & Cia Abogados lawyer Inés de Ros Casacuberta
Everyone knows that the majority of fruit and vegetable exporters dedicate an endless amount of efforts to achieve an optimal quality harvest to deliver to their clients at the best price. They look for growers in the most fertile areas with the best climatic conditions; they invest in agricultural consultants; they plan harvests to get the best windows that ensure the highest returns; and they buy transport insurance to cover any eventuality as a result of temperature failures in transit, among other things.
But how can exporters ensure that the credit given to their receivers every time they send fruit containers will be paid in 30, 45 or 60 days, and with what tools can they guarantee this payment?
The risk that exporters run in facing non-payment is certainly high. The exporter, once they have signed a deal with an importer or broker, can send their product 15,000km (9,320mi), occasionally without receiving nothing more than an advance on marginal payment against maritime documents, or in the better cases against shipping.
The remaining balance will be paid as a function of the fruit’s quality and condition on arrival, which as it is perishable are fairly volatile and difficult to control over long trips. Additionally there is the “market” factor that plays a determining role once the price payment is received, whether it be on consignment, with a minimum guarantee or even with fixed prices.
It is common to find situations where exporters, whether they are from Chile or Peru, cannot access recovery actions or settlements before judicial or arbitral tribunals, as they don’t have the necessary contractual safeguards or the necessary evidence to assert their rights and achieve restitution for the money owed.
Among the main risk points that South Americans face and that should be regulated in their contracts include setting deadlines for objections to product quality or condition; setting the procedure for the declaration and management of claims against insurance and transport insurance; ensuring the operation of the guarantees of the Perishable Agricultural Commodities Act of the United States, also known as PACA; avoiding market prices affecting fixed prices or minimum guarantees; and establishing a system for effective dispute settlement negotiations.
There are many aspects that escape from the hands of the parties involved, and in the case of problems or market lows the importer can use them in their favor to deny an agreed payment. To avoid all the efforts of exporters throughout the season falling into the abyss because they don’t have adequate legal protection, it’s necessary to emphasize prevention.
Aware of this situation, Araya & Cía Abogados has opened a representative office in Peru to ensure a friendly and personalized service that guarantees an adequate defense of their interests.