FLO Trade Certification Policy General

July 4, 2008, 12:15 pm
Filed under: Fair Trade | Tags: Fair Trade Certification, Fair Trade Certified, Fairtrade Labelling Organizations International, FLO, FLO-Cert

[This fall will mark the end of my sixth full year of involvement in the fair trade movement beyond the local level. I have been going through my old files to purge those I no longer need. I came across this file today. I was sent this about 2 years ago by someone who used to be involved in the management level of FLO-Cert. I figure many people don't often get access to these types of things all that easily and I don't understand why that is since fair trade is a movement seeking transparency in trade, amongst other things. This isn't all that exciting really but it might give you a bit of a glimpse into the technocracy of fair trade certification on the international level. ...Ian Hussey]

FLO Trade Certification Policy General

1. PURPOSE FLO-Cert policy documents tell you how FLO-Cert will interpret and enforce FLO Fairtrade Standards. This document describes the FLO-Cert policy that applies to all products. There are also Trade Certification policies for each product that add details about that specific product. Where FLO-Cert policy documents and FLO Fairtrade standards do not agree, FLO Fairtrade standards will apply.

2. WHAT FLO REGISTRATION MEANSIf an operator is registered with FLO-Cert or a FLO National Member it does not mean that all its products are certified FLO Fairtrade products. Only products with the FLO Fairtrade label and the raw materials used to make those products have FLO Fairtrade certification.

This often means that only a portion of an operator’s products are certified as FLO Fairtrade. FLO-Cert does not prohibit an operator having other competing fair trade labels or brands, provided that they do not cause any confusion and the operator makes it clear that the other fair trade labels or claims are not certified by the FLO system in anyway.

3. GENERAL REQUIREMENTS3.1 The FLO-Cert Operator ContractAll FLO registered operators must sign a FLO-Cert operator contract.

3.2 Inspections / External AuditThe FLO-Cert producer certification department regularly carries out FLO Fairtrade inspections of producer groups.

Starting in 2006, processors, exporters, importers and manufacturers who pay the annual trade certification fee will be inspected by FLO-Cert and FLO-Cert will pay for the inspection. This means that they will no longer have to give FLO-Cert an external audit.

Processors, exporters, importers and manufacturers who do not pay the annual trade certification fee must continue to give an external audit to FLO-Cert. They can ask FLO-Cert to do the external audit. Please refer to the FLO-Cert TC External Audit Policy for the costs of this service.

4. CERTIFICATION DECISION TYPESRegister

Can buy and sell FLO Fairtrade products

Register with Condition

Condition must be met before next inspection

Register with Corrective Action

Corrective action must be taken before deadline

Failure to take corrective action can result in de-registration, suspension, or financial sanction

Suspension

May not make new contracts for FLO Fairtrade products.

Should honour already existing contracts.

De-registration

May not buy or sell FLO Fairtrade products

Must re-apply if would like to start trading again

Financial sanction possible

normally used where suspension or de-registration would be too harsh

4.1 Operator listsIf an operator has a de-registration pending, a corrective action request unfulfilled, or is suspended then this is

You should regularly check the FLO-Cert operator lists to see if your suppliers or customers have corrective action requests. (Please see the FLO internal web pages and the section called “FLO-Cert Traders + Producers List Search”.) https://internal.flo-cert.net/

If you do not submit your flow of goods reports on time we will give a corrective action request.

5. FLO FAIRTRADE BUYING AND SELLING RULES5.1 Who can buy and sell?Operators may buy and sell FLO Fairtrade products only from:

FLO certified producers

FLO registered operators; and

FLO national member licensees.

All FLO Fairtrade products must be originally produced and sourced from FLO Certified producers. Only FLO registered importers may purchase FLO Fairtrade products from the original producing country.

FLO operator lists are available on the FLO internal web pages. (Please see the FLO internal web pages and the section called “FLO-Cert Traders + Producers List Search”.)

You need to ask FLO national members for up-to-date lists of licensees. See

www.fairtrade.net/sites/contact/ni.html

5.2 Product from newly certified producersWhen a new producer is certified, you can buy their product from the current and previous harvest year as FLO Fairtrade.

For wine made from wine grapes the time is longer. Please consult the FLO Wine Grape Standards and the Trade Certification Policy for Wine Grapes.

There are also special rules for tea. Please consult the Trade Certification Policy for Tea.

If you buy a product from a producer before the producer was certified, and you want it to be FLO Fairtrade, then you must ask FLO-Cert to retroactively certify the product. Please see the FLO-Cert Retroactive and Product Compensation Policy.

5.3 All FLO Fairtrade Contracts and InvoicesAll contracts and invoices for FLO Fairtrade products must clearly indicate:

the FLO ID of buyer,

the FLO ID of seller,

the FLO ID of the original producer; and

include the text “FLO Fairtrade”

5.4 FLO Fairtrade Contracts with producing countryWhen you purchase FLO Fairtrade products from the original producing country then the contract you must show:

the quantity you want to buy,

the quality you want to buy,

what price you will pay or fixing price methods, including differential if relevant,

the terms for pre-financing and payment ,

the estimated shipping schedule,

the text “FLO Fairtrade”,

5.5 Letters of intent and sourcing plansSome FLO standards ask importers to tell producers how much they are thinking of buying. Please see the FLO standards and policies for your product to find out what you need to do.

Importers and exporters must also have written purchase contracts with producers. This is very important for bananas and fresh fruit.

5.6 Pre-financing of Imports from Producing Country

Importers must provide pre-financing (payment in advance) if FLO standards and polices require it.The importer only needs to give pre-financing when:

FLO standards require pre-financing;

they (or exporter) buys directly from producer groups or their exporters;

the producer group has sold the product to the importer before and met the quality and shipping requirements; and

the producer group asks for pre-financing.

The importer does not need to give pre-financing when:

they can show that the producer is a credit risk or there other similar business reasons why they should not give pre-financing; or

pre-financing is irrelevant for the product or the producer’s country. (Contact FLO-Cert for details.)

The importer must charge an interest rate that is reasonable. In general this will be no more than the central bank rate in the buyer’s country plus 8%.

5.7 Exporter and processor Price Breakdown QuestionnaireIf the FLO Fairtrade price for a product is an FOB (free on board) price, then exporters and processors must give FLO-Cert a filled in Price Breakdown questionnaire each year. The questionnaire shows what deductions are made from the FLO Fairtrade price and what they are for. This information helps FLO-Cert ensure that the producer receives a reasonable part of the FLO Fairtrade price. Exporters and processor must not include the cost of the annual trade certification fee. However these costs may be passed on to their customers.

5.8 Supply transparencyIf producers ask, exporters must tell the producer which importers bought their FLO Fairtrade product. This rule helps producers develop, which is one of the main goals of FLO Fairtrade.

Similarly if a buyer asks, the supplier must tell the buyer which FLO producer or producers the FLO Fairtrade product came from. If the supplier does not know then they should ask their supplier. The supplier should also give the FLO ID of the producer because the buyer will need this information for their flow of goods reports.

To make things easier, all contracts and invoices should show “FLO Fairtrade” and the FLO ID of the buyer and the seller.

5.9 Export channelsImporters can buy directly from the producer if the producer is willing to sell, even if there is an exporter registered for the producer. This rule helps producers develop, which is one of the main goals of FLO Fairtrade.

Exporters and processors have a duty to allow producer to participate in FLO Fairtrade as fully as possible. Where an exporter or processor works with more than one producer they may not favour one producer over another except where they show a credible business reason. This is especially important were the exporter or processor owns one of the producers. Ideally producers should develop a direct relationship with importers.

5.10 Exclusive contracts for FLO FairtradeFLO Fairtrade does not recognise exclusive contracts with producers for the sale of FLO Fairtrade products. Producers may voluntarily agree to have exclusive FLO Fairtrade relations with an operator, however this may not be enforced by contract. Exclusive contracts for non FLO Fairtrade products are unaffected.

5.11 Unfairly influencing producersIf an operator owns a producer’s organic certificate or loans money to the producer they must not use this power to slow down the development of the producer.

5.12 Using subcontractors and agentsYou can use subcontractors and agents if you tell FLO-Cert and you are able to give FLO-Cert all the information it needs to do certification. You must take reasonable action to make sure that subcontractors and agents follow FLO Fairtrade standards. If you are not able to do this, you cannot use the subcontractor or agent. If a subcontractor or agent does not follow FLO standards then you can be deregistered. FLO-Cert may visit subcontractors and agents.

5.13 Selling FLO Fairtrade product as non-FLO FairtradeYou may sell products bought as FLO Fairtrade to non-FLO Fairtrade customers, but only if you make it very clear to the buyer that the products must not be sold as FLO Fairtrade products. You and the customer must not suggest that the products are associated with FLO, Max Havelaar, TransFair, Rättvisemärkt, Fairtrade, or Reilun Kaupan in any way.

5.14 Manufacturing and processingIf you change the form of a FLO Fairtrade product, for example green coffee to roasted coffee, you must fill in manufacturing yield form. If you process or manufacture cotton products you must fill in a cotton conversion unit form.

Where there is more than one ingredient in your product, you must fill in a product composition form. You do not have to tell us the specific amounts of non-FLO Fairtrade ingredients.

The important thing is that we know quantity the of Fairtrade inputs it takes to make a Fairtrade product.

5.15 Product contracts, de-certification, de-registration and suspensionIf you enter into a binding contract for a specific volume before you knew that the other operator was de-certified, de-registered or suspended then the contract should be fulfilled.

When a decertification, deregistration or suspension will take effect at some time in the future, then you cannot make FLO Fairtrade contracts for shipment more than six months forward.

5.16 Technical disputesIf a buyer and seller cannot sort out a dispute that needs special technical knowledge, they should take the matter to arbitration. FLO-Cert will not arbitrate for them on a technical matter. Buyers and sellers should have suitable arrangements for arbitration included in their contracts. FLO-Cert will use the result of the arbitration to decide whether the buyer and seller have followed FLO Fairtrade standards.

5.17 Quality ClaimsIf a buyer wants to make a quality claim they must follow the requirements of FLO standards and the trade certification policy for the relevant product. The standards and policies say that the buyer must provide certain information to the seller within a certain amount of time. If the buyer does not do this then the claim is not valid.

If the buyer and seller cannot sort out a technical dispute, such as whether the humidity of the honey is above a certain level, they should take the matter to arbitration.

5.18 Failure to deliverOnce the FLO Fairtrade price has been fixed following the rules in the contract, the price cannot be changed unless both parties agree.

If a producer or exporter refuses to ship the product unless the importer pays more or an importer refuses to take delivery unless the price is lowered, they are not meeting FLO Fairtrade standards.

When a producer or exporter believes that they may not be able to deliver for some reason beyond their control they must inform the importer immediately.

If the buyer and seller cannot sort out a technical dispute, such as whether the producer had no coffee because of crop failure, they should take the matter to arbitration.

5.19 Supply shortage Where a producer or exporter does not have enough product to cover all their binding contracts because of factors beyond their control, then the exporter or producer must chose who will get the product that is available. However the producer or exporter may not change the price unless both parties agree.

5.20 Bonded contracts and combined offersImporters and their agents must not offer to buy FLO Fairtrade product from the producer on the condition that the producer sell them some non-FLO Fairtrade product on less-favourable terms than what they would normally sell them. This includes offering lower than normal prices or offering less-favourable shipping terms.

5.21 Late Payments of Fairtrade Price or PremiumIf the buyer does not pay the FLO Fairtrade Price or Premium within the time given in FLO standards, policies or the contract then the buyer must pay the seller 1% interest per month on the amount owing. Exporters should pass this interest on to the producer if the producer has not already been paid.

6. PRICE EXTENSION INTERPRETATION6.1 Organic PricesWhere there is a Fairtrade price for a non-organic product in a country or a region but no organic price then the organic differential for the country will be the largest difference between the organic and non-organic price in other countries or regions for the same product. This organic differential is only an interim measure until a proper organic price has been set.

Operators who wish to use such an organic differential must contact FLO-Cert before proceeding. FLO-Cert will inform FLO eV SU and PBU that an operator is using this organic differential.

6.2 Prices for other fruit product formsWhere there is a producer certified for fruit and the producer wishes to sell that fruit in a form for which there is no price or premium, then the price and premium for the new product form will be based on the highest existing price and premium for the product form in FLO Standards.

This price and premium is only an interim measure until a proper price and premium have been set. Operators who wish to use such a price and premium must contact FLO-Cert before proceeding. FLO-Cert will inform the FLO eV Standards Unit and the Producer Business Unit that an operator is using this price and premium.

ReferencesFLO-Cert Sub-operator Policy

FLO-Cert Retro-certification and Product Compensation Policy

FLO-Cert product policies

shown on the FLO-Cert operator list.

activist notes

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