CAFTA detailed for importers at Southwestern Fertilizer Conference

By MONETTE TAYLOR | South Central Texas Edition

Steven J. Markey, CN Supply Agriliance director, noted the difficulties associated with trade and advised conference attendees to meet personally with the people they will do business with in other countries. -- Staff photo by Taylor

August 11, 2005 - The president has signed the Central American Free Trade Agreement, and many producers have mixed feelings concerning how this will affect them in the coming years.

Economists estimate the U.S. agricultural exports could go up by $1.5 billion, once the agreement is fully implemented.

On the other end of the spectrum, the U.S. will be able to import considerably more from the Central American countries of Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua, as well as the Dominican Republic.

Speaking at the 2005 Southwestern Fertilizer Conference and Grade Hearing at in San Antonio on July 26, Steven J. Markey, director of CN Supply Agriliance, St. Paul, Minn., addressed attendees about transportation logistics of importing products and “associated risks.”

While Markey called imports a “risky business,” he said it is more and more important, with the price and increased need of natural gas. He cited as example that the Middle East countries are “importing a lot” of things, and … yes … it is a risky business.

Markey noted three major areas of risk: transactional, logistical and commercial. The transactional risk includes the integrity of the off-shore purchasers, including the fact the seller wouldn’t be “face-to-face” with the buyer, and the legal systems differ.

Commercially, differences to consider are language, geography, distance measurements, and time zones. When considering the physical capabilities, Markey said that not only should production be a consideration, but storage, loading, product quality, and the ability to charter good companies with good ships to transport the goods.

Obviously, payment and document handling are important to importation, and need to be issued by the correct, and trustworthy, people.

In order to find out about these things, Markey was very emphatic that importers need to visit the countries and people they will be involved in business with, in order not to make “assumptions.” He suggested talking with others who have already done business with the companies, too.

One important piece of paper to include in the bargaining is a written contract. That should include expert language in product inspection, loading and discharge. While some may assume the import process is “a piece of cake,” Markey noted the details in the contract are part of the risk that suppliers need to identify.

Logistical risk includes finding the proper vessel, the timeliness and cleanliness of the vessel, along with the freight rates. Although the cost of vessels is high, now, Markey believes it will be going down in the future. Along with the proper vessel, the proper workers are very important, said Markey. Having a safe berth for the vessel, good barges, and safe, clean warehouses are necessities.

As Markey said, even if the importer addresses all of the above risks, one thing no one can really control is what happens during transit across the bodies of water. Rough seas and mechanical failures can happen, unexpectedly, and damage the cargo, as well as cause problems to the vessels. This is why insurance is a necessity, too.

Markey recommends producers make sure they have a reliable freight broker, along with the written contract and insurance, and he suggests importers know what the cargo includes.

In closing, Markey said that importing, although it can be a money-maker, is a risky business, and said it is “not for the faint of heart.”