Summary
Commercial arrangements for Cameroonian pineapple exports to France highlight the importance of business practices to burden sharing at times of trade disruptions. Massive losses for Cameroonian exporters have a risen as a result of the ‘yellow vest’ protests disrupting the delivery of exported pineapples to supermarkets, in a context of the absence of formal contractual arrangements along the supply chain. This raises important issues related to the application of the EU’s new UTP directive given the prospect for the severe disruption of ACP-UK triangular supply chains under a no-deal outcome to the ongoing EU-UK negotiations. This suggests a need for the concerned ACP governments to lobby for the accelerated implementation of the new UTP directive in the EU member states most directly involved in these triangular trade arrangements (Belgium, the Netherlands, France and Germany). It also suggests a need for the establishment of a special monitoring unit to trace Brexit related unfair trading practices which emerge under a no-deal Brexit scenario. However this would only be of value if ACP exporters in future insist on written contracts before entering into supply agreements with EU importers.
The ‘yellow vest’ protests in France have caused severe disruptions to Cameroonian pineapple exports to the EU. According to Jean-Pierre Tchatou, the owner of Cameroon’s largest pineapple exporter to France (Exotropique), as a result of ‘road blocks, many shopping centers are closed and cannot receive our fruits’, with merchandise consequently remaining in warehouses and trucks. This is seeing smaller exporters facing proportionally ‘massive losses’. Indeed, it is creating a situation where orders for Cameroonian pineapples are simply drying up.
The experience of Cameroonian pineapple exporters highlights the relatively large commercial losses which can arise under current commercial terms and condition for exports to the EU market when supply chains ae disrupted. According to Nestor Soh, general director of Tropical Fruit, Cameroonian exporters generally sell on a commission basis with French clients not paying anything up front and exporters even carrying the costs of aircraft fees, as well as their other expenses. This means that it is exclusively the exporter who suffers the losses arising from any disruptions along the supply chain, such as those experiences as a result of the ‘yellow vest’ protests (1).
Cameroonian Pineapple Exports to the EU 2013-17 (tonnes)
| 2013 | 2014 | 2015 | 2016 | 2017 | |
| EU28 |
4,372 |
2,607 | 3,482 | 3,890 |
3,931 |
| France |
2,043 |
1,148 | 1,812 | 2,340 |
1,878 |
| Belgium |
2,255 |
1,449 | 1,661 | 1,547 |
2,052 |
| Germany |
0 |
1 | 2 | 0 |
0 |
| Netherlands |
74 |
8 | 0 | 0 |
0 |
| Austria |
0 |
0 | 1 | 1 |
1 |
| Spain |
0 |
1 | 6 | 2 |
0 |
Source: EC, Market Access Data Base, http://madb.europa.eu/madb/statistical_form.htm
Given the potential for severe trade disruptions along triangular supply chains if a no-deal Brexit were to materialize in November 2019, this recent experience has a far wider relevance for the functioning of ACP-EU agricultural supply chains serving the UK market via initial points of landing in mainland Europe.
This Cameroonian experience would appear to highlight the importance of rapidly applying the new EU regulation on unfair trading practices (UTPs) which was adopted on 9th April 2019.
According to the EU Council press release a number of unfair trading practices will be completely banned such as ‘late payments for perishable products, last minute order cancellations, unilateral or retroactive changes to supply agreements, the misuse of confidential information, and the retaliation or threat of retaliation against the supplier‘ (2).
According to COLEACP the new directive also classifies as unfair trading practices a ‘refusal to enter into a written contract’ (3). This would appear to fall under the remit of article 3.1 (f) which defines as a prohibited unfair trading practice a situation where ‘the buyer refuses to confirm in writing the terms of a supply agreement between the buyer and the supplier for which the supplier has asked for written confirmation’ (4).
In addition other trading practices ‘will only be permitted if they are provided for in a clear and unambiguous previous agreement between the parties’, with this including for example ‘a buyer returning unsold food products to a supplier, a supplier paying for the promotion or the marketing of food products sold by the buyer, and costs for stocking, displaying or listing agri-food products’ (2).
However smaller operators will only be ‘protected against unfair trading practices in cases where these originate from larger businesses’.
Under the directive adopted on the 9th April 2019 EU member states ‘will have twenty-four months after the entry into force of the directive to transpose it into national law, and six more months to apply its provisions’.
| What Areas of Unfair Trading Practices Does the New EU Directive Cover?
In this Directive the EU defines 15 practices that qualify as UTPs and are therefore outlawed. The following practices are banned: 1. Late payments (defined as longer than 60 days, or 30 days for perishable products) 2. Cancellation of orders at short notice (less than 30 days) 3. Making unilateral changes to a supply agreement 4. Requiring payments from the supplier that are not related to the product 5. Requiring the supplier to pay for the deterioration or loss of a product once it 6. Refusing to provide a written supply agreement if requested 7. Acquiring, using or disclosing the supplier’s trade secrets 8. Carrying out (or threatening) commercial retaliation when a supplier exercises their 9. Requiring a supplier to pay for the cost of customer complaints Meanwhile, the final six practices are banned unless there is a proper supply agreement in place that specifies otherwise: 1. Returning unsold products to the supplier (without paying for them) 2. Charging a supplier for the stocking, displaying or listing of their products 3. Requiring a supplier to pay for the costs of promotions 4. Requiring a supplier to pay for advertising 5. Requiring a supplier to pay for marketing 6. Requiring a supplier to pay for the fitting out of premises Traidcraft, ‘What is the EU’s new Unfair Trading Practices Directive?’, 19 February 2019 |
COLEACP identifies a number of UTPs which are not covered by the 9th April EU directive (such as using two step auctions to drive down prices, de-listing of suppliers without just cause and buying and selling below cost), with action on these issues being left to the discretion of individual EU member states to ‘extend the list in their national law’ (3). Nevertheless COLEACP sees’ the EU’s new Unfair Trading Practices regulation as ‘ground-breaking’ since it will for the first time establish ‘a shared minimum standard for fair trading practices enforced throughout Europe’.
The UK trade and development NGO Traidcraft has highlighted the significance of the EU’s latest directive in terms of the requirement for each member state to establish a public enforcement body to ‘investigate suspected incidents of unfair trading practices and to punish buyers which are found guilty (through penalties such as fines)’ (5). Traidcraft argues it is vital that EU Member States authorities ‘work with trade attachés, producer associations and even international NGOs to ensure that vulnerable producers are able to access their legal rights, including providing resources where necessary’ (5).
It is also seen as essential that the identity of a complainant remains confidential. It this context the provisions of the directive which allow ‘other organisations (such as NGOs, producer organisations and unions) to make complaints on behalf of suppliers’, is seen as important in avoiding risks of retaliation and hence in encouraging abused suppliers to come forward with complaints which will, over time, lead to the elimination of such unfair trading practices (5).
| Comment and Analysis The issue of written contracts is particularly important for ACP exporters of fruit and vegetable products. It is unclear what happens along supply chains where no written contracts are negotiated and verbal agreements are relied upon. It is unclear whether article 3.1 (c) covers such arrangements. This clause defines as an unfair trading practice which should be prohibited situations where ‘the buyer unilaterally changes the terms of a supply agreement for agricultural and food products that concern the frequency, method, place, timing or volume of the supply or delivery of the agricultural and food products’ (4).What is clear is that where ACP exporters request a written contract and this is refused then this constitutes an unfair trading practice which is banned. This strongly suggests that all ACP exporters should now request a written contract before entering into supply agreements with EU importers. If they do so they will be in a much stronger position to invoke the protections accorded 3rd country suppliers against unfair trading practices which the new EU UTP directive potentially provides (see epamonitoring.net article, ‘EC Proposes New UTP Regulations Should Cover Sourcing from Developing Country Suppliers’, 23 April 2018). Given the serious trade implications which a no-deal Brexit could give rise to along triangular supply chains, the 30 month lead time for the entry into force of the provisions of the new UTP directive is a matter of concern. The October 2021 entry into force of the directives provisions would be too late to provide any assistance in dealing with the unfair trading practices which could arise along ACP-EU27 supply chains as a result of Brexit related trade disruptions under a November 2019 ‘no-deal’ outcome to the ongoing Brexit negotiations. In this context ACP governments should launch a political initiative towards EU governments in France, the Netherland, Belgium and Germany, requesting the national authorities responsible for the enforcement of the provisions of the new EU UTP directive to expedite the application of the new provisions and to establish a special monitoring unit to trace Brexit related unfair trading practices which emerge under a no-deal Brexit scenario. EU based trade and development NGOs could usefully lobby their governments for urgent action in this area, specifically in regard to setting up a monitoring mechanism from 1st November 2019, if a no-deal Brexit is imminent. This can be seen as particularly significant since it is generally believed that the very existence of such regulations can be enough to ensure ‘buyers hold themselves to a higher standard in their supply chain relationships’ (5). UK based trade and development NGOs could similarly push for the establishment of a Brexit related unit for monitoring burden sharing and UTPs under a ‘no-deal’ outcome to the ongoing Brexit negotiations. This would require an extension of the mandate of the Groceries Code Adjudicator and the establishment of a dedicated monitoring unit. This would however require additional resources to be made available given the severe resource constraints under which Groceries Code Adjudicator operates under. This could potentially draw from ‘EDF’ development financing funding which would no longer be made available by the UK through EU programmes. Such an initiative could be seen as an important element of the UK’s post Brexit trade and development policy, focusing as it would on eliminating unfair trading practices which fall most heavily on small scale producers and exporters. |
Sources
(1) agencecamerounpresse.com, ‘Cameroon the pineapple industry affected by the yellow vests movement’, 21 March 2019
https://www.freshplaza.com/article/9085006/cameroon-the-pineapple-industry-affected-by-the-yellow-vests-movement/
(2) EU Council, ‘Tackling unfair trading practices in the agricultural and food supply chain’, 9th April 2019
https://www.consilium.europa.eu/nl/press/press-releases/2019/04/09/tackling-unfair-trading-practices-in-the-agricultural-and-food-supply-chain/
(3) COLEACP, ‘What is the new EU Unfair Trading Practices Directive and how does it affect ACP horticultural suppliers?’ 16 April 2019
https://www.coleacp.org/sites/default/files/file_fields/Upload/DocDiv/neweuutpdirective.pdf
(4) EU, ‘Directive of the European Parliament and of the Council on unfair trading practices in business-to-business relationships in the agricultural and food supply chain’, 19 March 2019
http://data.consilium.europa.eu/doc/document/PE-4-2019-INIT/en/pdf
(5) Traidcraft, ‘What is the EU’s new Unfair Trading Practices Directive?’ 19 February 2019
https://www.traidcraft.org.uk/traidcraft-in-depth/2019/2/19/what-is-the-eus-new-unfair-trading-practices-directive