8 tips for organising your spices and herbs export to Europe

Finding a buyer who likes your offer is only half the game of entering the European market. You need to agree on delivery terms, sign a contract, pack your goods, deliver all required documents and physically organise the transport to Europe. Although this may look like a mere formality and easy work, you may face a lot of challenges. The tips listed below offer some practical information on how to deal with those challenges and become an efficient, trustworthy and successful exporter.

1. Trust is important, but always make sure to secure your payment

Selecting the most suitable method of payment is a key factor of a successful export sale. Whichever payment method you select, you should always sign a contract of sale before performing any international transaction. Basically, all methods of payment can be classified as either ‘clean’ or ‘documentary’. In clean payments there is no payment security, except for in advance payment. In documentary payments, a level of security is achieved using the banking system and accompanying documents. The following methods of payment are used:

• Payment by cheque - this is the most insecure method of payment in international trade and you should avoid it. The main problem is that your bank can refuse to accept the check. Sometimes it is better to lose the sale than to make a sale while not receiving the payment for the goods. Also, when sending the cheque through the international banking system, fees can mount up significantly, making this method very expensive and slow.
• Payment by bank draft – a physical document that is rarely used, as it has been replaced by electronic bank transfer.
• Clean bank transfer – this is a well-known method. The importer pays you, using a banking system, commonly through SWIFT (Society for Worldwide Interbank Financial Telecommunication). It is a safe method only in the case of advance payment (when you get paid before shipping the goods).
• Clean collections – this involves sending financial documents such as bills of exchange or promissory notes through the banking system in order to collect payment from the importer. You should use this method only after establishing a certain level of trust with your buyer, because you can lose control over the goods before getting paid.
• Documentary collections – this method guarantees your physical control of the goods until you get paid. Documents (such as invoice, shipping documents, insurance and the like) are transferred through the banking system. Importers can access the documents only when they comply with the instructions you sent to the collecting bank (Documents against Payment or Documents against Acceptance). This method guarantees your physical control of the goods, but it does not guarantee that you will actually get paid in the end. In the event that the importer does not pay you, you can return or store the products, but this is obviously not an ideal situation.
• Letter of credit – Other than payment in advance, a Letter of Credit is considered the most secure method of payment for you. In this process, the buyers’ bank will only make the payment when the presentation of documents complies with the Letter of Credit conditions. For extra security, the seller can request the advising bank or another bank to confirm the Letter of Credit. In that case, the importer will get goods only after payment. This is also a good way of checking the financial standing of the buyer, as the issuing bank will do a credit adequacy test before opening a Letter of Credit on behalf of the buyer.

Generally, when making the first export shipments, you should require advance payment and gradually move to a Letter of Credit and finally to a Standby Letter of Credit. A Standby Letter of Credit is opened in case of regular shipments for a whole year. It reduces the cost, because instead of twelve Letters of Credit during the year, you only need to open one Standby Letter of Credit that covers the average volume over the year. This can also be a good solution for deferred payment.

However, this process is related to long-term partnerships and for payments of individual shipments one by one. If you do not know your buyer, you should always insist either on advance payment (to be paid before sending the goods) or a Letter of Credit.

The main disadvantage of a Letter of Credit is that it can be costly. To overcome this problem, you can offer the buyer to split the fees. For example, you can pay the fees of your bank while the importer can pay the fees of his (issuing) bank. Another problem faced by some developing countries is that their banking sector does not offer the possibility of using a ‘Letter of Credit’. This process requires correspondent banks, which some developing countries do not yet have.

When trading with the European buyers, you may be faced with pressure from the importers to use deferred payment. You can accept this condition if you use export insurance services. However, in order to protect suppliers from this common practice, the European Commission has adopted a new directive to protect small and medium-sized suppliers in the food supply chain. The directive aims to protect farmers, processors, distributors, producer organisations and suppliers from outside the European Union.

2. Do not take risks - insure your export and increase competitiveness

Export involves a lot of different risks such as payment, risk of damage and thefts, currency fluctuations and political risks (such as a ban on the import of specific products). It is therefore recommended to insure the payment and goods, especially if the contract involves larger volumes and values. 

For the export of spices and herbs, export credit insurance is among the most common insurances. One particular advantage of export credit insurance is that it not only secures your export, but also increases your competitiveness. As many European buyers ask for deferred payment, you can ensure payment with export insurance services. Export credit insurance will allow you to offer deferred payment, which can greatly increase your competitiveness.

Export credit agencies (ECA) are responsible for the insurance. Many of them have an international network of privately owned offices. Export credit agencies can be also governmentally owned. Some export credit agencies are established by governments to increase the competitiveness of exports from their country. You should search for one in your country.

If you want to offer deferred payment to potential buyers, you can ask selected ECA for support. This is usually done in the following way:

• You submit the request for credit insurance with the necessary documents to ECA.
• ECA sends an indicative offer to you.
• If you agree with the indicative offer, ECA orders credit reports for all buyers that you would like to offer deferred payment terms.
• ECA analyses the buyers’ creditworthiness and sets the credit limits.
• ECA delivers the final offer to you, after which, if you accept, the insurance policy is signed.

The added value of this procedure is that you also learn a lot about your buyers and gain insight into their solvency and creditworthiness. For spices and herbs, due to the seasonal nature of the goods, a short-term insurance (repayment period of up to one year) is recommended.

The ECA will give details of risks covered by the policy, which is normally related to the event of non-payment by the buyer. An important thing to note is that they will not pay out under disputes between buyer and seller until the dispute is settled in the seller’s favour. Trade credit insurance only provides protection for bankruptcy of the obligor. Also, becoming insolvent can be very different than ‘failure to pay’.

Aside from insuring the payment, you should also insure your products. A shipment insurance is used to protect your shipment of products throughout the entire journey from you to your customer. The risks that are covered typically include, for example, theft, damage due to heavy weather and damage due to problems with a vessel. You and the importer will have to agree on who is responsible for the insurance. This is specified in the Incoterms (required technically only under CIP/CIF terms). You are advised to agree this type of insurance with your buyer. In this type of insurance, two types of documents are used: an Insurance Policy and a Certificate of Insurance.

Other types of insurances provided by ECA include the issue of guarantees (for companies willing to apply to international tenders), short-term financing or factoring.

3. Include customs procedures in your cost and time calculation

Importers, agents or customs brokers are responsible for taking the spices and herbs through European customs. Although you, as the exporter, are not usually directly involved in this process, it is extremely important to be in touch with the transporter and importer and provide all necessary documents and further support. Full customs clearance will only be the exporter’s responsibility if exporters use ‘Delivery Duty Paid’ (DDP). It is not generally recommended to use DDP because customs clearance is rather complex for non-European companies.

Generally, the customs procedures follow these three steps:

• Customs pre-alert: spices and herbs entering the European Union must be ‘pre-alerted’. This pre-alert is an electronically submitted alert, normally sent by the carrier or freight forwarder carrying the goods, usually between 2 to 24 hours before the arrival of the goods.
• Inspection and control: this step involves a documentation check and a physical examination of the goods, often in collaboration with the national authorities.
• Customs decides on further actions: accept the goods for free trade within the European Union, allow movement into the free zone, allow re-export outside the European Union, destroy the goods or refuse the goods.

When spices and herbs arrive in the European Union, they are inspected and checked by customs authorities. Apart from examining the export documents, examination can involve taking samples for analysis in a customs laboratory. In case of non-compliance with the European Union food safety rules, the product can be rejected, and in some cases, customs authorities may require the physical destruction of the goods.

Rejection of the goods may mean a great profit loss for the developing country exporter. It is therefore extremely important to properly check your spices and herbs, including laboratory testing, before the export. To find more about specific tests or requirements that are relevant for spices and herbs read our study about buyer requirements.

Another important aspect related to customs is the proof of the origin of goods. Most spices and herbs imported from developing countries are imported with lower customs duty or duty free, because this is guaranteed to developing countries within the European Union Generalised System of Preferences (GSP). In addition to GSP, the European Union has a number of specific free trade agreements with different developing countries.

In more than 90% of cases, spices and herbs imported from developing countries are duty free. For example, the 0% tariff is applied regardless of the origin for black pepper, ginger, turmeric, nutmeg, cinnamon, cardamoms and coriander seeds. There are only a few exceptions where some tariff rates (usually not high) are applied. Examples include dried chillies from China (ad valorem tariff of 5%), vanilla from Indonesia (2.1%), bay leaves and thyme from India (from 2.4% to 2.9%) and cloves from India and Indonesia (2.8%). For garlic, specific tariff quotas apply.

4. Select the best transport and logistics options

For spices and herbs, transport is of extreme importance, as it keeps the products in the right condition (for example, low moisture), influences your image (for example, late delivery can result in the loss of a client) and influences the price (20-40% of the sales price can be the logistical costs).

More than 90% of spices and herbs are imported to the European Union from developing countries via marine transport. However, in some cases (like import of coriander or sweet dried paprika from eastern European countries), road transport is used. In rare cases of smaller volumes but high prices, air transport is used. Examples of air transport include medically refined spices (such as turmeric) or expensive spices (such as saffron or vanilla), but it happens only occasionally.

Before starting to load the container, check if the container is clean, waterproof (without holes) and well painted (without rust on the inside). When loading the container, consider using moisture absorbing products like special food-proof gel bags. Those gel bags absorb condensation moisture caused by extreme temperature fluctuations during transit. This significantly decreases the risk of moisture damage.

The basic movement of container over sea consists of loading the goods on the track, transporting it to the port, unloading it from the track, inspecting it and loading it onto the ship (stowing). If the quantity of goods is less than container load (LCL), you can use a groupage service, which many companies offer. They arrange goods in such a way that the container can be shared by several companies.

The method of transport is also part of the Incoterms and therefore influences your decision about the price and contract you will offer. If you are trading large quantities of goods, you can get better offers from transport and insurance companies. In this case of Cost, Insurance and Freight (CIF), the price will be more competitive for you. Quoting CIF or CIP also generates more foreign exchange for you. If you have little export experience, it is safer to offer the price based on Ex Works or FOB only.

Transport documents are extremely important for you to check. These valuable documents (such as bill of loading) are issued by the nominated carrier or his agent. Check all details of the transport document and do not accept any ‘dirty’ document. A transport document is considered ‘dirty’ when the transport company adds a notation that it has noticed defective packaging that can cause damage to the goods. Such a transport document does not give any guarantees that you will receive a payment for a transaction.

One of the trends regarding transport and logistics, is the development of blockchain technology to reduce the costs of intermediaries. An example that illustrates supply chain complexity, is when a simple shipment of refrigerated goods from East Africa to Europe can go through nearly 30 people and organisations, with more than 200 different interactions. Blockchain systems allow each stakeholder in the supply chain to view the progress of goods through the supply chain, monitor the container movement in real time and see the status of the customs documents.

In addition to tracking the goods, blockchain technology can encrypt important documentation (for example quantities, prices and contracts). This secures the agreements made and gives control in every step of the chain. This means that, if something goes wrong, somebody receives a wrong quantity, a price is not paid, or an agreement is not fulfilled, it can easily be seen by the blockchain.

5. Ensure safe and cost-effective packaging

Optimal export packaging is a fundamental aspect in of spices and herbs trade. Packaging used for spices and herbs must:

• protect the organoleptic and quality characteristics of the product;
• protect the product from bacteriological and other contamination (including contamination from the packaging material itself);
• protect the product from hydration (spices are hygroscopic goods, meaning that they easily absorb moisture from the air);
• not pass any odour, taste, colour or other foreign characteristics on to the product.

There are many different materials used for export packaging of spices and herbs, but some of the most common options for bulk packaging are the following:

• Carton with polyethylene bags inside
• Polypropylene and polyethylene bags
• Multi-wall laminated paper bags
• Woven bags or big bags (increasingly used in the industry)
• Waxed, paper-lined tin boxes
• Cloth laminated with polyethylene or polypropylene
• Retail containers are usually made of glass, plastic, tin or aluminium
• Jute bags (almost not used anymore by the industry)

In general, it is recommended to ask your customers for the best most suitable packaging.

The European Union has announced the introduction of new legislation concerning plastic packaging, mandating Member States to collect 90% of their plastic throw-away bottles from 2029. Also, some single-use plastics will already be banned from 2021, and the use of other types will be restricted. Items on the banned list include oxo-degradable plastic and expanded polystyrene take-away food and drink containers. By 2030, all bottles in the European Union must be made from at least 30% recycled materials. You must be aware of those requirements and adapt to new export packaging materials in time.

Insect infestation during transfer can be prevented by fumigating the product before loading. Please carefully check the fumigant and the dosage, because fumigants can also be a hazard. Ethylene oxide (ETO) treatment has been banned under European legislation. Approved fumigants may be used in accordance with manufacturers’ instructions, but this must be indicated on the accompanying documents. In general, European spice companies support the use of environmentally friendly fumigants.

Upon the completion of packing and labelling, you must prepare a packing list. A packing list is an essential document for custom procedures. It will be used by carriers, cargo handlers, warehouses and customers. A packing list states the following particulars for each package: marks, numbers, gross weight in kg, net weight in kg, dimensions in cm, volume and content description. This list also gives the total number of packages and the total gross weight and volume. Depending on the product, certain internationally accepted marks are put on the outside of the packaging. A few examples relevant for spices and herbs are given in Figure 1.

Figure 1: Examples of marks used on the packaging for spices and herbs

Bear in mind that packed goods must be within the limits of size and weight established by the carrier. The majority of European traders prefer to use pallets with 1,200x800mm dimensions (Euro Pallets). In order to avoid pallets overturning, you must ensure that the cargo is well stabilised. The recommended height of a cargo unit is about 1.7m. However, you should ask your customer for the size limitations of their warehouse. Also, pay attention to the forklifts you are using. Electric forklifts are recommended when dealing with food, in order to avoid contamination that might be caused by forklifts powered by fuels.

Aside from the protective role, size and weight also influence the cost of transport. Packing and handling costs are reflected in the final cost of the product. Savings in packaging costs are significant if the container is fully utilised. It is important to emphasise that the time of loading and unloading the containerised goods from a vessel can be reduced by 20-25% if the port has appropriate facilities. Please note that in some European countries, labour health and safety legislation allows workers to lift a maximum of 20 kg.

6. Make detailed contracts

Well-defined agreements in contracts will protect your business and give your buyers a sense of reliability and professionalism. Some buyers may be satisfied with just email exchanges. However, even if your buyer does not want a contract, it is in your own interest to have one. Contracts or framework agreements act as a reminder and a record of what needs to be done. They also form the basis of legal proceedings, should either the supplier or the buyer breach the agreements. Though not an easy process, contracts can be enforced in Europe.

There are many details that should be included in the contracts, but the main subjects are the following:

7. Make a checklist of all your export documents and regularly review it

There are many different documents that you will need to finalise your export and get paid. Depending on legal and private requirements, you may sometimes need more than 200 documents. To organise your export smoothly, you should make a checklist of all the documents that you need for export to Europe. In your checklist, you should classify your documents in categories for easier orientation. For example, you can classify documents in the following way:

• Documents you must have for each shipment (for example, your invoice, transport documents and certificate of origin);
• Documents you should have to be more competitive (such as your contract, food safety certificate, letter of credit and laboratory tests);
• Documents you need to work with specific buyers (for example, an organic certificate, a Code of Conduct, tests on allergens or quality assurance documents for retail chains).

The most important types of documents that should be on your checklist are documents of origin, commercial documents, freight documents, administrative documents and any documents that your buyers may require.

Documents of origin

To benefit from possible reduced tariffs when exporting to Europe, you should obtain a document of origin. You should check which organisation is authorised to issue this document in your country. It is often issued by customs authorities or the Chamber of Commerce, but it differs for each country. A common practice is to hire a freight forwarder to obtain a document on your behalf. Depending on the type of trade agreement between your country and the European Union, 2 types of documents of origin are used:

• Form A – You should use Form A as a document of origin if your country is part of the Generalised Scheme of Preferences (GSP);
• EUR.1 – You should use a EUR.1 certificate of origin if your country has signed a preferential trade agreement with the European Union. If the export value is lower than €6,000, you should only write a statement on your invoice (invoice declaration).

To obtain a certificate of origin, you must follow specific rules that are relevant for your product. For example, if you export a single spice or herb, a certificate of origin will usually be based on proof that the product is produced in your country (or a region specified by a free trade agreement). On the other hand, if you export a spice mix, you may be allowed to use spices and herbs from different origins.

Commercial documents

Several types of commercial documents are obligatory for export procedures. These include:

• Proforma invoice – A proforma invoice is used to show the importer the exact amount to be paid and the method of payment. It is also necessary to open a letter of credit. In some cases, a proforma invoice is required to obtain special permits or licences (for example, in the export of wild-collected herbs).
• Commercial invoice – A commercial invoice is a document that customs authorities require as evidence of your export. It basically states the amount of money to be paid for your products. When opening a letter of credit, the invoice can be used instead of a contract. In some rare cases, your buyer may ask you to get the invoice certified by a specific authority such as a Chamber of Commerce.
• Packing list – A packing list specifies the goods in individual packages, and it usually gives the gross and net weights, the dimensions of each package and the number of pallets and packages. It is not required by customs authorities, but it can help customs inspectors if they wish to open a certain package for inspection. Although it is not mandatory, transport companies often require this document.

Administrative and transport documents

Several types of administrative documents are relevant for the export of spices and herbs to Europe.

• Health certificate – This is a type of certificate that suppliers must provide to the European customs authorities if their country is subject to a stricter import conditions regulation. A health certificate, together with the analytical test report, is necessary for a certain percentage of shipments from specified countries.
• Phytosanitary certificate – Most spices and herbs do not require a phytosanitary certificate for export to the European Union, except seeds of spices and herbs used for sowing. A phytosanitary certificate is issued by the authority in your country. In many countries, you can also authorise a third-party provider to obtain a certificate on your behalf.
• Transport documents – Depending on the means of transport used, different documents are carried by the transport company and presented to the European customs authorities. These include a Bill of Lading (commonly used in sea transport as a receipt of goods by the transport company), a Road Waybill (used in road transport), a Rail Waybill (used in rail transport), an Air Waybill (used in air transport) and a FIATA Bill of Lading (used when products are carried by more than one mode of transport).

Other documents

Several types of other documents may be required, either by your buyers or by customs authorities. Typical examples include:

• Certificate of analysis – It is common practice for your buyer to ask you to submit laboratory test results as proof that your products comply with legal requirements. These tests are performed by accredited laboratories. Common laboratory tests analyse microbiological contaminants, pesticide residues, heavy metals, irradiation, allergens and product composition.
• Product specification (also called a technical data sheet) – This document is used to specify the quality and food safety parameters of your product and the methods used for determination.
• Export certificate – In some countries, exporters must obtain an export certificate to export food items. It is not required by the European authorities, so you must check within your country if such a certificate is required.
• Weight certificate – In some cases of exporting retail pack products, your importer may require a document proving that the weight or volume of the packaging corresponds to the label. This proof is commonly issued by an independent inspection body.
• Certificate of inspection – In some rare cases, buyers may require a certificate of inspection to prevent fraud and to ensure that products comply with the contract. Such certificates are issued by independent inspection agencies.
• Black list certificate – In rare cases of export of spices and herbs by air, you may need a certificate stating that the air transport company is not banned by the European authorities.
• CITES certificate – If you export certain types of wild-collected products, you can be asked to provide a certificate proving that the collection of those products does not threaten the survival of the species.
• Material safety data sheet – This document is not required for dried spices and herbs, but it is required for oleoresins and essential oils. It lists hazards such as a fire or an explosion being caused by the product reaching a critical temperature. It also gives instructions for storage and first aid if materials come into contact with the human body.
• Voluntary certificates – Exporters use many types of private certifications to increase competitiveness and reach different market segments. Many of them are discussed in our study on buyer requirements. Such certificates are used as proof that your company follows certain rules regarding different aspects such as food safety, organic production, sustainability, ethical and fair trade and ethnic food rules.
• Financial insurance document – Such as a Letter of Credit, export insurance policy or bank guarantee.
• Contract.

Documents your importer must obtain to import your goods

Obviously, you are not responsible for the documents that your buyer must provide to finalise customs procedures. However, you may need to give your buyer some input to help them correctly fill out all the forms required by the European customs authorities. If you have already successfully exported to Europe, it is a good idea to ask your buyers or freight forwarders to share the correctly filled documents for customs clearing with you. These include a Single Administrative Document (SAD), a customs value declaration and a warehouse guarantee.

Please note that a customs value declaration is often mentioned in export guides on the internet as a document issued by the exporter, which it is not. The main purpose of this document is to assess the value of the goods to apply tariff duties. Tariff duties are commonly paid by your buyer, unless you have agreed on Delivery Duty Paid (DDP) Incoterms. However, developing country exporters rarely use DDP, as they would need to have a registered company in Europe to organise all the import formalities.

8. Use the assistance of support organisations when organising your export to Europe

There are many organisations where you can seek support, in your country as well as abroad. The section below lists the most relevant organisations for exporters of spices and herbs that can support you in the organisational and logistical issues related to export. Many of these organisations have already been mentioned in the other chapters of this study, but the following are the most recognised:

• European Spice Association (ESA) – the umbrella association representing the interests of the European spice industry. Many trade-related issues are discussed in the annual meetings. You can download a quality minima document (pdf) that is relevant for better defining your contract.
• American Spice Trade Federation (ASTA) – represents the United States spices industry. Most guidelines and standards defined by ASTA are also recognised and followed by European buyers. If you become a member of ASTA, you can get support for contracts or arbitration services.
• International Trade Centre (ITC) - a development agency for sustainable trade, with publications such as How to Access Trade Finance (pdf), Model Contracts for Small Firms and an SME Trade Academy that provides online courses (some are free of charge), including international transport and logistics.
• Access2Markets is a guide to duties, taxes, product rules and requirements that apply to the market of the European Union.
• International Chamber of Commerce (ICC) - has worldwide offices and offers arbitration, export learning tools and information about incoterms.
• Your own Chamber of Commerce can provide you with advice and information. Chambers of commerce usually have staff specialised in dealing with issues like transport, trade agreements and legal issues.

Read CBI Tips for Finding Buyers and Tips for Doing Business, these can help you in understanding how to enter the European market and will provide insight into how European buyers think.

This study was carried out on behalf of CBI by Autentika Global.

Please review our market information disclaimer.