Case Studies
Trade finance is easiest to understand through a real transaction. This guide follows a single shipment of citrus from the moment a buyer issues a tender through to the moment payment lands in the trader's account, showing exactly where financing, risk and documentation come into play at each stage.
A Quick Glossary
A few terms come up throughout this journey. FOB, or Free on Board, means the seller's responsibility ends once goods are loaded onto the shipping vessel. CIF, or Cost, Insurance and Freight, means the seller is responsible for cost, insurance and freight all the way to the destination port. DIP, or Documents in Progress, refers to shipping and certification documents that are still being finalised as the transaction moves forward.
It Starts With a Tender
Every export begins with demand. A foreign off taker, typically an importer based in Europe, issues a tender specifying the quantity, quality and grade of citrus required, along with the delivery port and terms, often CIF to a hub port such as Rotterdam.
Forward Sale and Forward Purchase Agreements
A trader sources citrus to fulfil the tender and negotiates terms directly with the producer. Once both sides agree, two linked contracts are signed: a Forward Purchase Agreement with the producer and a Forward Sale Agreement with the off taker, with the trader positioned between the two. These agreements specify fruit type, quantity, quality, pricing, delivery terms and payment timing, commonly 60 days after the bill of lading is sighted.
Packhouse Grading and Certification
Once harvested, the fruit is delivered to a packhouse for sorting and grading against the standard set out in the agreement. From here it passes through two separate inspection processes. A government official, operating through the Perishable Products Export Control Board, certifies the fruit as fit for export. Separately, the trader appoints an independent inspection company to verify that quality matches what the off taker has specified. This dual layer of certification protects both the reputation of the exporting country and the interests of the buyer.
Cold Storage and Palletising
Certified fruit is packed into barcoded cartons and transferred into cold storage, where it is cooled further and palletised according to the off taker's specifications. A goods received note is issued at this stage, creating a documented handover point. Before the shipment can proceed, one final inspection is carried out to secure a Phytosanitary Certificate, confirming the fruit is free of pests and disease and cleared for international transport.
Freight Forwarding and Logistics
A freight forwarding company then takes responsibility for logistics through to final delivery. This includes coordinating berthing dates so fruit does not sit in storage longer than necessary, arranging refrigerated transport from cold storage to the vessel, securing marine cargo insurance, managing customs clearance, and presenting the cargo manifest and supporting certificates to the vessel's captain ahead of loading.
Loading, Bills of Lading and Payment
Once the cargo is loaded, a mate's receipt is issued confirming exactly what went onboard. The vessel departs, and roughly seven days later the trader receives the original bills of lading. Only at this point does the trader raise an invoice to the off taker, attaching the bill of lading and full certification package. Payment is typically due 60 days from the bill of lading date, at which point funds are settled into the trader's account.
Why Trade Finance Sits Behind Every Stage
Sourcing, grading, certification, cold storage and freight all carry real costs, and every one of them is incurred before the trader receives a cent from the buyer. That gap between cost and payment, often stretching well beyond 60 days once the full cycle is accounted for, is precisely what trade finance exists to bridge. Structured correctly, with collateral management covering quality, quantity and documentation at each stage, a trader can keep multiple shipments moving simultaneously without being constrained by how long any single buyer takes to pay.
This is the mechanism behind nearly every commodity that crosses a border, not only citrus. At Teybridge, this is the type of transaction our structured trade and commodity finance is built to support, giving SME importers, exporters and traders the working capital to keep goods moving between agreement and payment.
Tuesday 25 August
