Sunday, October 31, 2010

Meeting with David Funkhouser from TransFair USA

Meeting with David Funkhouser from TransFair USA (a.k.a. Fair Trade USA)

September 30, 2010

Below are my notes from the meeting last week with David Funkhouser (again--awesome last name), he works with Fair Trade USA and talked with the folks from Fair Trade San Diego about how the process works--how coops in other countries become Fair Trade coops. D.S.

FLO—Fair Trade Labeling Organization
Located in Europe—sets the standards for producers to be certified
FLO sets the standards
And inspects the FT coop to make sure it adheres to FT standards

Fair Trade USA (used to be called “Transfair)
Here in the USA—FT USA cross-checks transactions, audits FT partners here in the USA
(like Rigo’s company, CafĂ© Virtuoso)

For artisanry / handcrafts, there is no certification process
The oldest FT org’s are those that work in handcrafts (artesanĂ­as): 10,000 Villages, SERRV, etc.)
They have criteria, different from standards
Depends a lot more on trust: handcraft producing org’s being members of a Fair Trade Federation, but there is no certification process for handcrafts (there is, on the other hand, for coffee, tea, etc.)

There is a “Fair Trade town” program to campaign for a city in the U.S. to be a “FT city”
This means that a certain percentage of stores per capita must sell Fair Trade certified products

Fair Trade clothing

Fair Trade USA is developing a standard for FT apparel; it’s still in its pilot year this year, just now being developed.

“HEY NOW”- a company in the US that is importing cotton clothing from a FT group in India.

“World of Good” – an org that is developing a ‘wage tool’ for calculating fair wages for producers of clothing

The FT standards for clothing are not yet in place enough to be implemented with a coop like the Valle Verde ladies. “It’s hard getting enough org’s together who are willing to go through the whole process”.

Companies involved in pilot program for FT textiles (including clothing):
Indigenous Designs
Maggie’s Organics
Hey Now

Integrated Market Ecology Organizations – IMO
A different organization that provides certification
Located in Switzerland
Applies the same FLO standards for certifying producers as FT
David F. doesn’t know a lot about them—they don’t do much business in the USA

How FT coffee producers are paid

Guaranteed minimum is paid them for coffee: $1.25 US / pound
This is called the “floor price”—they are guaranteed this minimum price, even if the market price (conventional world market price) dips down lower
Plus a $0.10 / lb. “social premium”

However, if market price goes higher, FT coffee farmers are paid market price for their coffee

Right now, market price for coffee is above $2.00/lb, so floor price doesn’t matter right now.
Market price is referred to as the “C-price”
When the C-price is up, that’s when the social premium makes the difference for FT coffee farmers—they get that extra $0.10 / lb, no matter what the market price is

A management body within the coop decides how to invest / use this social premium
Some have spent it on: hospitals
A Colombian coop used it to buy cell phones for security concerns (kidnapping)

How do coffee farmers become FT coffee farmers?

The easiest way: to join an existing FT coop near them
Piggyback on their existing FT registration, become compliant

Otherwise—form a new FT coop (a lot of work)
Most coops out there have 100 – 200 member farmers

If they form their own coffee FT coop:
They would apply with FLO
FLO would send a list of standards (this list is online—what the standards are)
FLO would see if the coffee coop complies with the standards:
- Does it have the correct percentage of small producers? (i.e. not big plantations)
- Does it have an accounting system?
- Is the business collectively owned?

Why is certification so expensive for producer org’s?

Up to around 2004—certification was cost-free.
But there were a lot of coops that wanted to get certified, and it just wasn’t feasible anymre—the line was too long, backlog, etc. So FLO started a for-profit company, “FLO-CERT”, to run certification. It couldn’t have been managed with just a non-profit or just volunteers.
Also—because, when you pay for something, there is a sense of investment, ownership.
And—the cost of audits on the business, to make sure it’s all legit.

Example of how the cost breaks down

It depends on the size of the coop
Example: in a 50-member coop, made up of 50 farmers, it costs about 1400 Euro to certify. (And less to renew certification, keep it current in following years.) This is for transportation, cost of tax auditors, etc. for 3 ½ days of work.
But, if you divide the cost up between the 50 members, it comes to 28 Euro per farmer—more doable.

And, there are scholarships for certification available.

In addition, an importer company (like Rigoberto’s roasting company, for instance) can opt to ‘sponsor’ the coop, covering the cost of certification. This establishes a relationship between the two, and lets the importer have a personal connection, put a face on the producer.

At any rate, FLO is trying to streamline the certification process to make it all more easy and cheaper.

(NOTE: David F. did not know why FLO had to set up a for-profit company—it was for some legal purpose. Regardless, it is not making profit from FT.)

Fees involved for coops
Certification fees (one-time)
Inspection fees (annual)
Licensing fees for using the FT label (10 cents / pound of coffee; cost goes down the more you produce)

Side note on coffee importing, comment by Rigo:
The reason they’re building a harbor in Ensenada is that right now, Wal Mart has a monopoly on the Long Beach harbor, can control what comes in.