Fair Trade USA Seafood Yellowfin Tuna Premium Review
June 2016
As standard operating procedure, Fair Trade USA regularly reviews premium rates to both identify
externalities that may affect our producer and industry partners and ensure Fair Trade products deliver
positive impact on the ground. Fair Trade USA is currently reviewing the premium rate for Indonesia
yellowfin tuna in order to optimize impact and simplify operational implementation as we expand our
seafood certification program in South East Asia.
Background
The Fair Trade USA seafood program was launched in 2014 with the initial certification of an Indonesian
yellowfin tuna supply chain, comprising roughly 100 fishermen on two Moluccan islands. Since then, that
supply chain has grown to almost 600 fishermen on three Moluccan islands and one community in Central
Sulawesi. Since certification, fishermen in Indonesia have received over $46,000 in Fair Trade community
development premiums. Thus far, Fair Trade premium funds have been allocated toward health and safety
improvements, conservation projects, education, beautifying community spaces, and funds to support
grieving or ill families. In 2015 we also certified eight shrimp cooperatives in the Sinaloa region of Mexico
and started working toward the Fair Trade certification of canned Maldivian skipjack tuna and frozen
Maldivian yellowfin tuna supply chains.
Current Fair Trade Premium Review
The current Indonesian yellowfin tuna premium rate established by Fair Trade USA is 10% of ex-vessel
price. The Fair Trade premium is paid by the importer within the country of the product’s final destination
and is set at a per species, per region/country basis. A review of this premium rate has been initiated in
order to achieve the following objectives:
1. Optimize Impact – In establishing Fair Trade premium rates, the goal of Fair Trade USA is to balance
positive impact for fishermen and their communities with business viability for industry partners. If we
maintain the current premium rate, we have identified potential limitations to achieving these objectives
based upon the following:
a. Increasing ex-vessel prices – Since 2014, ex-vessel prices in Indonesia have been slowly increasing. While
a 10% of ex-vessel price premium rate proved viable for industry partners two years ago, as ex-vessel
prices continue to increase it will likely render Fair Trade prohibitively expensive.
b. Lack of clarity for fishermen – Because the current premium rate is based upon a percentage rather than
a flat rate, fishermen have a difficult time calculating how much premium they will likely be receiving
each quarter, which in turn causes difficulties in project management and accounting. In addition,
the current premium rate is not structured to protect fishermen if ex-vessel prices drop in future
years, as premium amounts are directly tied to market prices.
c.
Lack of consistency with other yellowfin tuna premium rates – Since setting the current Indonesian yellowfin
tuna premium rate, an additional yellowfin tuna premium rate has been set for the Maldives.
Yellowfin tuna in the Maldives is subject to highly volatile ex-vessel prices on a daily basis. Due to
these market characteristics, Fair Trade USA chose to set a flat premium rate for Maldivian yellowfin
tuna. The Fair Trade seafood program is relatively new, and as additional supply chains come on
board, we will need to revisit premium rates in order to ensure parity across regions.
2. Simplify Implementation – Fair Trade USA seeks to establish premium rates that are easy for industry
partners to implement. If we maintain the current premium, we have identified potential limitations to
achieving these objectives based upon the following:
a. Current Fair Trade premium rate requires complex calculation and ad hoc price data collection by multiple parties in
the supply chain – Currently, industry partners must calculate Fair Trade premium across three quality
grades (A, B, and C) and three size classes. Those rates than get transferred from Indonesian rupiah
to USD for reporting purposes and then back into rupiah for disbursement to Fair Trade fishing
associations. The calculations require high amounts of manpower on the ground to collect data,
extensive record-keeping, and may result in miscalculated premium amounts.
b. Current Fair Trade premium calculation creates uncertainty that may limit program growth – The premium
calculation and allocation complexities can make it difficult for current and new brand partners to
estimate their cost commitments to Fair Trade. We are concerned this uncertainty could limit
growth of the seafood program and impact in Indonesia.
New Fair Trade Premium Proposal
In order to achieve our objectives of optimizing impact and simplifying implementation, as well as create
consistency with yellowfin tuna premium rates in the Maldives, Fair Trade USA proposes to introduce a flat
Fair Trade premium rate for Indonesian yellowfin tuna as follows:
Flat Rate
USD $0.15/kg
USD $0.30/kg
Purchase Form
Whole fish
Clean loin
To align with our internal processes, we plan to hold this premium rate for at least the next full calendar
year (until June 2017). However, if market or programmatic issues arise, this premium rate may be
revaluated before June 2017 per the request of supply chain and business partners.
Consultation
1. What are your thoughts on this approach? From your perspective, does it achieve the objectives
of optimizing impact and simplifying implementation?
2. Do you foresee any challenges with the proposed premium or methodology?
3. Please provide any additional feedback you would like to share.