Fair Trade System Interactive
Click on a portion of the diagram for more information.
Per Fair Trade nomenclature, an importer/packer is a company in in a developed country that imports a commodity from a developing country. Here we have a US tea company that imports tea from Sri Lanka.
Fair Trade Organization
A Fair Trade labeling organization creates a Fair Trade Certification logo. The most widely recognized logo today comes from the non-profit Fair Trade International. Other Fair Trade labeling organizations exist as well, such as Fair Trade USA
The importer/packer imports a commodity from a developing country. In this case, the US tea company imports Fair Trade tea from Sri Lanka. The importer/packer purchases the tea from a Fair Trade certified producer. Generally the price is somewhat higher than tea's free market price.
The importer/packer pays the Fair Trade organization a licensing fee for permission to place the the organization's Fair Trade logo on its product.
The Fair Trade organization spends most of the proceeds from licensing their logo on marketing expenses.
Fair Trade organizations market Fair Trade logos in developed countries worldwide.
Due to the marketing efforts of Fair Trade organizations, their logos are readily recognizable to consumers. In the United States, for example, nearly half of consumers recognize the logo of Fair Trade USA, another leading Fair Trade organization.
Fair Trade labeled product
The importer/packer includes the Fair Trade logo on its product's packaging. The tea with the Fair Trade logo on the package can usually be sold for a higher price than equivalent tea without the logo. This higher price allows the importer/packer to recoup the higher price that it paid to the cooperative in Sri Lanka for the bulk tea.
Consumers in developed countries often have the financial resources to voluntarily pay more for a product. Many such consumers for whom social and environmental issues are important are willing to pay a higher price for their tea. They expect that this price difference will help the tea producers to achieve a higher standard of living and practice sustainable cultivation methods.
Finished Product Pricing
The tin of Fair Trade labeled tea sells for a higher price to consumers than other tea tins without the Fair Trade logo.
Fair Trade Producer
A tea producer in Sri Lanka, often a cooperative, gets certified as a Fair Trade producer. As a Fair Trade producer, it must then meet certain criteria and standards laid out by Fair Trade labeling organization.
FLO-CERT is a for-profit company that certifies and audits entities involved in Fair Trade. For a producer to become Fair Trade Certified, it must be audited for compliance by FLO-CERT. Thereafter, it is periodically audited for continued compliance.
The prospective Fair Trade producer is responsible for paying certification and auditing fees to FLO-CERT. Some grants exist to assist small producers that don't have the resources to pay these fees.