Fair Trade Certified | Transfair USA | Frequently Asked Questions

TransFair USA works with a broad range of business partners and stakeholders to find solutions that work for farmers and farm workers, industry, consumers and the earth. The Fair Trade model involves engaging challenging issues that rarely have black and white solutions. Below we have attempted to address some of the more complex questions about the Fair Trade Certified™ model and TransFair USA, and we hope you find them helpful.

How does TransFair USA feel about large-volume retailers like WalMart and McDonald’s carrying Fair Trade Certified products?

The expansion of Fair Trade Certified products into thousands of retail outlets across the U.S. means TransFair USA is extending the benefits of Fair Trade to a growing number of farming families around the world. And giving Americans the opportunity to purchase Fair Trade products wherever they choose to shop makes it possible for a broader range of consumers to be part of the Fair Trade solution. That's why TransFair is working to make Fair Trade Certified products available everywhere; at large retailers and national chains as well as small independent stores and cooperatives.

TransFair understands that consumer confidence in the Fair Trade Certified label is of utmost importance to our model. That's why we never lower our product certification standards for any company, regardless of their size or commitment to Fair Trade. The Fair Trade Certified label on a product package is the consumer's guarantee that the product has met strict social, economic and environmental standards. The same international Fair Trade standards apply to all participating companies and retailers, regardless of their size or business model.

It is important to remember that the Fair Trade Certification model cannot and does not attempt to monitor a company's broader business practices or motives for involvement in Fair Trade. In other words, TransFair certifies products, not companies.

TransFair strongly supports "conscious consumerism": we encourage people to educate themselves about the companies from which they buy, the origins of the products they consume, and the business practices of the stores where they shop.

For more information on international Fair Trade standards and how they are set, see this question.

Since launching Fair Trade Certified (FTC) coffee in 2000, Starbucks has undeniably made a significant contribution to family farmers through their rapidly growing volumes of FTC purchases. By offering FTC coffee in thousands of stores, Starbucks has also given the FTC label greater visibility, helping to raise consumer awareness in the process.

FTC coffee now represents over 6% of all Starbucks coffee purchases. Starbucks makes its FTC volume information public. It is available below, and in their 2006 CSR Annual Report.

Avg. “C” Price/lb of coffee (market price)	Year	SBUX Pounds of FTC coffee purchased
$ 0.90	2000	190,000
$ 0.55	2001	653,000
$ 0.53	2002	1,100,000
$ 0.62	2003	2,100,000
$ 0.76	2004	4,800,000
$ 1.08	2005	11,500,000
$ 1.08	2006	18,000,000
Total		38,343,000

Starbucks offers an incredible opportunity to make positive impact in the developing world. We at TransFair look forward to continued collaboration and growth in the volume of FTC coffee purchased, sold, and marketed by Starbucks.

As large, mainstream companies and retailers begin to offer Fair Trade Certified products, is there a danger that the Fair Trade standards will erode?

The standards will not erode. Fair Trade standards are established by Fairtrade Labelling Organizations International (FLO) and address social and economic development, environmental management, and labor conditions on Fair Trade farms. For example, the Fair Trade standards require that producer groups receive the established Fair Trade floor price for their products. Therefore, all US companies licensed to sell Fair Trade Certified products must pay Fair Trade floor prices to Fair Trade farmer groups for those products. TransFair USA, the only independent certifier of Fair Trade products in the US, verifies industry compliance with the Fair Trade criteria.

FLO uses a multi-stakeholder process to set the Fair Trade standards. Fair Trade producer networks, workers, Alternative Trade Organizations (ATOs), conventional traders, Labeling Initiatives (including TransFair USA), and independent consultants specializing in Fair Trade and labor issues are all involved in the standards approval process. This thorough process ensures that a broad range of stakeholders' views are considered in setting and reviewing Fair Trade standards.

Rather than getting weakened, Fair Trade standards are subject to an ongoing process of review, improvement and strengthening. For example, in December 2005 FLO tightened the standards for hired labor on Fair Trade farms (for product categories in which the FLO standards incorporate hired labor, such as tea and bananas). Now, workers on Fair Trade farms must democratically elect a workers' committee to represent them and negotiate with management to defend their rights and interests. This clause goes beyond the previous requirement that management simply respect the right of freedom of association and collective bargaining.

Similarly, Fair Trade has always had strong environmental standards and a strict list of prohibited agrochemicals, but in 2005 FLO reviewed and strengthened them. As a result, the new standards contain clearer objectives, provide more guidance to producers on how to comply, and are more specific and therefore more practical to audit.

To read the complete standards for all Fair Trade products, and to learn more about the process by which they are created, go here.

Do individual farmers receive the entire Fair Trade price paid to the cooperative?

No. Just like any business, farmer cooperatives must deduct operating costs, administrative expenses, business reinvestments, and the cost of social and other programs before determining profits. That's why the final price paid to individual cooperative members is lower than the Fair Trade price received by the cooperative. Also, since most cooperatives are only able to sell a portion of their harvest on Fair Trade terms, the final price received by members is often comprised of an average of all prices received throughout the year, including Fair Trade prices and lower conventional market prices, minus expenditures. It is important to remember that since co-ops are democratically organized, members approve all financial allocations and payment structures.

For most products, including coffee, FLO calculates a minimum Fair Trade price that is intended to cover the cost of sustainable production. For washed Arabica, the highest quality coffee, the Fair Trade minimum price is set at $1.25 per pound, plus an organic differential of $.20 if the coffee is certified organic. Should the world market price rise above these prices, the Fair Trade minimum price rises accordingly and becomes the world market price. In addition, importers pay farmer groups a Fair Trade premium, which is $0.10 per pound, over and above the Fair Trade minimum price. The Fair Trade premium is spent by cooperatives on community and business development projects. NOTE: The Fair Trade premium and organic differential were recently raised by $.05 cents each. Read more about the change here. In addition, the Fair Trade minimum price for coffee was raised by four cents in Africa, Asia, Mexico, and Central America, and by six cents in South America. Read about this change here.

How does TransFair protect against misuse of the Fair Trade Certified label?

TransFair strives to ensure the proper use of our trademark and logo. We have a legally binding contract with each company we license to use the Fair Trade Certified logo that obligates them to abide by specific usage guidelines. Licensed companies are prohibited from using the FTC label and the term "Fair Trade Certified" in ways that are false, confusing or misleading. Our complete logo usage guide is available on the TransFair website.

In addition to requiring licensed companies to sign a legal contract regarding the use of the FTC label, we also require them to submit for approval samples of all new product labels, advertisements and package copy which carry the FTC logo before they are printed. Licensees who misuse the FTC logo are notified in writing of the incorrect usage and asked to correct the violation. If a violation continues, the licensee is warned that potential action, including licensing termination, may be taken if the misuse continues. If a licensee's contract is terminated, we make sure the trademark and logo do not remain on the company's website.

Any non-licensee found using the trademark and/or logo is offered the chance to become a licensee. If the company chooses not to become a licensee, it must immediately stop using the trademark and logo or face legal action.

We encourage Fair Trade advocates to help us monitor the marketplace by reporting label abuse whenever it occurs. We are committed to rigorously following up on such reports to defend the integrity and credibility of the FTC label, and we are grateful for the public's support. To report FTC label abuse, fill out this form here.

TransFair seeks real commitment and real partnerships with companies that have a genuine interest in investing in and increasing the market for Fair Trade Certified products. We believe that when companies make the necessary investments in marketing, promotion and consumer education, their Fair Trade products perform much better in the marketplace, and so we work with them to invest appropriately as part of their commitment to Fair Trade.

At the same time, we respect the right of companies to test the market for Fair Trade and then grow their volumes over time, based on consumer response. Particularly for large companies, it is unrealistic to expect them to convert large portions of their overall business to Fair Trade overnight, before demand has been proven, and before they can stage the reorganization of their supply chains on the rest of their business. Our approach has therefore been to engage with companies, encourage them to test the market, and require a commitment on their part to marketing support, increased volumes, and growth of their Fair Trade product lines over time.

Even small percentages of Fair Trade purchases by very large companies can translate into real benefits for tens of thousands of farmers. If we take a rigid approach with regard to minimum volumes or percentages -- presumably in defense of the credibility of the label -- we could potentially lose significant volume to the detriment of the farmers we seek to serve.

If, on the other hand, TransFair is perceived as condoning greenwashing (when companies engage in minimal efforts toward social or environmental responsibility in order to enhance their public image), we risk losing credibility with consumers, who form part of the movement upon which the long-term success of Fair Trade depends. Thus, we seek a balanced policy that is based on engagement, partnership and mutual trust, one that acknowledges the particular business challenges of conversion to Fair Trade, and one that defends the credibility of the FTC label and the mission of TransFair. Finding that balance is not always easy, and we welcome the dialogue and input of our allies in preserving this balance.

For more information, or if you have feedback about this issue, please contact Kimberly Easson, Director of Strategic Relationships.

What about companies that claim to offer "fair trade" products but do not use the Fair Trade Certified label?

TransFair currently certifies agricultural products including coffee, tea and herbs, cocoa and chocolate, fresh fruit, rice, sugar, flowers, honey and vanilla. We encourage companies that offer these products on fair trade terms to participate in TransFair's rigorous audit system and to use the Fair Trade Certified label on their products.

TransFair applauds the efforts of companies that establish long-term, direct relationships with their suppliers, pay fair and stable prices, and provide access to credit and other technical assistance to their producer partners. We also maintain that certification by an independent, third-party organization is the consumer's most reliable guarantee that a company's claims about its products are true. Product certification and labeling educate consumers about Fair Trade and reduce confusion in the marketplace, thereby helping build a unified Fair Trade movement.

Furthermore, Fair Trade Certified licensing fees support the international Fair Trade system and enable TransFair and FLO to perform the vital work of identifying and incorporating new farmer groups into the system, provide valuable market linkage opportunities for producers, and raise consumer awareness of Fair Trade on a national level.

For products that TransFair does not certify, like handicrafts, we encourage consumers to look for and support companies and retailers that are committed to fair trade principles and practices. Looking for the Fair Trade Federation logo on a product package is one way to know that a company is committed to providing fair wages and good employment opportunities to economically disadvantaged artisans and farmers worldwide. For more info on the Fair Trade Federation, go to http://www.fairtradefederation.org/.

What does the blue and green Fair Trade label mean, and why is TransFair’s label different?

The blue and green FAIRTRADE Certification Mark is used by many European and Asian countries that are members of Fairtrade Labeling Organizations International (FLO). Like the Fair Trade Certified logo used in the U.S., the FAIRTRADE label means the product on which the label appears was produced and traded according to international Fair Trade standards.

FLO launched the FAIRTRADE label in 2002 in an effort to harmonize the different labels used by various Labeling Initiatives (LIs) internationally. Some LIs, including TransFair USA, have elected to continue using their current labels. All LIs, regardless of the specific label used, adhere to the same rigorous Fair Trade standards established by FLO.

What is the difference between Fair Trade Certified and Rainforest Alliance Certification?

Both TransFair USA and Rainforest Alliance are international, mission-driven organizations that share common goals of promoting sustainable livelihoods for producers, environmental conservation, and economic viability. TransFair certifies coffee and cocoa, fresh fruit, tea and herbs, rice, sugar, flowers, honey and vanilla. Rainforest Alliance certifies coffee, cocoa, and bananas as well as citrus, flowers and timber. The two models vary in emphasis and approach.

Fair Trade Certification is the only certification system that provides an economic benefit to producers in the form of a guaranteed minimum price and a social premium for community investment. Fair Trade provides economic incentives for farmers to improve the quality of their production, protect the environment, and reinvest in their farms. Fair Trade social premiums fund projects like scholarship funds, organic certification, and low-interest loan programs. In addition, Fair Trade provides farmers with access to pre-harvest credit.

Fair Trade empowers farmers and workers to make decisions that affect their organizations and communities. Fair Trade farmers are organized into democratic, transparent organizations where members vote on the use of Fair Trade premiums. Through more direct trade, Fair Trade farmers develop the business skills they need to compete in the global marketplace.

Fair Trade's environmental standards are equally strict. The standards incorporate a list of prohibited agrochemicals, require environmental impact assessment, planning and monitoring, proper agrochemical usage and storage, waste disposal, soil and water conservation, and a ban on genetically modified organisms (GMO's). Small farmer groups must implement Internal Control Systems to monitor member compliance with farm management protocol.

Fair Trade producer groups must also adhere to Fair Trade labor standards, which comply with the internationally recognized conventions of the International Labour Organization (ILO), including the freedom of workers to organize democratically, health and safety protections, and living wages.

One of the main differences between Fair Trade Certification and Rainforest Alliance (RA) certification is that RA does not guarantee above-market prices or premiums for community and social development. RA certification is intended to enable compliant farms to negotiate better prices in the marketplace - but fair, sustainable prices are not guaranteed. Similarly, pre-financing for farmer groups is not a part of the RA model.

Another difference between the two certification systems is that the RA model certifies farms of all sizes, and has no requirement for democracy or transparency. Since most of the world's coffee is grown by small-scale family farmers who represent the most marginalized and disadvantaged sector involved in the coffee trade, Fair Trade only works with smallholder coffee producers (with 5 hectares or less), organized into democratically-run cooperative organizations. In supply chains where larger estates and plantations are more prevalent, such as tea, bananas, and flowers, Fair Trade also works with farms that employ hired workers.

Finally, a product package bearing the FTC label means that 100% of the ingredients within that are eligible for Fair Trade Certification are Fair Trade Certified (see Ingredients Program). RA, on the other hand, allows products to bear the seal if a minimum of 30% of the contents have been certified.

The Fair Trade Federation is an association of organizations whose members are committed to providing fair wages and good employment opportunities to economically disadvantaged artisans and farmers. Companies apply for membership in the Fair Trade Federation (FTF) by completing an application outlining their business practices and demonstrating that they comply with FTF requirements.

The FTF label on a product package means that company is a member of the association. The FTF does not certify products or companies. For more information on the Fair Trade Federation go here.

Does paying farmers a fair price encourage overproduction and create an oversupply problem?

While in theory, higher Fair Trade prices might incent farmers to increase production, in practice we have often seen the opposite. Fair Trade farmers invest Fair Trade revenues into improving their homes, sending their children to school, and on farming methods and equipment that improve crop quality -- rather than on increasing production. In fact, many Fair Trade farmer groups have successfully implemented crop diversification and income generation projects in order to reduce their dependence on a single crop as their primary source of income. Fair Trade revenues provide a safety net that allows farmers to explore alternative income generation projects such as beekeeping, ecotourism, and handicraft production.

Another reason Fair Trade does not lead to overproduction is that most Fair Trade farmer groups are currently only able to sell a fraction of their production on Fair Trade terms; they must sell the rest to conventional buyers and local traders at lower prices. In other words, most Fair Trade farmers have no incentive to increase production only to sell the majority of their harvest at low prices. As demand for Fair Trade grows, certified farmer groups will be able to sell a larger share of their production on Fair Trade terms and extend the benefits of Fair Trade to a greater number of farmers.

Nor is there any evidence that Fair Trade prices have any effect on world prices or depress prices for non-Fair Trade farmers. In fact, studies show that when Fair Trade markets are operating in rural areas, prices paid to non-Fair Trade farmers actually increase. This is because Fair Trade makes accurate market information more widely available to previously isolated farmers, and forces local intermediaries to compete with prices paid to farmers by Fair Trade cooperatives.

Fair Trade addresses the problem of asymmetric market information that renders classical "free trade" a fiction. Commodity prices can fluctuate wildly, and isolated, poor growers are often unable to take advantage of the sophisticated financial instruments employed by buyers to lower risk and volatility. The Fair Trade floor price gives farmers market information, financial stability, and access to credit.

Perhaps most importantly, Fair Trade is a voluntary, market-based model of trade: farmers only receive Fair Trade minimum prices and premiums if they have a buyer willing to pay them. Unlike government mandated pricing or subsidies, any producer, company or consumer can opt in or out of Fair Trade. The Fair Trade system enables companies to take advantage of growing consumer demand for sustainable products; that's why over 600 U.S. companies have chosen to participate in the Fair Trade certification system, helping to make Fair Trade the fastest growing segment of the 11 billion dollar specialty coffee industry.

TransFair receives many requests for new Fair Trade Certified products, including soccer balls, wine, vegetables, apples, gold, diamonds, garments, and others. Developing an audit system that can guarantee that Fair Trade standards are being met by all the U.S. actors in the supply chain requires significant resources, and we must balance costs against the potential benefits when considering new product introductions.

Some of the criteria we evaluate when looking at the potential for new products include:

U.S. companies must purchase from FLO-certified Fair Trade producer groups, pay TransFair USA a per-pound fee for certification, regularly report purchases and sales of FTC products, and sign a licensing agreement and Letter of Intent (LOI) with TransFair USA.

The LOI outlines a company's plans to market and develop their FTC product line over time and includes specific initial volume projections and growth estimates. The LOI is a tool that helps set realistic mutual goals with our new company partners, aligning our respective expectations and establishing a foundation for success.

TransFair encourages companies to commit to converting at least 5% of their total purchase volume to Fair Trade within the first two years of launching labeled products. Experience has shown that such a commitment is usually necessary to position companies for sales success by strengthening the visibility and breadth of their Fair Trade Certified product line. Of course, 5% is by no means a ceiling, and most of our partners enter the Fair Trade market by converting between 5% and 20% of their total volume. Making Fair Trade 5% of a company's total purchase volume isn't a requirement; rather, it's a goal. For this reason, the 5% guideline is not a part of our certification and licensing agreement with companies.

We understand that different companies face different constraints, especially in conversion of current supply chains to Fair Trade Certified supply chains. So TransFair takes a flexible, pragmatic approach to the initial and subsequent volume guidelines. We believe that ultimately consumer demand will continue to simulate the growth of the Fair Trade market, and that companies will meet that demand with growth in their lines of Fair Trade Certified products.

First, TransFair does not certify companies (only products), therefore we don't decertify companies either. We have terminated our contracts with dozens of companies because of non-compliances with their legally binding agreements with TransFair. Most non-compliances involve failure to adequately document Fair Trade purchases and sales in a timely manner. Failure to report inhibits our ability to cross-check transactions and maintain the integrity of the label and the Fair Trade system.

On occasion, we have also terminated our contracts with companies who we felt were only making a token effort with their Fair Trade product and who did not achieve growth or volume over time. When it appears that there is no longer a "good fit" with a given company, we prefer to amicably part ways in order to maintain our focus on those industry partners who are truly invested in Fair Trade and improving the lives of farmers.

How can stakeholders engage with TransFair USA in shaping the Fair Trade movement?

TransFair recognizes that the active participation of a range of stakeholder groups in consultation around strategy issues is vital for the successful growth of the Fair Trade market and movement. Since its founding as the Fair Trade certification agency in the U.S., TransFair has worked closely on campaigns and projects with partners that include NGOs, advocacy groups, producers, and consumers. We continue to increase our efforts to collaborate with other stakeholders as the Fair Trade movement continues to develop and as Fair Trade Certified products become increasingly available to the general public.

In recent years, TransFair has been working on several important initiatives in an effort to improve communication and collaboration with other stakeholders, and to develop opportunities for stakeholders to offer input to discussions related to strategic direction. TransFair’s Board of Directors, management, and staff are committed to these initiatives, underscoring their strategic importance to our organization..

How much do U.S. companies pay for Fair Trade product certification and what is the license fee used for?

TransFair USA charges licensed companies a per-pound certification fee for Fair Trade Certified products. TransFair uses its license fee revenue for five primary activities:

TransFair's licensing fees enable us to operate a system that is transparent and consistent, and that balances the need for our work to be adequately resourced with the objective of maximizing market opportunities for Fair Trade producers. It is therefore important that the fees are set at a realistic level but that they do not act as a barrier to entry or a disincentive to increase sales.

TransFair currently works with over 600 licensed companies in several different industries. TransFair USA also receives grant support from major foundations, development agencies and philanthropic organizations. These funds supplement our certification revenues and are invested in consumer education, producer support and other programs. TransFair's ability to raise around $1 million/year in charitable grants reduces our financial dependence on certification fees.

TransFair USA Certification Fees by Product
Product	TransFair USA License Fee per lb.	Charged to
Coffee	$0.10*	Roasters
Cocoa Products	$0.10	Importers
Tea	$0.18	Importers
Rice	$0.035	Importers
Sugar	$0.035	Importers
Fruit	$0.01	Importers

* Coffee licensees can lower their fees by increasing their total yearly Fair Trade volume and/or by increasing Fair Trade coffees as a percentage of their total coffee business. Additionally, in some product categories we offer discounts to licensees that submit their certification reports and fees on time. For questions concerning the certification fees please contact certification@transfairusa.org.

Yes. Producer groups who wish to sell into the Fair Trade market must pass an inspection by FLO-CERT. In the early years of FLO and Fair Trade, producers were not charged for the cost of inspecting and certifying of their farms; this cost was subsidized by industry fees. Because of the overwhelming number of producer applications received and the growing cost associated with these certifications, FLO found it necessary to implement a system of producer fees to be able to address the backlog of applications and revisit the increasing number of certified farms regularly. Since implementing producer fees in 2004, FLO has been able to improve the quality and timeliness of its producer inspection and certification services. Many producer groups find that investing in certification by FLO-CERT affords them access to higher-priced Fair Trade markets and is a worthwhile business move.

Annual producer certification fees generally range from $2,500 to $10,000, based on the size of the producer group and length of time the inspections take. For example, some Fair Trade cooperatives have fewer than 100 members, others have tens of thousands. Some cooperatives are more established and organized than others, thus reducing the time required to complete the inspection.

In early 2007, FLO-Cert revised its producer fee schedule again. A new fee category for very small producer organizations (< 50 members) was created, enabling them to receive a discount of up to 35% on certification fees. FLO also implemented a discounted fee structure of up to 10% for organizations that are certified by an accredited organic certification body. More information on FLO-CERT’s fee schedule can be found here.

Inspection fees are intended to balance the costs of a rigorous, efficient and transparent certification system with the needs of farmers. For small producer groups who have found the fees to be a barrier to entry into the Fair Trade system, FLO has developed producer certification grants that are partially funded by the European Union. Producer groups can have up to 75% of the certification fee covered by these grants. Producer groups interested in applying for a grant may contact fund@fairtrade.net.

Why is it that only cooperatives of small-scale coffee farmers may participate in the Fair Trade Certification model, and not coffee estates and plantations with hired workers?

The difficulties experienced by farmers and farm workers in developing countries differ greatly from product to product. Most of the world's coffee, for example, is grown by small-scale family farmers. They face low and volatile prices, lack access to capital and international buyers, and are often forced to sell to exploitative middlemen at prices below their costs of production. Workers on banana plantations, on the other hand, often encounter union-busting companies, exposure to toxic chemicals, hazardous working conditions and low pay.

The Fair Trade model originally set out to empower small-scale coffee farmers, who are the most vulnerable and marginalized participants in the coffee sector. By getting organized into democratic cooperatives and participating in Fair Trade, coffee farmers are able to gain access to international markets, earn higher prices, invest in their farms and communities, and strengthen their organizations.

As Fair Trade has expanded into products that are typically grown on plantations using hired workers (like bananas and tea) and products produced in factories (like soccer balls), FLO has developed standards to address the problems faced by the millions of landless workers in those sectors. The Fair Trade standards for plantations with hired workers address wages, living and working conditions, and the right to organize.

To date, FLO has not created a set of standards for coffee estates and plantations with hired workers. Many current participants in Fair Trade, including small-scale coffee farmer groups and some licensed companies, fear that Fair Trade plantations and estates would compete unfairly with small-scale farmer cooperatives just as they are beginning to develop the capacity to become competitive participants in international trade. FLO maintains that since less than half of the total certified coffee production is sold on Fair Trade terms, worldwide demand for Fair Trade Certified coffee is still too limited to support both small-scale farmer organizations and plantations. Therefore, any discussion of opening Fair Trade markets to coffee plantations and estates will most likely be postponed until the market grows large enough to absorb them without undermining the position of the small-scale coffee farmer groups.



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