Lack of clarity on the implications for the cocoa industry of the financial penalities imposed by the EU on the Ivory Coast has prompted trade representatives in the bloc to seek additional information from the Commission.
The EU has tightened its economic sanctions against the West African cocoa producing country in a move to try and unseat incumbent president Laurent Gbagbo, who has failed to concede defeat despite the UN saying he lost November’s presidential election.
EU Council Regulation 25/2011, which entered into force on 15 January 2011, is targeted at individuals and organisations in the Ivory Coast said to be jeopardising the proper outcome of the electoral process.
The European Cocoa Association (ECA) and the Federation of Cocoa Commerce (FCC) sent a joint communiqué last week to the Commision requesting more information about the regulation in order to gain greater understanding of how the sanctions would impact the cocoa supply chain.
The new measures block most trade between the EU and Ivory Coast, the world’s top cocoa producer, by barring any financial transactions between Europe and any of the people or entities on the sanctions list, which includes the country’s two main ports, as well as cocoa and petroleum companies.
In the letter to the Commission, the two trade bodies point out that "the lack of clarity of the Council Regulation effectively means that cocoa business is being conducted in a regulatory environment which is unclear.
The members of ECA and FCC are as a consequence exposed to certain risks as they endeavor not only to keep the economy moving forward in very difficult circumstances on the ground, but to do so with uncertainty in that they may unintentionally breach the terms of the Council Regulation."
The two cocoa trade bodies said that the measures are unclear in many respects including their scope of application. They question whether non-EU companies are also subject to the sanctions and the letter seeks additional information in relation to the impact of the EU regulation on prior commitments or contracts with entities in the Ivory Coast.
The ECA and the FCC said that they note "with much concern" that the ports of Abidjan and San Pedro together with the Coffee-Cocoa Sector Management Committee (CGFCC) have been included within the organisations on the EU sanctions list, and they have asked the Commission to clairify how cocoa shipments can be put through without the standard export tax-based payments to these bodies.
Cocoa, observed the trade bodies, represents the main source of income for over 800,000 Ivorian smallholder farmers, and mploys an additional significant number of Ivorians in activities such as transformation and transport. "Any interruption of the cocoa trade, at this key moment of the cocoa season, will impact families’ livelihoods significantly."
The industry represenatives added that they will do whatever is required to assist in the design "of an appropriate and workable mechanism to enable the international community to deliver what is intended by the sanctions set out in the Council Regulation but which recognises the need for the cocoa business to continue."
In terms of cocoa prices, Laurent Pipitone, interim director of economics and statistics division of the International Cocoa Organisation, told ConfectioneryNews.com that it is difficult, at this juncture, to predict the impact of the recently imposed EU sanctions.
Meanwhile, cocoa futures on the Liffe commodities' exchange in London were up 3.9 per cent today, with insiders citing Sunday's announcement by the president-elect of the Ivory Coast, Alassane Outtara, of a suspension of all exports including cocoa and coffee for a month from today as a reason for the hike. The move by Outtara is an attempt to cut off funding from his rival Gbagbo.
The London futures on the commodity, according to Bloomberg, reached £2,223 pounds per tonne this morning, the highest since early August 2010.