4 new gafta contracts 88 89 andrew jacobs a. poortman uk

Presented by Presented by

ANDREW JACOBSANDREW JACOBS Managing DirectorManaging Director

A. A. PoortmanPoortman [London] Ltd.[London] Ltd.

CICILS Convention, Brisbane May 2nd 2010

New GAFTA Contracts 88 & 89 for containerised transportation

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• KEY CLAUSES• Gafta

88 – for CIF / CFR transactions

• Gafta

89 – for FOB transactions

Innovations # 1 ‐11

Six Recommendations

• INTRODUCTION

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GAFTA provides many services which include training courses and distance learning programmes, trade policy representation, a quality assurance scheme, as well as standard forms of contracts with supporting rules for the transboundary movement of goods globally.

The Grain and Feed Trade Association, GAFTA, represents the international trade in grain, feed, pulses, rice, spices and general produce. The Association started over 130 years ago. It currently has almost 1200 members in 85 countries and has offices in London, Geneva, Beijing and Kiev.

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There are a number of risks in trading. The risk of the goods, the shipment risks as well as documentary risks.

It is a feature of shipping that it depends upon a variety of commercial activities. The need for goods to comply with their contractual provisions is highly important.

GAFTA therefore provides standard forms of contracts and supporting rules to complement the essential elements of the trades, (such as price, quantity, time and place of shipment/delivery and quality) and sets down the means and methods by which a contract is to be performed.

It is therefore important to GAFTA that its standard forms of contract represent the customary practice in the trade.

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GAFTA contracts are used world‐wide asthey are recognised to be even handed to the rights andresponsibilities of both sellers/exporters and buyers/importersthe fairness and legal robustness of GAFTA Arbitration service



GAFTA has responded to the needs of the Pulses / Special Crops industry with new and updated containerised contracts # 88 & # 89

reflecting the “customs of our

trade”, introducing 11 innovations

Separately I am making Six Recommendations

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New GAFTA Contracts 88 & 89for containerised transportation

GAFTA # 88 (for CIF/CFR) and # 89 (for FOB) will from June 1st 2010 replace GAFTA # 86 which has been in use for containerised

transportation for over 25 years, so the time had come to "refresh and update”

to reflect current “customs of the trade”

GAFTA Contracts Committee comprises 12

industry experts with combined international trade experience of over 275 years.

I was co‐opted to represent the Pulse/Special Crops trade with specific and relevant experience of containerised transportation

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New GAFTA Contracts 88 – CIF / C&Ffor containerised transportation

Clause 4: lines 22‐25 BROKERAGE

Standard GAFTA provision that Brokerage is payable “goods lost or not lost, contract fulfilled or not fulfilled”

[unless cancelled under Prohibition or Force Majeure

clause]

Header: All types of packaging included in the title bulk or bags, cartons, drums or tins ‐

Innovation # 1

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New GAFTA Contracts 88 – CIF / C&Ffor containerised transportation

Clause 5: lines 27‐48 QUALITY

Various options exist

• Line 28: Final at point of stuffing container = “shipped quality final”

• Line 30: Final at time and place of discharge or unstuffing

of container= “delivered quality final”

• Line 32: Final “as per sealed sample”

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New GAFTA Contracts 88 – CIF / C&F for containerised transportation

Clause 5: QUALITY

cont/…

• Lines 37‐44: Independent Certification ‐

Innovation # 2but in absence of independence(often the case in Pulses/Special Crops industry)

• Line 39‐41: the Buyer has the right of re‐grading and/or analysis

This concept is borrowed from GAFTA 24, which was specifically designed by GAFTA for the Pulse trade 20 years ago

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Clause 5: QUALITY

cont/….

• Line 46: provision for FUMIGATION

• Line 48: provision for shipment in GOOD CONDITION which addresses seller’s responsibility to prepare cargo “fit for transit”

Recommendation One: Buyer should stipulate acceptable moisture content under goods description [Lines 8‐10]

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Clause 6: lines 50‐64 Extension of Shipmentasper

standard GAFTA provision

Clause 7: lines 66‐73 Period of Shipmentoption for parties to agree either

• Lines 67‐68: when containers are “ON BOARD”

OR

• Line 69: when goods are handed over to container consortia[“RECEIVED FOR SHIPMENT”]

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Clause 7: Period of Shipment

cont/…

• Lines 71‐73: in absence of specific agreement –

Innovation # 3when goods are actually handed over to container consortia [Received for Shipment B/L] becomes the default option.

Recommendation Two: Buyer needs to stipulate “ON BOARD”and obtain sellers agreement if they require this tougher condition

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Clause 8: lines 75‐77 Notification of shipment (C&F terms)

Sellers advice of container number[s] to enable Buyers to insure – Innovation # 4

Clause 9: lines 79‐82 Sales by Named Vesselasper


Clause 10: lines 84‐88 Shipment, Containers and Classification• Line 87 shall be in “containers fit for purpose” – Innovation #5

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Clause 11: lines 90‐111 Appropriation [advice of shipment] asper


• Line 111 “When a valid notice of appropriation has been received by Buyers, it shall not

be withdrawn, except with their consent”

Recommendation Three: Sellers to understand that you only get one chance; if you make a mistake when appropriating, you can only

withdraw appropriation with Buyer’s agreement – if appropriation is wrong [say quantity appropriated in excess of contractual tolerance],

Buyers could refuse and cancel contract

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Clause 12: lines 113‐146 Payment

• Line 115: C.A.D. on presentation of shipping documents or alternatively

• Line 116: on arrival of vessel at destination –

Innovation # 6

• Lines 117‐142: asper


• Line 143‐146: interest payable if there has been unreasonable delay in payment does not

give buyer option to delay,

as Clause 12a takes precedent

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Clause 13: lines 148‐149 Duties, taxes, levies, etc.asper


• Line 148: All export

duties, taxes, levies etc present or future in country of origin

shall be for Seller’s

account

• Line 149: All import

duties, taxes, levies etc present or future in country of destination

shall be for Buyer’s account

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Clause 14: lines 151‐157 Weighing

–

options available

• Line 152: Final at time and place of loading at Seller’s expense

• Line 153: Final at time and place of discharge at Buyer’s expense

• Line 157: Independent weighbridge certification with deduction of pallet weight where appropriate [acknowledging trend to ship on pallets] Innovation # 7

Clause 15: lines 159‐160 Deficiencyasper


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Clause 16: line 162 DischargeContainers shall be de‐stuffed promptly after release of the containers by

the shipping line

–

Innovation # 8

This acknowledges that many industrial end users have little or no raw material storage and have developed the habit of holding cargo in

containers at, or near, port of destination without de‐stuffing, thus without knowing if quality received is or is not contractual or in sound

condition.

Recommendation Four: Seller should ‘know your customer,’

and be aware if container can sit for weeks at, or near, port of destination

before discharge, and reflect on what additional measures

should be taken to ensure cargo remains in sound condition

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New GAFTA Contracts 88 – CIF / CFR for containerised transportation

Clause 17: lines 164‐195 Insurance asper


• Lines 167‐170 Risks covered: “Cargo Clauses WA – with average, including War, Strikes, Riots and Civil Commotions”

with first class

underwriters or companies domiciled or carrying on business in UK and who provide an address for service of [legal] process in London

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Recommendation Five: I consider it more important to have Insurance Claims Settling Agent specified at Port of Destination

than to have UK

domiciled insurer, but it is up to both parties to agree this

Recommendation Six:

Be aware there is no provision for “deductable / franchise”, cargo must be insured for 102% of CIF invoice value –

although our custom is to require insurance for 110%

of CIF invoice value, in order to put us back in “no worse place”

should cargo be lost,

considering Buyer will otherwise lose their profit on the transaction

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Clause 17.2: lines 197‐200: Insurance

cont/…

Whilst it is Buyer’s responsibility to cover insurance on C&F transaction, if Seller’s request evidence that cargo has been insured and Buyers

refuse or fail to provide evidence, then Sellers are entitled (but not obliged) to cover insurance at Buyer’s expense

++++++++++++++++++

Remaining Clauses 18-28 are as per current standard GAFTA provisions

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New GAFTA Contracts 89 - FOB for containerised transportation

Header: All types of packaging included in the title ‐

Innovation # 1

Clause 4: lines 20‐23: BROKERAGE same as # 88

Standard GAFTA provision that Brokerage is payable “goods lost or not lost, contract fulfilled or not fulfilled”[unless cancelled under Prohibition or Force Majeure

clause]

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New GAFTA Contracts 89 - FOBfor containerised transportation

Clause 5: lines 25‐42: QUALITY same as # 88Various options exist• Line 26: Final at point of stuffing container = “shipped quality final”• Line 28: Final at time and place of discharge or unstuffing of container = “delivered quality final”• Line 30: “as per sealed sample”• Lines 35‐42: Independent Certification ‐ Innovation #2

but in absence of independence (often the case in Pulses/Special Crops industry),the Buyer has the right of re‐grading and/or analysis

This concept is borrowed from GAFTA 23, which was specifically designed for the Pulse trade 20 years ago

• Line 44: provision for FUMIGATION• Line 46: provision for shipment in good CONDITION which addresses the seller’s responsibility to preparecargo “fit for transit”

Recommendation One: Buyer should stipulate acceptable moisture content in

goods description [Lines 8‐10]

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Clause 6: line 48: Place of Acceptanceat point of stuffing

or container depot, base or terminal in .......

Clause 7: lines 51‐60: Delivery Period

of stuffed container during ......

• Line 54: Bill of Lading shall be dated when the goods are handed over to the Container Consortia or their Agents= Received for Shipment B/L Innovation # 9

• Line 60: “and the container number”

–

Innovation # 4

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Clause 9: lines 62‐74:

Extension of Handing Overnot standard GAFTA provision for FOB contract,

Traditionally it is Buyer’s responsibility to fix and provide the freight; however GAFTA is responding to the “custom of the trade”

where it is

now common for Buyer to nominate a shipping line or loading agent, then Buyer relies on Seller to initiate placing of empty container for

loading and slot on vessel; hence giving

Seller’s unusual right of Extension of Handing Over on FOB contract Following same principle as Extension of Shipment Clause on # 88Innovation # 10

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Clause 10: lines 76‐77: Loading

• Line 76:

Containers shall be fit for purpose –

Innovation # 5

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Clause 11: lines 79‐99: Payment

Line 80: C.A.D. OR alternativelyLine 80: on arrival of vessel at destination – Innovation # 6 OR alternativelyLine 81: .. days from B/L date – Innovation #11Lines 85‐98 as per standard GAFTA provision same as # 88Lines 95‐98 Interest payable if there has been unreasonable delay in payment does not

give buyer option to delay, as Clause 10a takes precedent

Clause 12: lines 100‐106 Weighing

–

options available

same as # 88

Line 102: Final at time and place of loading at Seller’s expense OR alternativelyLine 103: Final at time and place of discharge at Buyer’s expenseLine 107: Independent weighbridge certification

with deduction of pallet weight where appropriate [acknowledging trend to ship on pallets] Innovation # 7

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Clause 13: line 109: Export Licence, if required, to be obtained by Sellers

Clause 14: lines 111‐112: Duties, taxes, levies, etc.asper


All export

duties, taxes, levies etc present or future in country of origin or shipment for Seller’s

account

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Clause 15: lines 114‐117: Insurance

same as # 88

Whilst it is Buyers responsibility to cover insurance on FOB transaction, if Sellers request

evidence that cargo has been insured and Buyers refuse or fail to provide evidence, thenSellers are entitled (but not obliged) to cover insurance at Buyer’s expense

++++++++++++++++++

Remaining Clauses 16‐25 are as per current standard GAFTA provisions

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GAFTA welcomes trading companies

to apply for membership

[National Organisations can not

be members of GAFTA]

Membership Application forms are included in your Welcome Pack

You will join an elite club of the world’s premier traders in cereals,

rice and pulses

You will benefit from regular briefings and up‐dates on changing

global regulations

You will benefit from having a trade organisation recognised all

over the world, which looks after and represents the interests of

traders in grains, feeding stuffs and special crops

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CICILS has a high level collaboration with GAFTA

These two organisations “complement”

each other

They should not be seen as “alternatives” to each other

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My name is Andrew Jacobs, Managing Director of A. Poortman (London) Ltd

We are specialist importers, distributors and inventory holders of quality Pulses, both conventional and organic, Birdseeds and organic Coffee

with offices in UK [head office], Holland [branch office] and China [own processing and export].

I am proud to have been associated with GAFTA & CICILS for more than 30 years

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Any questions ?

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4 new gafta contracts 88 89 andrew jacobs a. poortman uk

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