Introduction
Types of export sale
Chartering grain shipments
WFP charter party, part II, states
Role of chartering broker
Port phytosanitary inspectors
· The responsibility and obligation of charterers/shippers, ships owners, shipping agents, and Plant Quarantine.
The majority of export contracts are transacted offshore, but some buyers find it advantageous to be located for example, in the United States. All exports under the federal government's PL 480 or "Food for Peace" Program, by law, must however be negotiated in the United States.
The marketing of grain in the United States has some unique features compared with those of other major grain-producing nations. For example:
· it is relatively free of governmental regulation,
· it is primarily in the hands of the grain industry,
· governmental control is limited in most instances to certification of quality and weight, and
· ownership is very diverse prior to marshalling grain in sufficient quantities to meet export sales contracts.
This diversity of ownership and of knowledge to adequately store grain, can result in a variety of preventive insect control practices ranging from none to the very best. Grain is often stored on-the-farm, in relatively small quantities. As a result, when it becomes necessary to assemble large quantities to meet one or more sales contracts the grain rapidly becomes admixed as it moves from the multitude of storage sites and collection points to a U.S. export elevator. During this period it is (often) logistically impossible to adequately search out or detect lots of grain which may harbour insect infestations. Even when an infestation is discovered, the requirements of sufficient time and proper facilities may not he available to effect an acceptable insect control procedure.
Grain exported from the U.S. is visually inspected by the USDA's Federal Grain Inspection Service (FGIS) for the presence of live adult insects injurious to grain. If sufficient numbers of live insects are found, the lot of grain in question is assigned the special grade "weevily". The exporter has the following options:
· Receive an inspection certificate indicating that the grain is "weevily";· Remove that portion of grain determined to be "weevily" from the vessel. Inspection personnel are required to conduct a subsequent inspection of the grain remaining in the hold to ensure no further infestation remains;
· Fumigate the grain in the hold after which inspection personnel examine the grain to ensure that the infestation has been adequately controlled;
· Fumigate the infested hold(s) or the entire consignment in- transit by the approved method utilizing phosphine. Certification is provided that the treatment has been effective prior to ships arrival at port of destination.
In most U.S. grain exporting terminals, facilities exist only to load ships. To remove grain containing an insect infestation from a ship will often require moving a floating unloading facility and a barge to the site. This significantly increases the grain handling costs of loading and can delay the loading of other ships awaiting that berth. The option of fumigating the infested lot of grain on board the ship also requires that loading into the hold be stopped. Loading can only recommence after the inspector has certified that the insects have been killed. This option too can cause considerable delays, particularly if the other holds on the ship are filled or out position for loading, in addition to the safety hazard caused by the requirement that the inspector enter the hold to determine if the fumigation treatment has been effective.
The two major types of export sales are "F.O.B." and "C & F".
F.O.B. (Free on Board): Seller is responsible for placing grain at the end of the loading spout. Buyer is responsible for providing the ocean vessel.
C & F (Cost and Freight): Seller provides the cargo, covers the loading costs, and charters an ocean vessel for a specific destination.
Buyer pays for discharge.
Agreements are invariably set forth in detail in a contract of sale or purchase. A proper contract of sale or purchase must identify the following in concise terms:
· Who are the principals?
· What type and grade of commodities were traded?
· What quantity?
· When is delivery to be made?
· Where is delivery to be made?
· What price was agreed upon?
· How, when, and where is payment to be made and in what currency?
· What shipping documents are required to effect payment? (This can be very important when trying to cash the letter of credit).
Certain trade organizations have created contract forms that contain many standardized items widely accepted by the trade. Among them are the North American Export Grain Association (NAEGA), that has issued a widely used contract form for F.O.B. trades, and the Grain and
Feed Trade Association of London (GAFTA), that has prepared a series of forms for C & F and CIF (cargo insurance, and freight) transactions. Export sales are typically made directly between exporting firms and importing country buyers. In many developing countries, the buyer is a government or parastatal agency. In most other countries, the buyer is typically a merchandiser or buying agency who buys grain and resells it to end users in the importing country.
Most U.S. export sales are made under terms specified in North American Export Grain Association, Inc. (NAEGA) contract forms. Industry sources indicate that at least half of U.S. grain export sales are made under terms specified in the NAEGA F.O.B. contract. This contract specifies that:
· the quality and condition to be final at port of loading in accordance with official inspection certificates;· seller shall retain title to the commodity until seller has been paid in full, it being understood that risk of loss shall pass to buyer at discharge end of loading spout.
Therefore, the seller retains title of the grain until paid, but the buyer assumes all risk once the grain leaves the discharge end of the loading spout at the export elevator.
For most bulk grain shipments the party responsible for marine transportation; whether buyer or seller, will undertake "to charter" a vessel To charter a vessel is to rent it for carrying the commodity (grain) from a port of loading to a destination port where the grain is to be discharged or unloaded. A vessel may be leased to perform a single voyage or consecutive voyages or for a specified period of time, such as one year. The contractual leasing document is called a "charter party". Under this arrangement:
· The charterer is the buyer or lessee of shipping space;
· The shipowner is the seller or lessor;
· The broker is the intermediary whose function it is to keep both sides negotiating until an agreement is reached.
Charter-parties are of two basic types: Voyage charters and time charters
The actual contractual format may vary according to the requirements of each situation. In the grain trade the following types of voyage charter forms are generally used, with some modifications to suit each charterer's local circumstances and needs:
· North American Grain, called "Norgrain";
· Baltimore form "C", commonly known as "BFC";
· Chamber of Shipping River Plate, called "Centrocon" (from Argentina);
· Australian Grain Charter, called "Austwheat";
· Synacomex (grain shipped from the continent);
· Cencon (ie, from Brazil, where NORGRAIN contracts are increasingly being used).
The essential clauses of a charter-party specify viz.:
· Owners/vessel characteristics;· Cargo/trade;
· Terms of payment;
· Period of time;
· Lay-day. Lay-days are the dates during which the vessel is to arrive ready for loading. Charterers are not obliged to begin loading until the first date within this period. Lay-time, the period during which the vessel can be loaded or unloaded without payment of demurrage, consists of a specific number of "lay-days". Lay-time usually begins at 07.00 a.m. of the first business day following the Notification of Readiness.
· Inclusion of special protective clauses. New "Both to Blame" Collision Clause. New Jason Clause, War Risk clause, US Clause Paramount and Protective and Indemnity Club, Oil Bunkering clause are usually attached to the charter party and are deemed to be fully incorporated in the charter party and bills of lading.
Para 29. Exception Clause:
· The provisions of the International Brussels Convention 1924 as amended by the Protocol signed at Brussels on Feb 23rd 1968 (the Hague-Visby Rules) are to apply to this Charter Party and to any non-negotiable cargo receipt issued hereunder in those circumstances in which the Hague-Visby Rules would apply compulsorily if a Bill of Lading had been issued.
However in circumstances in which the Hague - Visby Rules are not applicable it is agreed that the provisions of the International Brussels Convention 1924 (the Hague Rules) shall apply to this Charter Party and to any Cargo Receipt issued hereunder.
· Neither the owners nor the Charterers shall, except as otherwise provided in this Charter Party, be responsible for any loss, damage, delay or failure in performance hereunder arising or resulting from Act of God, Act of War; seizure under legal process; quarantine restrictions: strikes; boycotts; lockouts; riots; civil commotions and arrest or restraint of Princes, Rulers or people.
The position may be that special clauses should be inserted into a charter party to cover LGB. If LGB control at shipment were built into contracts then costs or supplying grain could be adjusted in anticipation of the costs routinely added for fumigation at port of consignment, and prior to export.
· Demurrage:Rate or amount payable, per weather working day or portion thereof, to the shipowner by the charterer as a penalty for the latter's failure to load or discharge a cargo within the "lay- time" specified in the charter party, provided, however, that the delay was not due either to circumstances within the control of the shipowner or beyond the control of the charterer. The rate of demurrage is determined by the shipowner in accordance with the size of the ship and the rate generally prevailing.
· Dispatch:
This term means the rate or amount payable, per "weather working day", or portion thereof, by the shipowner to the charterer as a reward for the latter's accomplishment of loading or unloading a cargo in less than the "lay-time" specified in the charter-party. Dispatch is the converse of demurrage, and dispatch money is usually computed at one half of the rate of demurrage.
Such specialists may be engaged by a shipowner or shipper,¹ and are customarily referred to as chartering agents or chartering brokers2 and are paid a commission for their services (usually paid by a shipowner unless other wise stipulated), which customarily is 1.25 per cent of the gross revenue and any demurrage. When two or more brokers are involved, duplicate (double) brokerage is normally paid.
1 The word shipper, when used in reference to the ocean transportation of grain, is synonymous with "charterer". A buyer of grain on f.o.b. basis is a shipper, as he has to lease shipping space or a full tramp vessel for carrying the grain. The seller of grain on c.i.f. basis is also a shipper, as he assumes responsibility for booking shipping space or a full cargo vessel.2 A "chartering agent" or "broker" may represent either the "charterer" ("shipper") or the shipowner in negotiations related to the contract for leasing a vessel. The charterer's agent is the representative of the charterer, and the "owner's" agent is the representative of the shipowner. When negotiations are successfully completed and approved by the charterer and the owner, a chartering agent prepares the control called "charter-party" for signature.
The principal functions performed by the two brokers are:
· To determine the form of charter and special provisions that most closely meet the needs of the particular transaction;· To facilitate the negotiation of the terms and broker the charter on behalf of the principals;
· To chart the vessel's position and availability for loading and to co-ordinate delivery of cargo to shipside;
· To ensure that the required notices of readiness are given, that the election of loading or discharging port or berths are declared, and that appropriate insurance coverage is obtained;
· To supervise the preparation of dispatch, demurrage, and lay- day statements, payments of dues and customs at various ports, and settlement, insofar as possible, of disputes arising in this connection;
· To obtain certification of freight invoices, arrange for surrender, bills of lading, facilitate collection of freight, etc.;
· To arrange for the appointment of port agents and to issue appropriate instructions.
Shipping or freight forwarders. Because of the distance from the source of supply, procurement officials may have to rely on shipping agents or freight forwarders to help in the execution or implementation of their contracts. The functions of the freight forwarder or shipping agent include the following:
· To discuss and offer technical advice in respect of invitations of bids, purchase contracts, etc, in cases where transportation is an element or component of the transaction as a whole.· To participate in the construction of purchase contracts and charter-parties, especially the transportation aspects and commercial practices relating to the shipping and perhaps payment/collection.
(a) To receive tender of the vessels (after being satisfied that the vessel's representatives furnish evidence of the vessel's arrival within the limits of the port, and that the vessel is ready in all respects to load and carry the cargo, as may be prescribed in the charter-party).(b) To prepare, and/or to have prepared, the relevant bills of lading.
(c) To represent the charterer at the loadport with a view to ensuring that the charterer's turn at the loading berth is maintained (thereby mitigating risks of loss of lay- time liable to demurrage, or enhancing dispatch earnings), or to give notice to vessel owners when time may be lost owing to a deficiency on the part of the vessel, e.g. if after the vessel has been tendered it is found to need repair which may adversely affect the speed of berth assignment, loading etc.
(d) To ensure that the supplier is not causing or contributing to delay of the loading, berth assignment, etc. which might result in demurrage or reduce despatch to the charterer's/buyer's detriment.
(e) To prepare and/or collect and distribute the relevant shipping documents as may be required, e.g. bills of lading, statements of facts, manifests, export declarations, stowage plans, etc.
(f) To maintain liaison among the many parties involved in the transactions.
(g) To keep charterers/buyers informed of any local or other developments which may arise and which in any way may directly or indirectly affect a particular transaction; and
(h) To co-ordinate the activities of the buyer/charterer which may involve shipping through many ports to and through local port agents.
Inspectors should be aware of ships arrival well inadvance of its arrival at anchorage, issuance of Notice of Readiness to commence discharge or coming along-side its appointed berth. The Inspectorate should be active in ascertaining information on the origin of the shipment (which may have been assembled from different locations prior to loading at the export terminal, and therefore, constitute a risk in new pest introductions), be familiar with relevant clauses in the purchase contract and charter-party, as well as all agencies involved. Plant quarantine requirements (treatments at export terminals, certification, and subsequent treatments and their associated costs on arrival) should be adequately covered in contractual obligations. This becomes particularly important, if shipboard fumigation (for ships arriving infested) cannot be done to an appropriate standard and grain must be off-loaded, segregated and fumigated under sheets in port transit sheds. The responsibility transfers to the owner of the grain once it is over-the rails, unless this has been previously specified, and would also include the costs of any curative treatments.
Wherever possible, and certainly in cases where ship's are carrying maize from countries where LGB is known to be endemic, or recently established, inspectors should inspect ships whilst they are at anchorage to avoid potential delays and disputes that may arise once the ship has been piloted to its appointed berth. All relevant information (ie., Phytosanitary Certificates) can be collected from the Master, and clearances given to open the ships holds for compliance inspection at anchor, if this procedure does not constitute an infringement of the contract or other maritime regulations. Additionally, pheromone traps can be placed in holds, holds reclosed and traps inspected once the ship berths, if a perceived risk exists, and no live LGB were found during top-of-the-hold compliance inspection. Any additional costs should be covered by the shipowner or ships agent. covered by the shipowner or ships agent.
Most bulk grain ships berth in a similar manner:
· Grain ships always arrive on the quay during the hours of daylight.· Grain ships arriving at the weekend usually do not start discharging until Monday morning.
· Grain ships arriving in the afternoon rarely start discharging until the next morning.
· Grain ships arriving on the quay in the morning sometimes start discharging in the afternoon.
· Grain ships almost always work for 24 hours per day.
· All shipping agents keep Customs, Immigration and Health inspectors fully informed of ship movements because they know that the require their clearance before discharge can commence. The same must apply to Plant Quarantine clearances.
· Ship must open all hatches to allow full inspection of all holds.
Plant Quarantine will then issue a Clearance to Discharge notice following the inspection only if:
· Immediately if no live insects are found;· If live insect are found that are not of quarantine importance, a Clearance to Discharge notice will be issued only after confirmation of identification of any insect specimens by the PQ Laboratory.
· If insects are found which are believed to be of quarantine importance and confirmed as such by identification in the PQ Laboratory, the Clearance to Discharge notice will only be issued after fumigation has been carried out to the satisfaction of, and certification by, PQ.
After a Clearance to Discharge notice has been issued, and discharge commenced, if at any time live LGB or other quarantinable insects are found in the cargo and identified as such, PQ reserves the right (on the basis of its Regulations), to either stop the vessel discharging and order fumigation, and/or to order that all cargo from the ship is fumigated under-sheet(s) in the warehouse prior to its further distribution, with costs borne by the shipper/charterer.
