Review Of ANEC FOB Contract Form No. 41, Edition 2020

The ANEC FOB Contract No. 41 is a FOB contract form issued by ANEC (Brazilian Grain Exporters Association) to be used for the FOB sales of parcels of Brazilian soybeans.

Contract Price
The unit price is stated to be "basis Bulk Carrier, delivered free on board, stowed and trimmed".
The Brazilian soybean exporters should specify in their price quotations and sale contracts what type of bulk carrier would be suitable for such delivery: i.e. a self-trimming bulk carrier or a non-self-trimming bulk carrier.
The loading rate, time necessary for loading and ultimately, the loading costs will be in function of the type of vessel nominated and presented for loading by the buyers and the vessel`s characteristics, i.e. the vessel`s deck configuration, vessel`s hold shape and vessel`s de-ballasting capacity.

Vessel Nomination
The pre-advice period for the submission of the vessel`s nomination notice is minimum 15 days prior to the expected date of vessel readiness to load. In the vessel`s nomination notice the buyers must provide the vessel`s ETA date, IMO Number, flag, age and ownership and the quantity required to be loaded which must be in multiples of 1,000 MT. The minimum nominated quantity must be at least 1,000 MT.

Conditions For The Vessel Substitution
The Clause 8 of ANEC Contract No.41 provides that the buyers may substitute the originally nominated vessel in the following conditions:
- the originally nominated vessel is unable to proceed to loading port due to a force majeure event or the seller agrees the vessel substitution;
- the buyers must give written notice of substitution of the vessel to seller with at least 3 working days prior to the substitute vessel`s ETA at loading port;
- the notice of substitution must include all the information required about the substitute vessel, i.e. IMO number, flag, age, ownership;
- the ETA date of substitute vessel is not more than 5 days earlier or 5 days later than the last ETA date reported by the Master of the originally nominated vessel.
Maximum two substitutions are allowed under ANEC Contracts. A third substitution is allowed only for short shipped quantities.

Conditions For The Vessel Presentation For Loading Bulk Grain Cargoes At Brazilian Ports
The acceptance of vessels for loading bulk grain cargoes at Brazilian ports is subject to the prior approval of holds by a surveyor of the Brazilian Ministry of Agriculture and a qualified marine surveyor appointed by the sellers.
The vessel`s NOR tendered after berthing must be accompanied by the Certificate of Fitness for the Carriage of Cargo issued by the surveyor of the Brazilian Ministry of Agriculture and the Cargo Hold Inspection Certificate issued by the marine surveyor appointed by the sellers.
The ANEC Contract has no provision concerning the conditions for the presentation of vessel for loading, no cleanliness warranty and no mention about the mandatory inspection of holds.

NOR And Commencement Of Laytime
The vessel`s Master may tender NOR only upon the vessel is ready in all respects to receive the soybean cargo, i.e. after the vessel was inspected and approved for loading by a surveyor of the Brazilian Ministry of Agriculture and a qualified marine surveyor appointed by the sellers, at the berth ordered by the sellers<sup>1</sup>.
If the loading port is congested and/or the berth is not available at the time of the vessel`s arrival at the loading port, the vessel`s Master can give NOR upon arrival at the anchorage place<sup>2</sup>.
The laytime will commence to run at 08:00 a.m. on the next working day following the working day when the vessel`s NOR becomes effective, that is, after the expiry of the 15 days` pre-advice period. NOR tendered after 17:00 hours local time (Brazilian local time) on a regular working day or after 11:00 a.m. on Saturdays or Sundays and Holidays shall become effective only from 08:00 a.m. on the next working day.
If the Master tenders NOR upon arrival at the anchorage place and after berthing the vessel fails the holds` inspection, the time lost by the vessel waiting for berth will not count as laytime or time on demurrage. In such case, the laytime shall start to count upon the vessel is declared ready in all respects for loading. These provisions are in line with Sub-Clause 18 (b) of NORGRAIN-SOUTH CHARTERPARTY 2000, used to charter vessels for the carriage of bulk grain and oilseed cargoes shipped from the South American ports, which stipulates that:

"If the vessel is prevented from entering the limits of the loading/discharging port(s) because the first or sole loading/discharging berth or a lay berth or anchorage is not available within the port limits, or on the order of the Charterers/Receivers or any competent official body or authority, and the Master warrants that the vessel is physically ready in all respects to load or discharge, the Master may tender vessel`s notice of readiness, by telex, fax, radio if desired, from the usual anchorage outside the limits of the port, whether in free pratique or not, whether customs cleared or not. If after entering the limits of the loading port, vessel fails to pass inspections as per Clause 18(e) any time so lost shall not count as laytime or time on demurrage from the time vessel fails inspections until she is passed."

ANEC Contract Options For Counting The Time Spent By The Vessel At Anchorage Waiting For The Goods
The Brazilian farmers lack sufficient storage capacity to handle large crops. This is the reason why after harvest the grains and oilseeds are sent to ports by trucks. This leads to congestion on the roads and at the ports. The trucks wait sometimes for days to unload the goods at grain terminals. The slow arrival of grain and oilseed cargoes caused in the past loading delays and long waiting times for the buyers` vessels.
ANEC Contract provides two options for counting the time lost by the vessel waiting for the goods:

The first option is stated in Clause 11.1. In this case, the time lost waiting for the goods shall not count as laytime but the buyer shall be entitled to claim damages for detention for the time lost thereby. The detention shall be payable at the rate stated in the vessel nomination.
In case of FOB shipments from the port of Paranagua, the calculation of charge for detention is to be made pursuant to the Contractual Appendix 001 - "Calculation of Detention for shipment of products in Paranagua". If the vessel after being entered in the line-up of vessels is removed from the line-up at the request of Brazilian exporters due to delays in the arrival of cargo at the port (i.e. the cargo availability date is later than the expected date of vessel berthing) or congestion in grain terminal, the charge for detention of vessel shall be calculated from the date when the vessel called to enter into the line-up of vessels waiting for berth, provided that the vessel is in all respects ready to load and the pre-advice period has expired, until the day the vessel is re-inserted in the line-up.
In case of contracts for sale of parcels, the charge for detention shall be prorated amongst all shippers based on their parcels` quantity and the number of days that the vessel was retained on the waiting list due to their failure to have the goods ready for loading.

The second option for counting the time lost waiting for the goods is stated in Clause 11.2. In this case, the time lost waiting for the goods will count as laytime or if the laytime is exceeded, as time on demurrage. However, by stipulating a low rate of loading, the Clause 11.2 gives the Brazilian grain exporters a lengthy laytime and thereby protects them against a potential extensive liability for demurrage. Furthermore, if the goods arrive in time at the loading port, the Brazilian exporters can earn despatch money thanks to the port operators` ability to load at an average rate of 1,200 MT per hour.
In case of contracts for sale of parcels, if one or several sellers do not have the goods ready for loading at the berth, then the pro rata counting of laytime shall stop from the moment when all the goods are loaded by the sellers who had the goods ready for loading and the time shall count separately for the sellers of remaining parcels. If the vessel is not allowed to berth because one or several sellers do not have the goods ready for loading, the faulty sellers will be jointly and exclusively responsible for the time lost by the vessel until berthing.
The excepted periods to time counting, including the rain periods, will apply to the time spent by the vessel waiting for berth as in case of the time while the vessel is at berth.
The Debit Notes for detention or demurrage or despatch must be settled within 30 days from the date of presentation, but ANEC Contracts do not stipulate a time limit by which such debit notes should be presented.

The Contractual Time Limit For Tendering Valid NOR
The port operators schedule the grain shipments in function of the vessel`s laycan and expected readiness date.
The Clause 8 of ANEC Contract provides that the loading obligation date will be on the 16th day after the vessel nomination date or the first day of the contract delivery period, whichever is later.
If the Master will notify the shippers and port agents that the vessel will not be able to present for loading on the expected readiness date due to unexpected delays on the approach voyage to the loading port, the port operators will re-schedule the shipment date usually with no additional costs provided that the vessel will arrive within the contractual time limit after the expected readiness date.
The Clause 8 of ANEC Contract provides that the contractual time limit for the presentation of vessel for loading is 10 days from the expected readiness date notified in the vessel`s nomination notice. In the event that the originally nominated vessel does not present ready for loading within the 10 days` time limit, the loading obligation date shall be postponed with another 10 days.
The buyers must present the vessel ready in all respects for loading by 17:00 hours local time (Brazilian local time) on the last business day of the contract delivery period provided that the buyers have complied with the minimum 15 days` pre-advice requirement stipulated in the Clause 8 of ANEC Contract.  If the buyers nominate the vessel with at least 15 days before the last working day of the delivery period and the vessel arrives and tenders valid NOR by 17:00 hours local time (Brazilian local time) on the last working day of the delivery period, the buyers shall be deemed to have complied with the contract requirement and the sellers shall, if necessary, complete loading after the delivery period³.

Conditions For Extension Of The Delivery Period And Liability For Carrying Charges
If the buyer nominates the vessel with at least 15 days before the last working day of the delivery period and the nominated or substitute vessel arrives and tenders valid NOR by 17:00 hours on the last working day of the delivery period but the seller cannot commence or complete loading during the delivery period, the sellers shall, if necessary, commence and/or complete loading after the delivery period and bear the cargo carrying charges accrued after the delivery period.
Should the buyers fail to present the vessel ready in all respects for loading by 17:00 hours on the last day of the contract delivery period, they have the right to claim extension of the delivery period with additional 30 days by notice served to sellers not later than the last day of the contract delivery period.
In case of late nomination of vessel, that is, when the buyers nominate the vessel in less than 16 days before the expiry of the contract delivery period, the extension shall be deemed to have been claimed and the buyers will have to reimburse to sellers the cargo carrying charges accrued from the first working day after the expiry of the delivery period until the Bill of Lading date, even if the vessel arrives and tenders NOR by 17:00 hours on the last day of the contract delivery period, because the sellers must have the goods ready for loading on the 16th day after the vessel nomination date (i.e. after the expiry of the 15 days` pre-advice period), not sooner.

Buyer`s Obligation To Provide Evidence Of Insurance Cover
The buyer must obtain cargo insurance cover and upon the seller`s request, he must confirm by notice to the seller before the commencement of loading that the cargo insurance cover has been effected. If the buyer fails to provide evidence of insurance cover in due time, the seller shall have the right to obtain insurance cover for the buyer`s account and expense.

Quality Determination
The cargo`s quality characteristics (specified in the sale contract) must be determined and certified by a FOSFA member superintendent appointed by the seller, based on a composite sample.
The buyers have the option to appoint a FOSFA member superintendent to sample the cargo jointly with the sellers` surveyor and provide their analysis results of the cargo sample provided that the seller shall be advised, at the latest upon the vessel`s berthing, of the name of the surveyor the buyer has appointed.
If the difference between the sellers` and buyers` surveyors analysis certificates does not exceed 0.5% in respect of moisture content, 0.5% in respect of damaged beans, 0.5% in respect of heat damaged beans, 0.2% in respect of foreign matter, 0.5% in respect of greenish beans, 0.1% in respect of burned beans and 0.5% in respect of mouldy beans, then the analysis results certified by the sellers` surveyors shall be final and binding.
If the difference between the seller`s and buyer`s surveyors analysis certificates exceeds any of the above-mentioned percentages, then either party may ask within 45 days from the Bill of Lading date a third analysis of cargo sample. In such case, the average of the two closest analysis results shall be final as to quality of the cargo and shall be settled by a complementary debit note.
However, the seller`s surveyor analysis certificate attesting the cargo`s quality characteristics at the time and place of loading shall be final, that is, the buyer will have to pay for the cargo based on such certificate, even if the buyer asked a third analysis of cargo sample. The request of the third test shall not entitle the buyers to refuse or delay the payment of shipping documents.

Weight Determination and Certification
The cargo weight figure determined and certified by the independent surveyors appointed by the sellers based on the official shore scales shall be the basis for the calculation of price and issuance of commercial invoice.

by Vlad Cioarec, International Trade Consultant

This article has been published in Commoditylaw`s Grain Trade Review Edition No. 6.

Endnotes:

1. See Clause 10.
2. See Clause 10.
3. See Clause 5.