The Vessel Requirements In The Grain And Oilseeds` FOB Sale Contracts
Grain and oilseed cargoes are transported by sea with four types of vessel:
- Conventional Bulk Carriers;
- OBO (Ore/Bulk/Oil) Combination Carriers;
- Box Shaped Bulk Carriers.
- Tween Deck General Cargo Vessels.
The Conventional Bulk Carriers are single deck vessels with heptagonal shaped holds which prevent the empty spaces from developing in the upper edges of the holds. They are the most economical type of vessel because their holds can be filled with free flowing grain in bulk without the need for any trimming of the cargo other than the spout-trimming by the shiploader or grab trimming. Hence, these type of holds are referred to as "self-trimming holds" and the conventional bulk carriers are referred to as "self-trimming bulk carriers".
The OBO (Ore/Bulk/Oil) Combination Carriers are vessels designed to carry both dry bulk cargoes and oil cargoes. They are single deck vessels with self-trimming holds but the access of shiploader or grab to the holds could be difficult due to the small hatch openings. Hence, they usually require extra trimming in addition to spout trimming and their loading takes longer than the loading of a conventional bulk carrier.
The Box Shaped Bulk Carriers are single deck vessels with box shaped holds. The loading of grain in bulk into the box shaped holds takes longer and costs more than the loading into the self-trimming holds of the conventional bulk carriers, because after loading the upper edges of the box shaped holds remain unfilled and therefore, it is necessary the trimming of cargo, i.e. levelling of grain cargo by moving it to the upper edges of the holds to reduce the risk of shifting during the voyage. This is the reason why the box shaped bulk carriers are referred to as "non-self-trimming bulk carriers".
Amongst the vessels with box shaped holds are: the open hatch gantry crane bulk carriers, semi-open hatch gantry crane bulk carriers, open hatch jib crane bulk carriers, semi-open hatch jib crane bulk carriers. These vessels are referred to as “Box Shaped Bulk Carriers”.
The Tween Deck General Cargo Vessels are vessels with two decks designed for the carriage of both break bulk and bulk cargoes. The loading of grain in bulk on board the tween deck general cargo vessels takes longer than in case of any other type of vessel and therefore, the grain terminal operators charge the highest rate for loading such vessels.
The FOB price quotations and sale contracts should stipulate the type of vessel required to be nominated because the loading rate, the time necessary for loading and ultimately, the loading costs are in function of the type of vessel presented for loading, particularly the vessel`s deck configuration, the vessel`s hold shape and vessel`s de-ballasting capacity.
The ANEC FOB Sale Contracts No. 41, 42, 43 and 44 are the only grain FOB sale contract forms that stipulate a different loading rate for each type of vessel:
- for Self-Trimming Bulk Carrier – 2,000 MT per day;
- for Non-Self-Trimming Bulk Carrier – 1,500 MT per day;
- for Non-Bulk Carrier – 1,200 MT per day1.
It also states that the buyer has the option to execute the contract with non-bulk carrier vessels but in such case the price will increase with USD 2 per metric ton over the price for delivery to bulk carrier vessels2.
The type of vessel required to be nominated in the FOB sale contracts should be in function of the delivery terms quoted by the sellers.
The FOB prices are quoted either on "spout trimmed" basis, on "grab trimmed" basis or on "stowed and trimmed" basis.
The exporters from the Black Sea Region quote the FOB prices on "grab trimmed" basis or on "stowed and trimmed" basis depending on whether the grain is loaded by cranes fitted with grabs or by shiploader. The grain is delivered by grabs in cases where the grain is stored in warehouses rather than silos and loading is made by shore cranes fitted with grabs or where the grain is loaded from barges by floating cranes fitted with grabs. A FOB price quoted on "grab trimmed" basis means that the seller`s responsibility ends when the grain is dumped into the vessel`s holds by grab.
The Canadian, US and Australian grain exporters quote the FOB prices on "spout trimmed" basis, because at Canadian, US and Australian ports the grain in bulk is loaded into the vessel`s holds directly from the terminal elevators by means of shiploader spout. A FOB price quoted on "spout trimmed" basis means that the seller`s responsibility ends when the grain is delivered at the discharge end of the shiploader spout.
Both NAEGA FOB Export Contract No. 2 and GTA FOB Contract No.1 provide that delivery shall be made on FOB spout trimmed basis but without stating the type of vessel required to be nominated by the buyer. A FOB spout trimmed delivery is possible only if the buyer nominates and presents for loading a vessel suitable for spout trimming, i.e. a self-trimming bulk carrier. That`s why a price quotation on FOB Spout Trimmed basis should also mention the type of vessel suitable for such delivery, as in the example provided below:
"USD ….... per metric ton, basis delivery FOB Spout Trimmed one (1) self-trimming single deck bulk carrier."
In the ANEC FOB Sale Contracts No. 41, 42, 43 and 44 the unit price is stated to be basis delivery FOB stowed and trimmed to a "Bulk Carrier". The Brazilian grain exporters should specify in the 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.
Another requirement concerning the vessel to be nominated it is that related to the vessel`s de-ballasting capacity. The nominated vessel must have sufficient de-ballasting capacity to enable the loading terminal operator to achieve the maximum loading rate applicable to that size of the vessel without the interruption of loading, i.e. the ballast water must be discharged at a rate which prevents the interruption of loading or at least it does not require the interruption of loading in excess of the time permitted by the terminal operator.
If the vessel sails under a Flag of Convenience, the vessel must have on board a valid ITF Blue Card to evidence the fact that the minimum terms and conditions of employment of the crew of the vessel are approved by the ITF (International Transport Workers` Federation).
Another requirement concerning the vessel to be nominated it is that the nominated vessel must have on board all the IMO required certificates valid, including the Document of Authorisation For the Carriage of Grain in Bulk and Grain Loading Manual, International Ship Security Certificate, Maritime Labour Certificate, Safety Management Certificate and Document of Compliance with the ISM Code.
The operators of the Australian grain terminals use the RightShip Vetting System to determine whether to accept or reject the vessel nomination.
RightShip uses three risk categories on a five star rating scale in the assessment of nominated vessels:
1. Acceptxxx
A three, four or five star rating means that the vessel is an acceptable risk with no further query required.
2. RightShip reviewxx
A two star rating means that RightShip must make a further review of the risk profile of the vessel, including the physical inspection of vessel. The two star rating is given to the vessels over 18 years of age.
3. Further Investigation requiredx
A one star rating means that RightShip needs to conduct a more detailed review of the vessel and owners, including the physical inspection of vessel.
by Vlad Cioarec, International Trade Consultant
This article has been published in Commoditylaw`s Grain Trade Review Edition No. 1.
Endnotes:
1. See Sub-Clause 9.2 of ANEC FOB Sale Contract forms No. 41, 42, 43 and 44.
2. See Clause 9 of ANEC FOB Sale Contracts No. 41, 42, 43 and 44.