Review Of The Shipping Conditions For Sales Of Indonesian Coal Basis FOBT Kalimantan

Laycan Fixation Notice
The buyers must give to sellers notice of the 15 days` laycan spread with at least 45 days prior to the first day of the contract delivery period. The 15 days` laycan must fall entirely within the contract delivery period.

Vessel Nomination Notice
If the sellers will accept the laycan, then not later than 21 days prior to the first day of the laycan, the buyers shall have to narrow the vessel`s laycan to a 10 days` spread, to nominate the vessel and declare the quantity of cargo required to be loaded with the 5% contractual tolerance.

Vessel Requirements
The type of vessel required to be nominated by the Indonesian shippers will be in function of the quantity of coal required by the buyers.
If the quantity of coal required is in the range of 30,000 – 60,000 metric tonnes, the Indonesian shippers will deliver the coal at an open sea anchorage (e.g. Taboneo Anchorage, Muara Satui Anchorage, Tanjung Anchorage) and will require the buyers to nominate geared bulk carriers in order to allow the shippers to load the coal from barges using the vessel`s cranes operated by local stevedores.
The bulk carriers with a deadweight in the range of 30,000 – 60,000 tonnes are equipped with 4 cranes with a lifting capacity (Safe Working Load) of 30 metric tonnes each, fitted with 4 electro – hydraulic grabs with a capacity of 10 – 12 cubic meters each. The vessel`s gear certificates (i.e. certificate of test and thorough examination of lifting appliances, certificate of test and thorough examination of derricks used in union purchase, certificate of test and thorough examination of loose gear, certificate of test and thorough examination of wire rope) must be valid and up-to-date. The vessel`s gears must have been examined and certified by a surveyor to be in safe working condition at least once in the last 12 months preceding the laycan at loading port.
The coal cargoes up to 60,000 metric tonnes can also be delivered on FAS (Free Alongside Ship) terms rather than FOBT terms. In a FAS delivery, the sellers bear the costs and risks until the coal is placed alongside the ship ready for loading. The buyers shall bear all costs and risks from that moment. Therefore, a FAS (Free Alongside Ship) delivery would be more favourable to the Indonesian sellers who can deliver the coal in barges alongside the ship provided by the buyers, leaving the buyers the task to find and pay the stevedores for loading the coal on board the ship.
If the quantity of coal required exceeds 60,000 metric tonnes, the Indonesian shippers will deliver the coal either at a shore terminal or at an open sea anchorage by means of a floating transshipper. In such case, the Indonesian shippers will require the buyers to nominate a gearless bulk carrier.
The nominated vessel must have self-trimming holds to allow the shippers to deliver the coal spout or grab trimmed.
The nominated vessel must have all the IMO required certificates valid, including a Certificate of Fitness for the Carriage of Solid Bulk Cargoes listing coal as a permitted cargo, a Certificate of Fitness for the Carriage of Dangerous Goods, the Bulk Carrier Booklet endorsed by the Flag State Administration, the International Ship Security Certificate, Maritime Labour Certificate, Safety Management Certificate and the Document of Compliance with the ISM Code.
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.
For the coal shipments at North Pulau Laut Coal Terminal, Taboneo Anchorage, Muara Satui Anchorage and Tanjung Anchorage, the Indonesian shippers use the RightShip Vetting System to determine whether to accept or reject the vessel nomination. To obtain RightShip approval, the nominated vessels must receive a minimum three star rating level. The nomination of vessels over 18 years of age is not acceptable because the RightShip Vetting System downgrades them automatically to a two star rating and require their physical inspection.

ETA Notice
If the vessel nomination is accepted by the port operators, the buyers will charter the vessel and then give the ETA Notice at least 14 days prior to the vessel`s ETA at the loading port.

ETA Updates
The buyers must ensure that the vessel`s Master will give through the port agents the ETA notices at 7 days, 3 days, 48 hours and 24 hours before the vessel`s ETA and inform the port operators of any deviation in excess of 24 hours from the initial ETA.

Conditions For The Vessel Substitution
The buyers may substitute the originally nominated vessel provided that:
- they give the vessel substitution notice to the port operators at least 5 days before the ETA of the originally nominated vessel;
- the substitute vessel will not arrive earlier than the ETA of the originally nominated vessel;
- the substitute vessel complies with the contract requirements in respect of type, size and de-ballasting capacity to be able to load the cargo quantity ordered by the buyers within the contractual time allowed for loading;
- the vessel`s demurrage rate is not higher than that of the originally nominated vessel.

The Submission Of The Vessel`s Loading Plan
The buyers must ensure that at least 72 hours prior to the vessel`s ETA at the pilot station of the loading port, the vessel`s Master must provide through the vessel`s agents the following information:
- the vessel`s loading plan;
- the final quantity of coal required to be loaded based on the vessel`s loading plan;
- arrival and departure drafts;
- the quantity of ballast water on board and the estimated time required for de-ballasting.
If the Master does not provide this information to the terminal operator at least 72 hours prior to the vessel`s ETA, any time lost thereby shall be solely for the buyers` account.

Conditions For The Vessel Presentation For Loading
The vessel must present for loading with the cargo holds clean, dry, empty, free of waste material and remnants of previous cargo and with the draught marks legible.
The gearless vessels shall be considered physically ready to load only after passing the inspection of holds. The inspection of holds shall be made by a qualified marine surveyor appointed by the sellers. The marine surveyor shall certify the cleanliness of holds by issuing the Hold Cleanliness Inspection Certificate. If the vessel has previously carried potential contaminants such as phosphates, sulphur, cement, salt, potash or iron ore, the marine surveyor inspecting the holds must certify that the holds are clean and free of contaminants.
If the vessel is an OBO (Ore/Bulk/Oil) Combination Carrier which has previously carried petroleum products, the Master can tender NOR only upon the vessel passing the inspection of PT Sucofindo.
All expenses and time incurred for making the holds gas-free and obtaining the Gas Free Certificate will be for the buyers` account.
The geared vessels shall be considered physically ready to load only after passing the inspection of holds and survey of the loading equipment.
If the loading equipment is not fully functional but the vessel is ready to commence the loading of coal with the available cranes and grabs, then the vessel shall be considered ready to load, even though not at the contractual rate of loading.
The only consequence of temporary non-availability of a crane or grab would be a proportional reduction in loading rate during the period of breakdown. The revised loading rate shall be assessed by an independent surveyor based on the lifting capacity of the functional cranes and grabs. This would be equally applicable to the breakdown existing at the time of the vessel`s arrival as well to the breakdown occurring subsequently.
The time lost due to the breakdown of cranes or grabs shall be deducted on a pro rata basis in function of the ratio between the cranes and/or grabs in breakdown and the total number of cranes and grabs.

NOR And Commencement Of Laytime
The vessel`s Master shall tender NOR upon the vessel`s arrival at the outer anchorage or pilot station  of the port of loading at any time, day or night, including Saturdays and Sundays, but excluding the Major Indonesian Holidays.
The 12 hours` Notice time shall start to count from the time of acceptance of NOR by the port operators provided that the vessel has arrived within the agreed laycan period and is in all respects ready to load the coal cargo.
The vessel shall be considered ready in all respects for loading if:
- she has obtained the ISPS clearance prior to the NOR tendering;
- she is not subject to an arrest order;
- she presents for loading in a seaworthy condition;
- she passes the holds` inspection.
If the Master tenders NOR before obtaining the ISPS clearance, the NOR shall be invalid and the Master will have to tender a new NOR upon receiving the ISPS clearance.
If the vessel is arrested prior to the commencement of loading, the sellers` loading obligation will be subject to the directions of the court which issued the arrest order. In such case, the Master may tender a new NOR only after the arrest order is lifted.
If the marine surveyor rejects the holds, the NOR tendered at anchorage shall be deemed invalid and the Master will have to tender a new NOR after he obtains the Hold Cleanliness Inspection Certificate from the marine surveyor. In such case, the laytime will start to count at 12 hours after the new NOR has been accepted by the port operators, unless the shippers commence the loading sooner in which case the laytime will start to count from the time of commencement of loading.
Given that the Indonesian coal shippers schedule their shipments in function of the vessel`s laycan, the commencement of laytime will also depend upon whether the buyers` vessel tenders valid NOR within the agreed laycan period or not.
If the buyers` vessel arrives at loading port and tenders valid NOR before the first day of the agreed laycan period, the NOR shall not become effective before 07:00 hours on the first day of the laycan and the 12 hours` Notice time shall commence to run from 07:01 hours on the first day of the laycan, unless the shippers commence loading sooner in which case the laytime will commence to run from the time of commencement of loading.
If for any reason, including the vessel`s late arrival or failure to pass the holds` inspection, the vessel does not tender valid NOR before the end of the cancelling day (the last day of the laycan period), the berthing of vessel after the laycan shall be subject to the consent of the shippers and the laytime will commence to run when the loading starts.
The commencement of laytime will also be in function of the Master`s compliance with the deadline imposed by the port operators for the submission of the vessel`s loading plan. If the Master fails to provide the vessel`s loading plan to the terminal operator or to the shippers at least 72 hours prior to the vessel`s ETA, the vessel shall not be included in the berthing programme on the expected readiness date and the 12 hours` Notice time shall not commence to run before the 72 hours` time limit from the submission of the vessel`s loading plan has elapsed.
In case of the vessel substitution, the commencement of laytime will also be in function of the buyers` compliance with the 5 days` time limit imposed by the port operators for the submission of the vessel substitution notice. If the substitute vessel arrives and tenders NOR before the expiry of the 5 days` notice period, the NOR shall not become effective before 07:00 hours on the fifth day after the day of substitution and the 12 hours` Notice time shall not commence to run before 07:01 hours on the fifth day after the substitution notice date.
The laytime shall cease to count at the time when the loading, trimming and final draft survey have been completed or when the cargo documents required to effect the Customs clearance are on board, whichever is the later.

Sellers` Obligation To Have The Goods Ready For Loading
The sellers must have the goods ready for loading at 07:00 hours on the first day of the laycan period.
The sellers shall be liable for any delay resulting from their failure to provide a free berth or anchorage and/or to have the coal cargo ready for loading and/or to provide the stevedores and/or the functional loading equipment in due time and any time lost thereby by the buyers shall be for the sellers` account.

Loading Conditions
The coal cargoes shipped at shore terminals by means of shiploaders shall be delivered free on board the vessel spout trimmed.
The coal cargoes transshipped from barges by means of floating transshippers shall be delivered free on board the vessel grab trimmed, i.e. trimmed by transshipper`s grabs.
The coal cargoes loaded from barges by the geared vessel`s cranes fitted with grabs shall be delivered free on board the vessel grab trimmed, i.e. trimmed by vessel`s grabs.
If the seller shall load the coal cargo using the vessel`s cranes, the vessel`s cranes shall be operated by local stevedores appointed and paid for by the seller. Any time lost due to the vessel`s gears breakdown caused by the stevedores` negligence shall count as laytime or time on demurrage.
Any damage caused by the stevedores to the vessel affecting the seaworthiness of the vessel or the proper working of the loading equipment must be repaired after each occurrence. Any time lost to repair the damage caused by the stevedores to the vessel shall count as laytime or time on demurrage.
The claims for damages caused by the stevedores to the vessel during loading must be settled directly between the shipowners and stevedores.

Cargo Weight Determination
The weight figure used for invoicing and issuance of Bills of Lading shall be determined by a marine surveyor based on the vessel`s draft survey before and after loading.

Sellers` Warranty As To The Cargo Fitness For Safe Carriage
Due to the propensity of Indonesian steam coal cargoes to self-heat, the contracts for the procurement of Indonesian steam coal contain a warranty as to the suitability of coal cargoes for sea carriage, as in the following clause:

"The shipment of coal will be fit to be carried safely in the vessel`s holds from the loading port to the port of discharge and shall not pose any risk of causing any damage or loss to the vessel by self-heating and spontaneous combustion."

Master`s Right To Reject The Coal Cargoes Considered Unsafe
Due to the numerous incidents involving self-heating of coal cargoes after being loaded on board the vessels off Kalimantan, in 2010 the P&I Clubs required their members operating in the region to engage surveyors to conduct pre-loading survey of coal cargoes loaded off Kalimantan. The surveyors are required to inspect the coal cargoes prior to shipment, to assess the risk of self-heating and reject the coal cargoes which are considered too hot or otherwise unsafe for carriage on board the vessels. Therefore, the FOB buyers should stipulate in their procurement contracts that the surveyors and Master of the vessel have the right to refuse to accept for loading the coal cargoes which in their opinion constitute a risk to the safety of the vessel.

by Vlad Cioarec, International Trade Consultant

This article has been published in Commoditylaw`s Coal Trade Review Edition No. 3.