Review Of FOSFA Contract No. 52, Edition 2019

The FOSFA Contract No. 52 is a contract form issued by FOSFA to be used for the FOB sales of crude sunflowerseed oil in bulk of EU origin delivered at the port of Rotterdam, at sellers` berth.
The sellers have the option to deliver the crude sunflowerseed oil at the ports of Amsterdam, Antwerp, Ghent, Dunkirk or Dieppe provided that they exercise this option not later than the first business day of the month prior to commencement of the delivery period. The sellers have also the option to deliver crude sunflowerseed oil of any other origin, but with the customs duty paid.

Vessel Nomination
The pre-advice period for the submission of the vessel`s or barge`s nomination notice is minimum 15 days prior to the expected date of the vessel or barge readiness to load, except in the event of a string of FOB back-to-back contracts, where the vessel`s or barge`s nomination notice must reach to the first seller not later than 10  days before the expected date of the vessel or barge readiness to load.
The FOSFA Contract No. 52 does not stipulate any requirements to be complied with by the vessel to be nominated by the buyers, other than the requirement to be classed 100A1 in Lloyd`s Register or have an equivalent class notation assigned by other classification society.

Conditions For The Vessel Substitution
The buyers may substitute the originally nominated vessel provided that the expected readiness date of the substitute vessel will not be earlier than that of the originally nominated vessel and not later than 10 days, unless otherwise agreed by the sellers, and that the expected readiness date of the substitute vessel falls within the contract delivery period. FOSFA Contract No. 52 does not allow the buyers to request extension of the contract delivery period.
The buyers must give the vessel substitution notice to sellers not later than 2 business days before the expected readiness date of the originally nominated vessel.
What the Clause 8 of FOSFA Contract No. 52 does not say it is that the substitute vessel must comply with the requirements stipulated by the sellers in the sale contract in respect of size and de-ballasting capacity.
The FOSFA Contract No. 52 should have also stipulated that if the substitute vessel presents for loading earlier than the expected readiness date of the originally nominated vessel, the substitute vessel`s NOR shall not become effective and the time will not count as laytime prior to such date.
The FOSFA Contract No. 52 should have also stipulated what will happen if the substitute vessel does not present ready for loading within the 10 days` time limit after the expected readiness date of the originally nominated vessel.

Nomination Of The Loading Berth
Following the nomination of ship or barge by the buyers, the sellers must nominate the loading berth. This is an express requirement of FOSFA Contract No. 52. The nomination of the loading berth by the sellers is a condition precendent to the presentation of ship or barge for loading, because until the loading berth is nominated by the sellers, the buyers cannot present the ship or barge to take delivery of the goods. Hence, the sellers` failure to nominate a berth in due time will constitute a breach of contract.
If the sellers nominate a Tank Storage Installation as the loading berth and the sunflowerseed oil cargo has been delivered to the Tank Storage Installation by a ship, the sellers shall have to present to buyers before loading a copy of the FOSFA Combined Masters Certificate issued by the Master of the vessel that carried the oil by sea from origin to the Tank Storage Installation showing that the immediate previous cargo carried by the ship was a commodity listed in the Annex to EU Commission Directive 2004/4/EC or any succesive Directive in force at the Bill of Lading date.
The EU Commission Directive 2004/4/EC is no longer in force since 17 June 2014. It was repealed by the EU Commission Regulation No. 579/2014¹, but the list of acceptable previous cargoes set out in the Annex to the EU Commission Regulation No. 579/2014 is mostly the same as in the Annex to EU Commission Directive 2004/4/EC.
The restrictions beyond the immediate previous cargo stated in the FOSFA List of Acceptable Previous Cargoes would also be applicable.
If the sellers nominate a Tank Storage Installation as the loading berth and the sunflowerseed oil cargo has been delivered to the Tank Storage Installation by a barge, the sellers shall have to present to buyers before loading a statement declaring the last three cargoes of the barge that carried the oil by inland waterways from origin to the Tank Storage Installation and certifying that the barge was dedicated for the transport of foodstuff only.
If the sellers nominate a Tank Storage Installation as the loading berth and the sunflowerseed oil cargo has been delivered to the Tank Storage Installation by truck, the sellers shall have to present to buyers before loading a statement certifying that the truck that carried the oil to the Tank Storage Installation was dedicated for the transport of foodstuff only.
Irrespective of the mode of transport used for delivery of the oil cargo to the Tank Storage Installation, whenever the sellers nominate a Tank Storage Installation as the loading berth, they will have to present to buyers before loading, in addition to the above-mentioned documents, a statement declaring the three previous cargoes in the shore tank(s) where the sunflowerseed oil is stored and certifying that the immediate previous cargo in the shore tanks used for the storage of the oil was a product listed in the Annex to EU Commission Directive 2004/4/EC or any succesive Directive in force at the date of the actual storage of goods, i.e. EU Commission Regulation No. 579/2014.

NOR And Commencement Of Laytime
The first sentence of Clause 9 of FOSFA Contract No. 52 stipulates that:

"Notice of readiness at loading port to be given during local office hours and laytime to start counting 6 hours after such notice has been tendered."

What the Clause 9 says it is that if the vessel`s NOR is given during office hours, the laytime shall start to count at 6 hours after the time when the NOR has been tendered. What the Clause 9 does not say it is that if the vessel`s NOR is given outside office hours, then provided the vessel complies with the contract conditions for giving the NOR, the NOR remains valid but it will become effective only at the start of office hours on the next working day. A non-contractual NOR which is given outside the office hours is not effective to start the laytime clock running at the time it is given².
The Clause 9 of FOSFA Contract No. 52 stipulates also that the vessel`s NOR must not be given prior to the expiry of the 15 days` pre-advice period. If nonetheless the vessel gives NOR before the expiry of the 15 days` pre-advice period, the vessel`s NOR shall not become effective to start the laytime prior to the expiry of the 15 days` pre-advice period unless the sellers agree to load earlier in which case the laytime shall start to count from the time of commencement of loading.
If the vessel presented by the buyers for loading fails to pass the tanks` inspection upon berthing, the time lost from rejection until approval of tanks by superintendents shall not count as laytime. Furthermore, if the commencement of loading will be delayed by more than 72 hours after the time of the sellers` acceptance of NOR due to the vessel`s failure to pass the tanks` inspection, any extra storage charges incurred by the sellers shall be for the buyers` account.

Extension Of The Delivery Period In Case Of Force Majeure Event
In case of a force majeure event, the contract delivery period shall be extended with 21 days beyond the termination of the force majeure event, unless the force majeure event continues for more than 60 days beyond the contract delivery period in which case the sale contract shall be cancelled.

Extension Of The Delivery Period In Case Of Prohibition Or Partial Restriction Of Exports
In case of prohibition or partial restriction of exports, the contract delivery period shall be extended with 21 days beyond the termination of the prohibition, unless the prohibition continues for more than 30 days in which case the sale contract shall be cancelled.

Settlement Of Disputes
Disputes arising out of the sale contracts incorporating the FOSFA Contract No. 52 shall be referred to arbitration in accordance with the FOSFA Rules of Arbitration and Appeal.

by Vlad Cioarec, International Trade Consultant

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


Endnotes:

1. The EU Commission Regulation No. 579/2014 stipulates that the liquid oils intended for human consumption may be transported by sea in vessels which are not dedicated for the transport of foodstuffs provided that the previous cargo was a substance or a mixture of substances listed in the Annex to the Regulation.
2. See the English law case Galaxy Energy International Ltd. v. Novorossiysk Shipping Company (The "Petr Schmidt"), [1998] 2 Lloyd`s Rep. 1