Review Of ANEC FOB Contract Form No. 71, Edition 2016

The ANEC FOB Contract No.71 is a FOB contract form issued by ANEC (Brazilian Grain Exporters Association) to be used for the FOB sales of Brazilian soyabean meal.

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 name and details (flag, age, ownership) and the quantity required to be loaded which must be in multiples of 500 MT. The minimum nominated quantity must be at least 500 MT.

Conditions For The Vessel Substitution
The Clause 7 of ANEC Contract No.71 provides that the buyers may substitute the originally nominated vessel in the following conditions:
- the ETA of substitute vessel is not more than 5 days earlier or 5 days later than the last reported ETA of the originally nominated vessel;
- if the ETA of the substitute vessel is earlier than the last reported ETA of the originally nominated vessel, the vessel substitution notice must be given to sellers with at least 3 working days prior to the substitute vessel`s ETA.
Maximum two substitutions are allowed under ANEC Contracts.
A third substitution is allowed for short shipped quantities.

Conditions For The Vessel Presentation For Loading Oilseed Meal Cargoes At Brazilian Ports
The acceptance of vessels for loading oilseed meal 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 oilseed meal 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 hours on the next working day following the working day when the vessel tenders the NOR.
The ANEC Contract does not stipulate clearly whether the time lost by the vessel waiting for berth will count or not as laytime or time on demurrage, if after berthing, the vessel fails the holds` inspection. The Sub-Clause 9.2 paragraph (G) provides that:

"Vessel must be ready in all respects to receive cargo. In case vessel is found unsuitable, laytime starts to count only when vessel is declared suitable in all respects to receive cargo."

The only helpful provisions can be found in the Sub-Clause 18 (b) of NORGRAIN-SOUTH CHARTERPARTY 2000, used to charter vessels for the carriage of bulk grain cargoes shipped from the South American ports, which provides 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 cargoes of soya bean meal 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 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 10.1. 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.
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 10.2. In this case, the time lost waiting for the goods will count as laytime or if the laytime is exceeded, as time on demurrage.
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, after getting the goods ready, those sellers shall be the first to load and any time lost thereby shall be for his/their account up to the moment he/they have loaded all his/their goods. Thereafter, the time shall count pro rata between the sellers who had their goods ready for loading.
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 shipment date will be on the 16th day after the vessel nomination date.
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 nomination shall be deemed to have lapsed and the buyers will have to make another vessel nomination subject to the minimum 15 days` pre-advice period.
The buyers must present the vessel ready in all respects for loading by 17:00 hours on the last 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 on that day, the buyers shall be deemed to have complied with the contract requirement³ and the sellers will have to bear the cargo carrying charges accrued after the delivery period.

Conditions For Extension Of The Delivery Period
Should the buyers fail to present the vessel in 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 sellers⁴.
The extension of the delivery period shall also be deemed to have been claimed in case of the late nomination of vessel. If 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 and Condition
The quality and condition of the goods ascertained at the time and place of loading by the superintendents shall be final, that is, provided that the samples` analysis certificate evidences that the cargo is within the contract quality specifications, no claim can be made by the buyer for subsequent deterioration. The buyers would only be entitled to reject the parcels found to be defective by the superintendents at the time and place of loading.
The buyers have the option to appoint independent surveyors to sample the cargo jointly with the  sellers` surveyors and provide their analysis results of the cargo sample.
If the difference between the sellers` and buyers` surveyors certificates as to protein and fat combined does not exceed 0.5% individually, then the sellers` surveyors quality certificate shall be final.
If the difference between the sellers` and buyers` surveyors certificates exceeds the above mentioned percentages, then within 45 days from the Bill of Lading date, a third test shall be carried out by a mutually agreed independent laboratory. In such case, the average of the two closest analysis results shall be final and shall be settled by a complementary debit note. The timing of payment of shipping documents shall not be delayed thereby.

Weight Determination and Certification
The cargo weight figure shall be determined and certified by the independent surveyors appointed by the sellers based on the shore scales.
The ANEC Contract stipulates that the cargo weight figure determined based on shore scales shall be the basis for the calculation of price and issuance of commercial invoice, irrespective of any other weight figure resulted from the vessel`s draft survey. In fact, it is not irrespective of any other weight figure. Only the shore – ship discrepancies up to 0.3% are deemed acceptable by the Brazilian port authorities.

Settlement Of Disputes
ANEC Contract No. 71 provides two options for the settlement of disputes:
- GAFTA arbitration in accordance with the GAFTA Arbitration Rules; or
- arbitration by Associacao Brasileira de Arbitragem – ABAR, Chamber of Arbitration in Sao Paulo, Brazil.

by Vlad Cioarec, International Trade Consultant

This article has been published in Commoditylaw`s Grain Trade Review Edition No. 5.

Endnotes:

1. See Sub-Clause 9.2 paragraph (G)
2. See Sub-Clause 9.2 paragraph (G)
3. See Clause 11 of ANEC Contract No. 71
4. See Clause 11 of ANEC Contract No. 71