Bunker Terms - BIMCO Bulletin

Bunker Terms

Contracts and Clauses | Bunker Terms May 2018 Bunker terms adopted in New York By Anna Wollin, Manager, Contracts and Clauses at BIMCO B IMCOs Documentary Committee adopted a new edition of its standard terms for buying marine fuels at its meeting in New York on 2 May 2018. The revised contract, called the BIMCO Bunker Terms 2018, is the result of two years of discussions between buyers, sellers and physical suppliers, with the help of legal and insurance experts. Anna Wollin, Manager, Contracts and Clauses at BIMCO, is involved in the development of BIMCOs wide range of standard contracts and clauses. She is a lawyer by training and holds a Master of Commercial Law from University of Lund, Sweden and a Master of Maritime Law from Southampton University, England. Anna joined BIMCO in 2007. Anna Wollin The Bunker Terms are expected to appeal to buyers and sellers, who are much in need of industry-wide harmonised terms and conditions that can help increase contractual certainty and reduce disputes. The International Bunker Industry Association (IBIA) has been involved in, and supports, this important initiative. Some key bunker industry players representing 25% of the volume of global sales of bunkers annually have worked with BIMCO and given strong support for the new edition. The bunker industry is well known for its fragmented approach to contracting, where the seller has their own, often advantageous, terms. Variations of plus or minus 10% from agreed quantity, and a right to increase the price at any time before delivery, are frequently seen in sellers terms and conditions. Bunkers are commonly sold through a chain of contracts involving a number of traders. The absence of standard terms and conditions means there may be conflicting terms between the various contracts on important issues such as payment and credit, law and jurisdiction, and time bars. These conflicts often put the buyers at a disadvantage and have been the cause of many disputes over the years. By bringing together all the parties involved in bunker purchase transactions, BIMCO has been able to create a clear and balanced contractual platform. By harmonising bunker terms so they are back to back in chains of contracts, shipowners and operators can avoid conflicting clauses and minimise disputes which, in itself, will provide certainty to buyers and sellers alike. Refined delivery provisions Co-ordinating the delivery of bunkers with the arrival of a ship can be a challenging exercise. Suppliers need to optimise their resources in terms of barge availability, while buyers may face delays to their ship that could affect when bunkers can be received. The new BIMCO Bunker Terms contain comprehensive delivery provisions that regulate when the bunkers must be delivered in situations when the ship is ready to receive fuel within the agreed delivery window and when it is not. General market practice in the bunker industry is 30 days credit for payment and this is reflected in the Bunker Terms. Paying for bunkers on delivery remains an option for buyers and sellers, but it is unlikely to be used to any great extent. It is estimated that the bunker industry, today, is financed by USD 10-20 billion, and very few buyers would have the liquidity to purchase bunkers without the benefit of credit terms. The BIMCO Bunker Terms also include comprehensive provisions on claims management for quantity, quality and delay claims. New liability cap The previous edition of the Bunker Terms, from 2015, gained a good but limited foothold in the market, probably because of the lack of a maximum limit of the parties liabilities. This, invariably, is something negotiated and commonly included in suppliers and traders bunker contracts. To reflect market practice, the BIMCO Bunker Terms 2018 incorporate a default limit of the invoice value or USD 500,000, whichever is the higher amount. The USD 500,000 is a default minimum figure and the parties are free to agree a higher limitation amount for larger bunker orders. Custom-made As most bunker contracts are preceded by negotiations resulting in amendments, to tailor the terms to a particular transaction, BIMCO has developed a one-page Election Sheet for the BIMCO Bunker Terms 2018 to make this process more transparent. It clearly shows what changes have been made to the standard terms. This makes the new edition of the Bunker Terms a more flexible and negotiable document than its predecessors. Sample copies of the BIMCO Bunker Terms 2018 plus comprehensive explanatory notes are available from BIMCOs website. Secure and authenticated Word copies are available from BIMCOs contract-editing systems, IDEA and SmartCon. Connect with BIMCO Facebook Twitter Linkedin YouTube