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  • Freight

     
     

    Where coffee is sold CFR/CIF the costs of bringing the goods to the port of destination are for account of the seller. If the rate of freight increases between the time of sale and the time of shipment then the increase is for the sellers account. Only increases that enter into force after the shipment took place shall be for the buyers account. This is indicative of the trades wish to control freights and shipping through the use of FOB contracts. Exporters who have to use national flag carriers therefore also have to accept they are potentially liable to pay for such freight increases.

    Place of embarkation. ECC does not speak of this but GCA states that for FOB, CFR and CIF contracts this shall be defined as the named seaport of the country of origin; for both the GCA and ECF FCA contracts it is defined as the place where custody of the coffee is turned over to the carrier for transport. The place of embarkation or point of delivery must always be clearly noted on the bill of lading or carrier's receipt.

    Port of destination. If this is not advised when the contract is concluded, the buyer must declare it at the latest by the deadline stipulated by either ECC or GCA. Otherwise a buyer could simply refuse to declare a port of destination and so frustrate the execution of a contract (for example, if the price had become unfavourable due to change in the market). Note that the ECC text states that the deadline is met when the declaration is made at the buyers place of business, i.e. all the buyer has to do is send the declaration by cable, fax, email, telex or other means of written electronic communication. The shipper cannot declare the buyer in default simply because no declaration has been received; if a declaration is overdue, the shipper should make inquiries rather than just let events unfold. GCA does not say this but clearly the same principle of due diligence applies - see the footnote below. However, whereas ECC sets a clear deadline for lodging a technical claim, GCA sets a limit of one year from the date the issue arises. Note also that ECC Article 27 states that communication by fax, email or other means of written electronic communication is at the parties own risk (basically because proof of dispatch and receipt is not automatic).

    Sometimes by the time the declaration (of destination) falls due the coffee has not yet been sold on and the buyer may not be in any position to declare a final destination. In the past the buyer would then declare a range of ports (e.g. Rotterdam, option Bremen/Hamburg), called options or optional ports. Then the goods would be stowed on board in such a way as to make discharge possible at any of the named ports, with the cost or option fees for buyers account.

    But on modern container vessels such stowage is difficult if not impossible and exporters should satisfy themselves therefore that the shipping line will in fact accept such cargo before they agree to ship to optional ports. Transshipment is a much more frequently used option but current transshipment practices often make it difficult to confirm the final vessel. Shipping advices against FOB contracts, and indeed bills of lading, can only mention the vessel that first loads the goods, leaving tracking of the goods to the buyer. Note also that bills of lading may stipulate the place of delivery as CFS (a container freight station) at or associated with the port of destination, regardless of the port of discharge.

    NB: To note that GCA also states that, in the case of a contract for forward shipment, if the buyer fails to declare the destination then the seller may ship to New York. ECC does not include any such provision.

    What this means in fact is that where a buyer fails to declare the destination in time, this GCA clause  offers the seller the choice whether to make shipment or not, always provided that such shipment is made within the contracted period. The underlying philosophy is to give a shipper an alternative if the buyer totally refuses to cooperate.  The shipper will then ship to New York and, if the buyer refuses to honor the documents, the goods are sold in the open New York market. The shipper then sends an invoice to the original buyer for any loss. If the buyer refuses to settle the shipper then goes to arbitration and wins a judgment that will be relatively easy to enforce in the US, based on New York Law. When a buyer refuses to give a destination, contract performance becomes secondary to legal action. New York is a coffee market with major liquidity and the assumption is that just about any coffee can be sold there whereas, with the exception of Japan and Canada, little coffee is traded on the CGA contract to non-US destinations. The entire procedure is a last resort obviously but it gives possible finality to an argument that otherwise could go on forever.

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