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  • The Green Coffee Association (of New York) contracts

     
     

    Many North American roasters purchase coffee ex dock: the importer/trade house deals with all the formalities of shipment and landing, including customs clearance and passing the obligatory sanitation check of the Food and Drug Administration (FDA). This latter check is particular to the United States and all contracts for importation into the United States carry the stamp-over clause no pass no sale. This means that if any or all of the coffee is not admitted at port of destination in its original condition by reason of failure to meet the requirements of governmental laws or acts, the contract shall be deemed null and void as to that portion of the coffee which is not admitted in its original condition at point of discharge. And further that any payment made for any coffee denied entry shall be refunded within 10 calendar days of denial of entry. (For more on this go to www.cfsan.fda.gov or apply for the information booklet Health and Safety in the Importation of Green Coffee into the United States from the National Coffee Association of the United States.) If coffee is refused entry under a contract that does not bear this over-stamp, in addition to having to refund payment as above the seller may also be required to make a replacement delivery within 30 days.

    Effective January 1st 2006 contracts should stipulate whether they cover 'Commercial Grade' or 'Specialty Grade' coffee. This will determine the type of arbitration that would be held - if nothing is specified, then the contract is automatically assumed to cover 'Commercial Grade' coffee.

    There are nine GCA contracts. Four of them deal with coffee that is sold outside of the country of destination, four deal with coffee sold inside the country of destination, and one deals with coffee delivered at the border or frontier. The main distinction between the contract types is based on how cost and risk are allocated between the parties. Go to www.green-coffee-assoc.org  for the full contracts.

    Free carrier (FCA). Risk of loss is transferred when the coffee is delivered to the freight carrier at place of embarkation. All freight charges, including loading onto an ocean vessel, railcar or trailer, are payable by the buyer.

    Free on board (FOB). Risk of loss is transferred when the coffee crosses over the ships rail. Terminal handling costs at the place of loading are for account of the shipper. Free on railcar (FOR) and free on truck or trailer (FOT) are variations of FOB, the only difference being the type of conveyance. The buyer pays the freight charges.

    Cost and freight (CFR). As for FOB except that freight is included in the price and paid by the seller.

    Cost insurance and freight (CIF). As for CFR but the seller also pays marine insurance and provides a certificate of insurance.

    Delivered at frontier (DAF). Under DAF contracts, risk of loss is transferred when the coffee is delivered to a named point at the frontier. Delivery takes place on arriving means of transport (trailer, truck, rail car), cleared for export but not cleared for import.

    Ex dock (EDK). When coffee is sold ex dock, risk of loss transfer takes place on the dock at port of destination, after all ocean freight and terminal handling charges are paid, and customs entry and all government regulations have been satisfied.

    Ex warehouse (EWH), delivered (DLD) and spot (SPT) contracts are outside the scope of normal export business and not discussed here.

    Price to be fixed (PTBF). This does not feature in ECC but GCA stipulates that such contracts shall specify the differential (value) that is added to or subtracted from an agreed price basis. When applicable the number of lots of coffee futures should also be mentioned, as well as whether buyer or seller has the right to execute the fixation. If there is margin payable between time of fixation and time of shipment/delivery, it must be determined at time of contract. Finally, the earliest and the latest fixation date shall be specified at time of contract. Any changes are to be by mutual agreement and in writing.

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