i COMMERCIAL PRACTICE IN BUNKERING xiii Contents Foreword v Preface vii About the author ix Acknowledgements xi Introduction – The commercial deal xxi Chapter 1 - The enquiry 1 Where, when, how much ...............................................................................................................1 Deviating for bunkers.....................................................................................................................2 Buyer’s name ................................................................................................................................4 Vessel name ..................................................................................................................................4 Vessel type ....................................................................................................................................5 Port ................................................................................................................................................6 Bunker-only ports ..........................................................................................................................6 Offshore – outside port limits (OPL) ..............................................................................................7 Date and time ...............................................................................................................................7 What grade – speci?cation ............................................................................................................8 Quantity .........................................................................................................................................8 Special requirements .....................................................................................................................9 When prices are needed ...............................................................................................................9 When to ?oat the enquiry...............................................................................................................9 Who to ask...................................................................................................................................10 Chapter 2 - The offers 11 Details as enquiry ........................................................................................................................11 Price ............................................................................................................................................11 Delivery method...........................................................................................................................12 Concurrent bunkering ..................................................................................................................12 Quality .........................................................................................................................................12 Delivery costs ..............................................................................................................................12 Pumpback....................................................................................................................................13 Other costs ..................................................................................................................................14 Calling costs ............................................................................................................................14 Bunker-only cost comparison ..................................................................................................20 Overtime ..................................................................................................................................20 Pipeline fee .............................................................................................................................20 Anchorage charge ...................................................................................................................21 Oil boom charge ......................................................................................................................21 Fuel surcharge on barge delivery costs ...................................................................................21 Environmental fees and levies .................................................................................................21 Ice surcharge ...........................................................................................................................22 Harbour fee ..............................................................................................................................22 xiv COMMERCIAL PRACTICE IN BUNKERING MARPOL compliance fees .......................................................................................................23 Fire watch charge ....................................................................................................................23 Watch boat charge ...................................................................................................................23 Wharfage .................................................................................................................................23 Payment terms ............................................................................................................................24 Reference to INCOTERMS......................................................................................................24 Sales terms ..............................................................................................................................24 Commissions ...........................................................................................................................24 Validity .....................................................................................................................................25 Comparing offers – negotiation ..................................................................................................25 Check like for like.....................................................................................................................25 Give feedback ..........................................................................................................................25 Assess subjective elements (quality, performance, ?exibility) .................................................25 Counter offer if appropriate ......................................................................................................26 Observe validity / deadlines .....................................................................................................26 Chapter 3 - Acceptance and post fixture 27 Acceptance is ?nal.......................................................................................................................27 Subject to.....................................................................................................................................27 Date and quantity ranges allowed ...............................................................................................27 Con?rmation messages ...............................................................................................................27 Post ?xture...................................................................................................................................30 Notices .....................................................................................................................................30 Time limits for quantities / dates ..............................................................................................30 Operational changes................................................................................................................30 Invoice processing ...................................................................................................................30 Payment processing ................................................................................................................30 Document / process control .....................................................................................................31 Chapter 4 - The buyer 33 Owner ..........................................................................................................................................33 Offshore companies.................................................................................................................33 Disponent owner..........................................................................................................................34 Buyer pro?les ...........................................................................................................................35 Shipping pools .........................................................................................................................37 Buying style .............................................................................................................................37 In-house broker........................................................................................................................37 Trader .........................................................................................................................................38 Buyer’s responsibilities ............................................................................................................38 Buyer’s intermediary ....................................................................................................................38 Agent .......................................................................................................................................38 Broker ......................................................................................................................................39 Chapter 5 - The seller 43 Supplier .......................................................................................................................................43 The re?ner ...............................................................................................................................43 The importer ............................................................................................................................43 The blender..............................................................................................................................43 Trader ..........................................................................................................................................44 The physical trader ..................................................................................................................44 The credit trader ......................................................................................................................44 Seller’s responsibilities ................................................................................................................44 Seller’s intermediary ....................................................................................................................44 xv Chapter 6 - Terms and Conditions 45 Prices...........................................................................................................................................46 Speci?cations ..............................................................................................................................48 Quality .........................................................................................................................................48 Measurements .............................................................................................................................49 Sampling......................................................................................................................................50 Delivery........................................................................................................................................51 Title and risk ................................................................................................................................53 Payment ......................................................................................................................................54 Claims ..........................................................................................................................................55 Limitation of claim amount ...........................................................................................................56 Liability.........................................................................................................................................56 Force majeure .............................................................................................................................57 Cancellation .................................................................................................................................58 Environmental protection .............................................................................................................59 Law and jurisdiction .....................................................................................................................60 BIMCO Fuelcon ...........................................................................................................................61 B.A.S.T.A.R.D.S...........................................................................................................................65 Is it fair? .......................................................................................................................................69 Chapter 7 - Credit 71 Why? ...........................................................................................................................................71 Cash ?ow .....................................................................................................................................72 Who is the real buyer? ................................................................................................................72 Credit security..............................................................................................................................73 Letter of Credit .............................................................................................................................73 Revolving Letter of Credit ............................................................................................................73 Bank guarantee ...........................................................................................................................74 Parent company guarantee .........................................................................................................74 Credit reporting ............................................................................................................................74 Credit insurance ..........................................................................................................................75 Withdrawal of credit .....................................................................................................................75 Managing credit lines...................................................................................................................75 How to get credit..........................................................................................................................76 For a new buyer: ......................................................................................................................76 For an established buyer unknown to the seller: .....................................................................76 Chapter 8 - Payment 79 Methods .......................................................................................................................................79 Cash in advance ..........................................................................................................................79 Cheque ........................................................................................................................................79 Electronic transfer........................................................................................................................80 Deduction from freight .................................................................................................................80 Late payment ...............................................................................................................................80 Interest.........................................................................................................................................81 Bank transfers, SWIFT and IBAN ................................................................................................81 Correspondent banks ..................................................................................................................84 Banks in shipping ........................................................................................................................84 Money laundering issues .............................................................................................................85 Chapter 9 - Physical suppliers 87 Trader ..........................................................................................................................................87 Trading oil ................................................................................................................................88 xvi COMMERCIAL PRACTICE IN BUNKERING Trading credit ...........................................................................................................................88 Risk/exposure ..........................................................................................................................88 Broker/trader/supplier ..............................................................................................................89 Deliverers ...................................................................................................................................89 Barge .......................................................................................................................................90 Road tank wagon (RTW) .......................................................................................................90 Contract arrangements ...........................................................................................................91 Customs, duties and levies..........................................................................................................91 Duty free .................................................................................................................................91 Taxes ......................................................................................................................................91 Exemption certi?cates..............................................................................................................91 Cabotage .................................................................................................................................93 Chapter 10 - Pricing 95 Spot prices...................................................................................................................................95 Term prices ..................................................................................................................................95 Posted prices ...............................................................................................................................96 Price reporting .............................................................................................................................96 Volatility .......................................................................................................................................96 Post ?xture change ......................................................................................................................97 Port arbitrage ...............................................................................................................................97 Chapter 11 - Hedging 99 Term deals ...................................................................................................................................99 Fixed price physical ...............................................................................................................101 Floating price physical ...........................................................................................................101 Over-the-counter derivatives .....................................................................................................101 Swap..........................................................................................................................................101 Call option..................................................................................................................................102 Collar .........................................................................................................................................105 Chapter 12 - Claims 107 Quality .......................................................................................................................................107 Quantity .....................................................................................................................................107 Demurrage / delay .....................................................................................................................108 Notice of claim ...........................................................................................................................109 Time bar ....................................................................................................................................109 Use of surveyors........................................................................................................................109 Payment default.........................................................................................................................109 Bankruptcy.................................................................................................................................110 Bankruptcy of disponent owner .............................................................................................110 Bankruptcy of trader ..............................................................................................................110 Vessel arrest ..........................................................................................................................110 Lien ........................................................................................................................................111 Maritime lien ..........................................................................................................................111 No lien stamp .........................................................................................................................111 Attachment.............................................................................................................................112 Freezing order (Mareva injunction) ........................................................................................112 Debunkering ..............................................................................................................................112 Defects in quality ...................................................................................................................112 Removal for operational reasons ...........................................................................................112 Debunkering costs .................................................................................................................113 xvii Chapter 13 - Bunker software and the Internet 115 Internet ......................................................................................................................................115 Market information .....................................................................................................................116 Ship information.........................................................................................................................116 Contact information ...................................................................................................................118 Pricing information .....................................................................................................................118 Web-based systems ..................................................................................................................119 Chapter 14 - Commercial responsibility for operational issues 121 Regulatory issues ......................................................................................................................121 MARPOL 73/78 .........................................................................................................................121 Sulphur ..................................................................................................................................121 International rules ..................................................................................................................121 EU rules: Directive 1999/32/EC and Directive 2005/33/EC .......................................................122 ISO 8217................................................................................................................................123 Implications for owners ..............................................................................................................123 Samples .................................................................................................................................123 Bunker delivery note ..............................................................................................................123 Alternative control ..................................................................................................................123 Applicable areas ....................................................................................................................124 Suppliers and samples ..........................................................................................................124 In an ECA ..............................................................................................................................124 California Air Resources Board (CARB) ....................................................................................127 Penalties ....................................................................................................................................127 Supply implications of sulphur regulations ................................................................................128 Abatement technology ...............................................................................................................128 Safety of Life at Sea (SOLAS) ...................................................................................................129 Flash point ............................................................................................................................129 Material Safety Data Sheet (MSDS) .....................................................................................129 International Ship and Port Facility Security (ISPS) Code ....................................................129 Greenhouse gases ....................................................................................................................129 Slow steaming ...........................................................................................................................130 Bunker clauses in charter parties ..............................................................................................131 Charterer to provide...................................................................................................................131 Appendix 1 - Where to go for help 133 Non-governmental organisations...............................................................................................133 Technical and legal information .................................................................................................134 General bunkering .....................................................................................................................135 Credit issues ..............................................................................................................................135 Ship arrest .................................................................................................................................135 Useful websites .........................................................................................................................136 Appendix 2 - Abbreviations 137 Appendix 3 - Glossary of terms 141 Appendix 4 – ISO: 8217:2010 145 Appendix 5 - ISO 8217: 2005-2010 - Differences 149 Index 15