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BIMCO highlights due diligence before entering a bunker contract

20 Jun 2018

The Baltic and International Maritime Council, otherwise known as BIMCO, advises marine fuel buyers to perform due diligence and consider a series of recommended questions to ask before entering into bunker fuel contracts.

The eight questions that should be asked about a potential counterparty are as follows:

  • Who are you dealing with and who is the legal entity?
  • What terms and conditions will you enter into agreement on (e.g. time bars, limitations, jurisdiction)
  • Does the counterparty have credit insurance?
  • Is the counterparty covered for product liability and have professional indemnity?
  • Is the counterparty financially strong?
  • Does the counterparty pledge its invoices?
  • Does the counterparty have a compliance programme?
  • Have you requested an independent market/credit report of your counterparty?

“A review of the circumstances of the OW Bunker collapse led to the committee to conclude that set-off clauses, pay-to-be-paid clauses, bankruptcy clauses and similar were not commercially or legally workable as they would not work in all cases and in all jurisdictions,” it said in a statement to North P&I Club.

“It also highlighted the importance of risk management and for the buyer of the fuel to carry out sufficient due diligence on the other parties before entering a binding bunker contract.”

The above recommendation follows the launch of the BIMCO Bunker Terms 2018 in May, where the organisation introduced a set of revised terms.

The Committee charged with reviewing BIMCO’s existing bunker terms included Michael Hope from North’s FD&D Department along with cross-industry personnel from maritime law, bunker suppliers, and shipowners.

“The goal of the revised terms was to create a balanced set of terms that could be adopted by both suppliers and buyers of bunkers with minimal changes and to replace or cut down the large number of supplier’s terms and conditions used in the industry,” says BIMCO.

“As such, the new terms provide comprehensive provisions regarding claims management for quantity, quality and delay claims. They also provide a liability cap which sets a default limit of liability for the other party at either the invoice value or US$500,000, whichever is higher. The parties can, however, increase that figure by mutual agreement.

“The new terms includes an innovative “election sheet” which forms part of the contract for the supply of bunkers in which the parties can make certain agreed changes to the terms. These include, amongst other changes, choice of law and forum, liability cap and place of delivery.

“It is hoped that since the new bunker terms have been created by representatives on both sides of the bunker transaction that the document will be widely taken up by the industry.”

Related: BIMCO introduces updated, approved bunker contract
Related: IBIA: BIMCO Bunker Terms 2018 ‘major step in the right direction’
Related: Clyde & Co explains BIMCO’s Bunker Terms 2018 contract

Published: 20 June, 2018

 

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