IBIA GUIDE TO GOOD COMMERCIAL PRACTICE

CONTENTS
Introduction Suppliers and Buyers Terms & Conditions Credit The Bunker Enquiry Distribution of the Enquiry Price Negotiation Responsibilities of the Broker Nomination & Confirmation The Agent Surveys and Sampling Cancellation The Delivery Barge Operators After The Delivery Disputes and Arbitration Acknowledgement The International Bunker Industry Association would like to thank all Members who have assisted in producing & updating this publication 2 3, 4 4 5 6 8 11 13 14 16 18 19 19 21 21 22, 23

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IBIA GUIDE TO GOOD COMMERCIAL PRACTICE

INTRODUCTION IBIAs Guide to Good Commercial Practice is intended to show all parties in the industry a reasonable and commercially acceptable way of buying and selling bunker fuel. Many of IBIAs members will be familiar with what is written here but IBIAs intention in producing these guidelines is that in time they will become more generally accepted as an arbiter of what is, and what is not, Good Commercial Practice. Together with IBIAs How to Resolve Bunker Disputes and the other books also published by IBIA this guide will go further towards forming a complete manual covering every aspect of the bunkering industry. THE BUNKER MARKET Buying or selling bunkers is not so different to any other commercial transaction but there are some aspects which are peculiar to the industry. These are: The large amount of unsecured credit involved The International spread of the market The speed with which deals can be put together in case of need and the degree of trust between parties involved which follows on from this The speed at which prices can change and the degree of transparency in the market The high proportion of cost to the Operator In order to establish what constitutes Good Commercial Practice we need to see how the business works and the role of the participants within it. These are primarily:Suppliers Buyers Traders Brokers We will take each of the above in turn and examine their roles and responsibilities.
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The role of agents, barge operators, terminal operators, surveyors and sampling and testing agencies will also be dealt with.

We will then examine their roles in the following stages of a bunkering: Generating and distributing an enquiry Working an enquiry Placing an order Physical delivery Post delivery

THE SUPPLIERS With majors, independent Suppliers and traders all in the market place there are many different ways in which Buyers can work their bunker enquiry and ensure they get the best price and terms for their bunker purchase. The following is a brief description of the Suppliers: A Majors

Traditionally the majors held the largest part of the bunkering business because of a production surplus of refinery fuel oil. Today modern refineries have become more efficient in breaking down fuel into more valuable products and fuel oil has become less in volume terms and of poorer quality. However, the majors are still strong players in the market although at a more restricted range of ports now. Some majors now increasingly replenish their supply terminals with cargoes bought in from outside of their own refining systems and act as traders using independent Suppliers to deliver on their behalf in ports where they have no physical presence of their own. With recent mergers and acquisitions the number of majors left in the market has diminished, however, they remain dominant Suppliers together with their marketing of marine lubricants. Majors tend to be at the more expensive end of the market, quoting quality of product and delivery operations as a basis for a higher price. B Independent Suppliers

Independents cover a range of Suppliers from local refiners to state oil companies. Generally, they are local Suppliers, often using major oil company refinery products which they buy locally and supply with their own, or contracted barges. The better independents give competitive pricing, reliable quality, a good service and attention to local details which help to make trouble free supply. C Traders

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Traders are not generally physical Suppliers but take the supply and credit risk for their own account. Traders often have a more flexible credit policy, based on a close and detailed knowledge of their customers. Sellers will sometimes prefer to quote for a Traders account rather than an unfamiliar owners account as they can be more confident in getting paid on time. Traders are also very useful in difficult areas like a state oil company monopoly ports and will often have credit arrangements here where business is normally done on cash before delivery basis. THE BUYERS A Ship Operators This sector of the business includes ship managers and charterers buying bunkers for vessels they manage or time charter. B Ship Owners The Owners buying bunkers for their own fleet. C Traders The Trader can also be a Buyer in the market. The traders take title and risk to the oil that they resell to the end user. INTERMEDIARIES A Brokers As the name implies they are between Buyer and Seller, helping to bring the two sides together. They dont take the credit risk for the Buyer or the supply risk for the Seller. Their stock in trade is market information and contacts. The broker helps the Seller to sell and the Buyer to buy. Brokers get a commission from the Seller. To save time and resources, many Buyers will entrust a broker with their bunker negotiations. B Traders They can also be considered as intermediaries. See definition above TERMS AND CONDITIONS (T & Cs)

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Also referred to as General Terms & Conditions of Sale (GTC). All reputable Sellers should have Terms. Almost all bunker sales are made on the basis of unsecured credit and this, together with the large potential liabilities in the shipping business, is why the Seller normally insists on Buyers agreement of terms prior to the sale. Suppliers will normally request acknowledgement and acceptance of terms on the opening of an account. In any event, Suppliers will quote and confirm a sale with a clause relating to sale being made under Suppliers Terms. It is prudent for both parties to be covered by terms. Some ship owners will have their own terms where it is a matter of negotiation between Buyer and Seller to agree exactly which terms apply. Terms can vary significantly from one supplier to another and it is therefore in the interest of the Buyer to negotiate any clause found to be unacceptable. Meanwhile, the bunker industry, particularly from the Buyers side, would prefer a single, uniform set of Terms acceptable to all parties. IBIA and BIMCO continue to work on standardising T & Cs. Further references to T & Cs relating to the bunkering procedure will be made later. CREDIT

Normal credit sales rely on the Buyer having a line of credit sufficient to cover the value of the enquiry. Frustrations arise when an enquiry is turned down due to insufficient or no credit. This situation can be avoided by both parties ensuring that a reasonable line of credit is established to cover the potential needs of the Buyer. Suppliers will employ various sources, including credit agencies, to investigate credit worthiness of Buyers, or prospective Buyers, and establish a line of credit based on their findings. For existing customers wanting an increase in their line of credit, credit reports, together with payment reputation, and previous trading history, will be taken into account. If a Buyer finds an established line of credit insufficient for their business needs it is in their interest to provide the Supplier with evidence of financial assets, or favorable financial accounts to increase credit limit. Most importantly, the best method of influencing line of credit with Suppliers, and increasing good reputation, is to pay the invoice on time.

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THE BUNKER ENQUIRY

Bunker enquires originate from the buying side. A requirement for bunkers may come in from the ship as it runs low on fuel or may arise as a result of the next employment of the vessel. Most owners keep a close watch on the bunker situation of their fleet. They forecast what they expect they will need over the next one or two months and then watch the market to see when and where the best buying opportunity is. The enquiry should be timed correctly Seven to ten days in advance of anticipated bunker requirement gives the Supplier ample time to plan deliveries. Many Suppliers will be reluctant to quote further out due to possible market changes. Less time could result in no quote due to barge congestion or lack of fuel availability. Requests for prompt quotes can often carry a price premium. Overnight validity must be confirmed by the Seller where time zones require quotation on day following enquiry. Bunker enquiries should comprise the following information, which should be provided by the Buyer:1) The quality or grade of bunkers to be supplied Most Buyers use the ISO standard specifications ISO 8217 2005, and any subsequent revisions, but there are often variations on this. Since the 19 May 2005 MARPOL Annex VI entered into force and this should be considered when specifying fuel to be purchased. Some ships need a specialised fuel quality. The specifications required should be stated clearly at the time of the enquiry for both fuel and distillate if required. 2) The quantity of bunkers to be supplied The Buyer often gives this as a range. A wide spread is normally acceptable to the Seller at the enquiry stage. 3) The delivery port Buyer should also provide specific terminal or wharf within the port if appropriate. 4) The time of delivery Sellers can usually accept a range of 2 to 3 days at the enquiry stage but there are exceptions, so always ask if unsure.
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5) The name of the vessel + IMO Number This is important for the Seller to know to avoid double quoting on the same enquiry received through different channels. 6) The name of the Buyer or responsible account This is required for Seller to check credit status. 7) Other important information If relevant to the delivery, include: a) b) c) d) e) f) g) h) Whether the delivery will be outside port limits? What are the prospects for simultaneous loading/discharge? Is the vessel at a wharf where there is a pipeline for bunkering? Especially for tankers who are the cargo Suppliers/receivers? Does the wharf owner allow a bunkering barge alongside? Is the vessel carrying a dangerous cargo? Is there a draft restriction at the berth? Is there safe access for Road Tank Wagons (RTW) alongside the vessel.

The vessel may want to maximize cargo and bunker after loading in deeper water outside port limits. Or the vessel may not be able to bunker until some of the cargo has been discharged. All this important information, which can affect the cost and physical delivery of the bunker oil, should be passed to Sellers. Complete information is not always known at this stage of the enquiry. The Buyer may well pass on the name of the agents with the enquiry so that the Sellers can check on the physical side of the delivery. Whenever information becomes available to either side it should be passed to each of the parties. It is particularly important that if, during the process of negotiations any of the original parameters, like quantities or dates, change the Supplier is made aware before any order is placed. A change in quantity or date may affect the price.

Good Commercial Practice dictates that the above is what the Buyer should include in his bunker enquiry

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DISTRIBUTION OF THE ENQUIRY THE BUYER The various options are outlined below. The Buyers aim should be to cover the market in an orderly way. These are the ways a Buyer can put their enquiry on the market:1) Buyer places enquiry with one or more majors only and ignores the possibility of quotations from independent Suppliers In this case the Buyer may not be fully covering the market. Provided there are independent Suppliers operating in the port they should be covered. There is a danger of not getting the lowest price or the best delivery option on this basis. The major oil companies have a good reputation but an owner should always look around to see what else is on offer. 2) Buyer places enquiry with one broker to cover the whole of the market Some owners, especially smaller Buyers who are not regularly in the bunker market, find this the best way to work their requirements. The relationship with the broker may go back over several years and the owner trusts the broker to cover the market for them and get a good deal. In some cases, because of the limited number of requirements, the owner may not be well known for credit. In such circumstances a broker who has been handling the owners business exclusively for some time may have influence with the Suppliers on making credit available. 3) Buyer places enquiry with one trader to cover the whole market. This is particularly suitable in certain difficult ports where there may be a monopoly state supplier who will not give credit on the open market. Prepayment can lead to difficulties in getting the cash there in the first place and refund of the unused balance should the ship takes less than nominated quantity. The trader can resolve this situation by having a credit account, or more usually, credit facilities via a revolving letter of credit with the local supplier. 4) Buyer places enquiry directly to major oil companies but also gives enquiry to a broker to cover the independents. This is favoured by some owners as the best option of seeing a good spread of prices to achieve the lowest price. 5) Buyer gives enquiry out to more than one broker
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This in itself is not a bad thing, provided the Buyer lays down some ground rules. For example, Broker A should cover certain Suppliers and Broker B others. This system could even be extended to three or four brokers if there are enough Suppliers to go round. However, if there is no control, Suppliers are likely to receive the enquiry from several different channels. When there are more intermediaries working the enquiry than there are physical Suppliers or Sellers in the market, uncontrolled distribution can carry a negative perception and Suppliers may not quote at all.

GOOD COMMERCIAL PRACTICE MAY BE ACHIEVED BY ANY OF THE ABOVE METHODS BUT THE IMPORTANT THING IS TO CONTROL THE CIRCULATION OF THE ENQUIRY
DISTRIBUTION OF THE ENQUIRY THE SELLER On receipt of an enquiry, the Supplier should accurately record all of the relevant information, including the time of receipt of the enquiry and the time a quotation is required. Should the Buyer send the enquiry to an intermediary then Broker or Trader has the dual responsibility of accurately passing information in both directions. When the Supplier does offer they should always respond on time and make it clear exactly what is being offered: 1) Price of the Bunkers. The unit cost is usually quoted in US dollars per metric ton although price can also in barrels, cubic metres, US or Imperial gallons. If price is quoted to a Broker, it must be made clear whether the price includes the brokers commission. 2) Method of Supply. Supplier must state method of delivery and if not a delivered price, delivery charges must be clearly specified. 3) Additional Charges. In many ports additional charges are levied on bunker supplies by local authorities. These charges are not made by the Suppliers but by third parties, such as: Port Authorities Customs Authorities Terminal Owners State Authorities

These charges are made against the bunker supplier or barging company in the port who then passes them onto the Buyer. For unprepared Buyers these
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charges can be a source of friction and dispute. Please refer to IBIA Guide to Avoiding and Resolving Bunker Disputes. The responsibility for informing Buyers of the possible extra charges can be a matter of dispute between Suppliers, Owners and Port Agents. Suppliers should inform Buyers of any additional charges they are aware of. 4) Payment Terms. Agreed terms of payment should be strictly adhered to. 5) Terms and Conditions. Any offer a Supplier makes is subject to their Terms and Conditions of Sale. This is normal commercial practice in any market. (See above) 6) Time Limit Time validity deadline will normally accompany the quote. Suppliers will consider The following factors when placing time validity:Price movements in the market. In a rising market, Suppliers do not want to leave their offer out for too long and find that their replenishment cost has increased since they offered. They are then committed to a level that is too low. Conversely, in a falling market, Suppliers time limitations will be more flexible. Delivery limitation. The Supplier may have a busy programme or know that there is barge congestion. Therefore they will want to have a reply within a certain time limit. Stock limitation. Under normal conditions, Suppliers want to turn their stock over rapidly. Limited stock can lead shorter time validity since Seller will be looking for rapid decisions from Buyer. In these circumstances, Seller may also offer subject to availability. Seller has right to withdraw offer once time validity has expired. If Suppliers have received the enquiry from more than one channel they may offer for, say, thirty minutes to one channel and then withdraw and offer to another channel.

GOOD COMMERCIAL PRACTICE WILL BE THE PROVISION OF CLEAR, PRECISE OFFERS WITH EXCEPTIONS AND QUALIFICATIONS CLEARLY SPECIFIED

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PRICE NEGOTIATION

The Buyer now has a range of options. Hopefully they will have received a number of offers from Suppliers at a range of levels which gives him an idea of what the market level is. If he is working through a Broker he should also get advice from them about the market and suggestions as to what the next step should be. In practice, his options will be defined by the market situation at the time and the circumstances of the enquiry as follows: THE MARKET IS MOVING DOWN

1. The market is moving down and the Buyer is in no hurry. It is clear that the Buyer will prefer to wait. Maybe they should not have asked for prices so soon. Depending on the vessels programme the Buyer may decide to bunker at another port later in the voyage and take advantage of the continuing downward trend. Buyers should be prepared to advise Suppliers that their decision is delayed which will release Suppliers to offer on other business. 2. The market is moving down but the Buyer cant afford to wait. The ship is sailing soon, running low on bunkers or will be moved off the cargo berth to outside port limits or other operational problems which mean the bunkering has to be fixed now. If the market is moving down Suppliers may well be willing to take a counter offer. In this instance, making a counter offer to a Supplier is the Buyers best option. A counter offer is a binding commitment to buy at the countered price. The Buyer should also be aware that a counter offer, if refused, allows the Supplier to amend or withdraw his offer. THE MARKET IS MOVING UP

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The Supplier will offer with a short validity and the Buyer has to take a decision as to whether they feel the market will continue to firm up or that this is just a spike and prices will be back again tomorrow. The intermediary should be in a position to make a contribution here but the truth is that nobody can call the markets with any degree of accuracy. Buyers have two options:1. Buyer must go with the prices in hand. They may take the risk of a counter offer but Buyer should make sure what the position of the Supplier is on this. Most Suppliers state that a counter offer constitutes a rejection of the original offer and that the original offer is no longer valid. This position is not unusual, neither is it unethical. 2. Buyer can wait Assuming they have this option as discussed above they can either withdraw the enquiry from the market or just leave it there indicating they are not interested to buy at such a high price. This of course is designed to leave the Suppliers thinking that they have lost the business to another port and the vessel will bunker later in the voyage unless the pricing is much more favourable than at present OTHER TERMS At the same time as the price negotiation the Buyer needs also to consider the other items on offer. Assuming that the quality and price are the same, these other points should be taken into consideration:1. Reliability and past performance. A track record of problem-free supplies gives the Buyer confidence. Many Buyers will consider this is worth money. The regular supplier may not be the cheapest but they may well get the business based upon past performance. Payment terms. The Buyer must abide with agreed credit terms and make timely payment. The Sellers GTC usually specify that payment is due solely on the production of an invoice sent by fax or e-mail. If Buyer requires additional or original documentation in order to effect timely payment, it is their responsibility to raise this with the Seller and get the Sellers agreement before the deal is concluded. Buyer and Seller should consider the service of a joint independent surveyor with costs shared 50/50. This is discussed further below. 3. Suppliers Terms and Conditions. (These paragraphs are taken from IBIAs Avoiding and Resolving Bunker Disputes) 4. Quote It is usually impractical for all Sellers terms and conditions (T&Cs) to have been read before contract to supply is agreed. Some Sellers do not have written T&Cs. Buyers should be aware that Sellers T&Cs are notorious for being biased in favour of the Seller. But it is worthwhile for the Buyer to check and be aware of the time limitations for complaints to be
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2.

3.

registered as these are frequently very short and of varying lengths for different types of complaint. Even if the sample is sent immediately to the laboratory there is frequently little time to register any complaint especially when full details of the problem have to be supplied. If the terms are totally unreasonable, an explanation should be sought, better terms negotiated and reference made to any changes agreed in the order confirmation. If possible, the Buyers should ascertain (via his bunker broker) whether the intended Seller has any unusually onerous conditions e.g. restrictions on value of claims to cost of bunkers supplied blanket disclaimers on quality of bunkers supplied attempts to shift all responsibility for oil spills and clean up onto the Buyer transferring responsibility to the Buyer at the terminal rather than at the vessels flange. If so, the Buyer should express his disapproval and attempt to place the order with an alternative supplier on more reasonable terms. Unquote

Good Commercial Practice, for the Buyer, will ensure that Suppliers are given fair and accurate feedback and, where applicable, the opportunity to compete. In their quest for the best commercial deal, Buyers have a duty not to mislead the Sellers.
THE RESPONSIBILITIES OF THE BROKER The broker has responsibilities to both parties during the negotiations. 1. 2. 3. The broker helps the Buyer to formulate the enquiry if asked to do so. The broker then follows the instructions of the Buyer regarding the distribution of the enquiry. The broker has to liaise with the Suppliers and pass on accurately and quickly the quotations and any associated information regarding the negotiation. It is a debatable point whether brokers should be obliged to declare their commission to Buyers. In present competitive market conditions brokers opportunities for increasing commission beyond the normal level are limited. Also if Buyers think that they are being taken advantage of then they will find another channel to use for their enquiries. The broker should also assist the Supplier with payment collection if required.
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4.

5.
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6.

The broker should assist in the resolution of any dispute which may arise following delivery.

Good Commercial Practice dictates that the broker should act in a trustworthy way towards both parties.
NOMINATION AND CONFIRMATIONS If the Buyer finds the Sellers price acceptable, the deal is concluded by means of a nomination. There is now a contract between the two parties. It is important that both parties review all the details of the nomination and then produce a confirmation which they send to each other. This confirmation should include the following items. The headings are taken from IBIAs Avoiding and Resolving Bunker Disputes. 1. The quantity of bunkers to be supplied a. The Buyer may say up to such a quantity. This is often used when it is a re-delivery quantity of bunkers required at the end of a time charter period. Sellers should take care in such a case, as the Buyer is committed to pay only for the quantity ordered or the amount actually received/delivered. b. A Trader acting as a Buyer may state a maximum quantity. Sellers must take care not to exceed this quantity, even if requested by the vessel, without referring back to the Trader. c. A Buyer may state masters requirements (MR) and give a range. In such case the ship can be supplied with any quantity within the range, 10% more or less is frequently used as a guideline. Suppliers, at the discretion of their T & Cs, frequently specify 5 or 10% more or less. 2. The quality of bunkers to be supplied The quality will have been stated in the original enquiry but there may be some variations which have been negotiated. A Buyer may well agree to exceptions and this should be stated in the confirmation. It should be clear to both parties whether the figure is guaranteed or as is often the case, typical. 3. The place and time of delivery Within the range given by the Buyer this is a matter for vessel agent and Seller to co-ordinate, 4. The Buyer and the Seller

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There can be confusion on both sides with Sellers acting through sales agents but the more usual complication comes from the buying side where the company buying the bunkers is only acting as an agent for the principal. Both sides should be clear as to who is responsible for payment. 5. The Speed of Supply & Duration of Supply Buyers always assume supply is on arrival but if that is required then it should have been specified and agreed by the Supplier before nomination. The Supplier will normally arrange delivery on the spot in consultation with the Buyers port agent . First-come-first served is the norm for bunkers only calls. Abnormal high or low pumping rates should have been requested, and agreed, before nomination. 6. Matters which will affect the Delivery Any matters which will affect the delivery e.g. high freeboard, cargo barges alongside, hot work, etc should have been mentioned and agreed upon before nomination 7. The price of bunkers 8. The price basis 9. The cost of any essential extras 10. The cost of any local extras e.g. pollution, wharfage, controls/booms, taxes 11. How/who will determine these extra costs 12. The name of the agent The Buyer must give to the Seller the name of his port agent, and contact details. This is essential for the Seller so that he can have a contact for all procedures connected with the bunkering operation. 13. Who will determine the quality and quantity of bunkers to be supplied? Will Buyer appoint own surveyor etc 14. Where and how will the quality and quantity of bunkers supplied be ascertained if not on Suppliers equipment (e.g. barge) 15. Whose Terms and Conditions to apply. 16. Any local regulations such as bunkering procedures or pollution control requirements 17. Special requirements by Buyer or Seller
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The Seller cannot always be relied on to list all these details. The standard Sellers confirmation forms the basis of the contract document. The Seller should, however, list out the additional terms agreed. Sellers should forward confirmation to Buyer as soon as the deal is agreed. Buyers should send confirmation of the deal from their side. It is good practice for this confirmation to also be sent to other interested parties connected with the Buyer. These can include the ship, the ship operator, the agent, the accounts dept, etc. This procedure helps to cut out errors of communication.

Good Commercial Practice means that Buyer and Seller should each have a clear understanding of the terms of the contract including, what their liabilities are regarding any possible additional charges, should these be incurred
REMEMBER

Sellers sales confirmation is the only one which has legal standing, this being normal commercial practice applicable not only to the bunkering business. It is better to have fulsome confirmations rather than have some details unconfirmed and discovered after the event. THE AGENT The agent has a significant role and important responsibilities in any bunker delivery. The agent is appointed by the Buyer and acts on their behalf. The Buyer should instruct the Agent when placing a bunker nomination. The Supplier needs to be informed by the Agent exact details of the ships intended bunkering programme and any restrictions or special needs which are to be taken into account. The supplier will need to know:
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Where the vessel is or where/when will it berth? How long will the vessel be in port? What is the vessel discharging? Is it dangerous cargo? Is there a discharge operation into lighters or cranes working alongside? Is there any restriction by berth owner on bunkering operation? Draft restrictions alongside the berth.
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 Where is the vessels bunker manifold? What quantity is required by the ship? This is not a complete list but shows the type of information the agent needs to provide in order to achieve a smooth and trouble free delivery. Suppliers will be justified in charging Buyers for the cost of an abortive bunkering trip or barge demurrage due to failure to provide vital information in good time. The Seller will usually ask the agent for the exact quantity to be supplied to the vessel. This is also vital information as in the majority of cases bunkering barges are loaded with specific quantities and not necessarily for one delivery only. It may be that the barge loading is controlled by customs authorities. Once the barge is loaded there is usually no margin of flexibility.

Good Commercial Practice means that the agent acting on behalf of the Buyer should have clear instructions from their principals and co-operate to the best of their ability with the bunker supplier
THE IDEAL FULFILLING THE CONTRACT

The performance of the contract is not only the responsibility of the Supplier. It is also the responsibility of the Buyer to fulfill their side of the deal. The Supplier has to deliver the oil to the ship. It is important that the Buyer appreciates that for the delivery to take place the ship and the agent have to extend a degree of co-operation to the Supplier. It is in the Buyers interest as much as the Suppliers to co-operate closely with the supply contractors and the agent to facilitate bunkering. From the Suppliers side they should also appreciate that in the majority of cases bunkering is not the first priority for the ship in port.

Good Commercial Practice means that the common aim should be for a quick, trouble free delivery, which relies upon the co-operation of all parties concerned
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SURVEYS Bunkers represent a major proportion of ship operating costs. Quantity disputes are one of the most frequent causes of dispute. Especially with large quantities, Buyers should seriously consider using an independent surveyor to measure the quantity delivered. Survey costs can be minimal when compared to the overall cost of the bunkers. There are stories of malpractice on both sides, such as bunker barges fitted with secret tanks or ships which have accumulated a surplus of oil on board from the massaging of delivery and consumption figures. The use of a surveyor is a deterrent to malpractice. SAMPLING

Because of the varying quality of fuel supplied, many owners now take a fuel sample for testing on deliveries. Taking samples of the oil delivered through an approved type of sampler is essential. An IBIA survey on Bunker Fuel Sampling Equipment looks at the range of equipment available. Once the sample has been obtained it should then be sent to a laboratory for testing. The service is provided by specialist companies and means that the ship can have the test results before they need to start burning the fuel. If there are some variations from the specification the ship can then be made aware and adjust their handling of the fuel in line with guidelines given by the testing organisation in order to minimize potential problems. If the fuel is seriously off spec, then more serious action will be required. Every day Suppliers, owners, charterers, traders and others engage in transactions involving large quantities of bunkers at locations throughout the world, often without knowledge of the complexities which are involved in the manufacture of bunker fuels. These fuels are generally traded using several readily available product quality specifications. Among these specifications, the most widely used are ISO 8217:1996 & CIMAC No 21 2003 These specifications are often used without proper knowledge of their interpretation. Complicated claims can and do arise from a rash of premature decisions having been taken on the face of a single test result without understanding the inherent limitations of the fuel testing and sampling procedures. These occurrences could be reduced with the help of proper tools for interpretation.
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CANCELLATIONS It is quite reasonable that on occasions, a ships voyage can alter after a nomination at a certain port has been made. Should this occur, the Buyer must inform the Supplier at the earliest opportunity in order for them to cancel the delivery and rearrange their schedule. Suppliers can charge cancellation fees and probably will if cancellation is left to the last minute and bunker barge has been loaded with nominated fuel. Cancellation with plenty of notice will normally be dealt with reasonably by Suppliers. THE DELIVERY

The confirmed deal is now a contract between the two parties and has to be translated into physical details in the port. There is usually an interval of a few days between the time of placing the order and the physical supply. The following check list is a guide to the delivery procedure: Enough tankage available on the ship for the quantities ordered Correct grades/qualities ordered and arranged to be supplied Order of products to be supplied Pumping rates required by ship/offered by Suppliers barge Control signals at time of bunkering Anti-spill/pollution procedures Witnessing the sampling collection position and procedure Witnessing the opening and closing barge tank gauges Preparation, sealing and identification of at least three representatives samples Compliancy with Annex VI of MARPOL 73/78 If Suppliers have agreed to be MARPOL compliant, they must provide a BDN that complies with Appendix V of Annex VI. Moreover, one of the samples provided must be designated the MARPOL sample and be kept on board the ship for one year.

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The BDN is required to contain the following: Name & IMO number of the receiving ship Port Date of commencement of delivery Name, address & telephone number of marine fuel oil supplier Product name(s) Quantity (metric tonnes) Density at 15C (kg/m3) Sulphur content (%m/m) A declaration signed and certified by the fuel oil Suppliers representative that the fuel oil supplied is in conformity with the regulations Moreover, one of the samples provided must be designated as the MARPOL sample & be kept on board the ship for one year. In some countries, notably the USA, in order to comply with local regulations regarding pollution, the above information has to be formalised into a bunkering plan which is submitted via the agent to the authorities. After the delivery is completed and the quantities have been agreed then an authorised signatory from the ship must sign for the bunkers. The Suppliers will usually give instructions to the barge crew that they should not unmoor from the receiving vessel until the receipt is signed. If there is a complaint from the vessel then it is not sufficient for the signatory to endorse the receipt. It is essential to make a letter of protest to the barge. Difficulties can also arise if the ship signs with any qualifications such as a/c charterers and with no lien on the vessel. Suppliers will not usually accept such qualifications. These points are covered more completely in IBIAs Avoiding and Resolving Bunker Disputes guide.

It is Good Commercial Practice to follow all the points in the above check list thereby greatly reducing the chances of problems arising. If problems do arise, however, both sides should try to solve these in a reasonable way and try to understand each others viewpoint and the circumstances behind any extra costs
More details of the best ways to handle disputes are contained in the Disputes Guide referred to above.

IBIA

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Additional points on quality and quantity problems There are recorded cases where Suppliers have been shown to have added water or other non-combustible materials to bunker deliveries. There are also recorded cases where the Supplier has tried to short deliver the Buyer on the supply quantity. Suppliers have a responsibility to supply the quality as agreed with the Buyer. At the same time there are on record cases where Buyers vessels have been found to falsely claim short delivery. Suppliers will become aware of vessels which consistently offend with this bad practice. BARGE OPERATORS The oil and shipping industries are at the forefront of issues relating to health, safety and good environmental practice. This is evident in the increasing emphasis now being placed on the standard and suitability of bunker delivery barges. Suppliers, particularly the majors, and port authorities in an increasing number of ports are setting minimum vetting standards for quality of the barge and high standards for operating procedures. Suppliers generally contract their barge operators which have to produce operating requirements and controls conforming to high environmental and safety standards. Many ship owners endorse and encourage this practice and see it as a general improvement in standards across the industry. Bulk shore tanks and bunker pipe lines fall into the same category with owners of these facilities having to keep them in good order and to a standard acceptable to Suppliers who may wish to hire them. AFTER THE DELIVERY Suppliers must produce a signed delivery document stating the exact delivered quantity. Once the Buyer has taken title of the bunkers, they must make preparation to pay the invoice according to the contract terms. Sellers can charge interest, usually at a punitive rate, on outstanding invoices. The Seller has a responsibility to present to the Buyer the agreed documentation in a reasonable time and in a form that can be read without difficulty. If it was agreed that the Seller would provide supporting documents prior to payment they should be legible for the Buyer to verify the invoice. Payment of the invoice should be arranged in good time and in such a way that the Seller can get good value with period agreed.
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The invoice should represent the result of the negotiations and should not contain surprises. However, extra charges can be incurred. Sellers should fully explain how such charges occurred if this has not been agreed before the delivery.

BOTH SIDES SHOULD TRY TO UNDERSTAND EACH OTHERS VIEWPOINT ON THE QUESTION OF SUCH UNFORESEEN CHARGES IN ORDER TO ARRIVE AT A FAIR AND REASONABLE SETTLEMENT
Listed below are some examples of what can be considered to be poor or bad commercial practice. The list is not exhaustive but is designed to indicate the type of behaviour to be avoided. Misreporting of the fuel density on the delivery receipt to affect volume/weight calculations The non disclosure by intermediaries, to both Buyers and Sellers, as to their exact role within the deal Late reporting of quality or quantity claims, to extend credit periods Asking for offers based on a larger quantity than required Withdrawing of price on a rising market without notice Bunkers being used as a method of disposing of waste products Cancellation of nomination on falling market DISPUTE RESOLUTION

On official receipt of a claim or complaint from the Buyer, the Supplier should act promptly and acknowledge receipt immediately. Local investigation into the complaint will then follow with a timely response as to the findings. On quantity claims, barge or shore tank ullage reports should be provided together with fuel temperature and density. Quality claims should be resolved by the analysis of retained sample by an independent testing agency. Suppliers should deal with disputes fairly and promptly. A reasonable approach by both parties should lead to satisfactory resolution. A negotiated commercial settlement is often used as a method of resolving a dispute without leaving either party aggrieved.

IBIA

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ARBITRATION OR MEDIATION

On the rare occasions where a dispute cannot be resolved by mutual agreement or commercial settlement, arbitration or mediation can be sought. The result of arbitration will be binding and will be judged under the laws of the country or state covering the Supplier. IBIA operates an arbitration and mediation scheme which is open to both members and non-members alike.

CONCLUSION By adhering to Good Commercial Practice at the time of negotiation and delivery, when paying for goods and services received and by satisfactory resolution of complaints, the reputation of all parties will be enhanced within the bunker market leading to a mutually satisfying future business.

IBIA

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