Role of Trade and Contracts (NOFOTA and FOSFA)

MVO Course Food and Feed Safety of Oils & Fats 8 April 2014

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Subjects: • The Trade; typicality's of the oils & fats market

• The Associations; differences and approach

• The Terms, the risks and admin • Arbitration; how does it work and what are the (dis)advantages?

• Interface with Food and Feed Safety

The market – Globalization

• Geographical spread • Multiple applications • Transportation • Social & Environmental influences

– Transparency • Commodity Exchange (BM, CBOT, Matif) • Reuters, internet • Brokers • Events

– Volatility • Supply & demand • Fundamentals; currency, crude mineral, politics/war,

nature, piracy

The market

• Who are the players in the market? – Producers – Consumers – Trading houses – Brokers – Superintendents – Laboratories – Storage companies – Shipping and transport companies – Insurance companies

Other stakeholders • (multi) branche organisations:

– FEDIOL, VERNOF – MVO – NEVEDI

• Multi stakeholder organisations: – RSPO

• Project organisations: – EPOA

• Certification scheme organisations: – GMP+ International – EFISC

• Trade Associations/contract bodies: – UCOGRAS, GROFOR, FOSFA, NOFOTA

The Trade Associations (Fosfa & Nofota)

• What stands FOSFA and NOFOTA for?

– The Federation of Oils, Seeds and Fats Associations formed in 1971 (predecessor Associations – 1863)

– Netherlands Oils, Fats and Oilseeds Trade Association 100th Anniversary – 2018

The Associations

NOFOTA Council

Industry

Brokers

Shippers

Meat trade

FOSFA Council

Peanut trade

Contracts Committee

Technical Committee

Arbitrators Committee

FOSFA O&F Section

UCOGRAS/ GROFOR

FOSFA Technical Ctee

FOSFA Contracts Ctee

Tank Storage

Super intendents

Laboratories

Secretary & Treasurer

What is the approach of the Associations (Fosfa & Nofota) • Policy, but not lead the trade

• Promote practical solutions for fair trade by;

– Create standard terms & conditions in a simple contract form

– Inform members via website and circular letters – Provide arbitration service – Organize educational events (seminars) – Organize annual dinner events/Contact days

FOSFA contract

NOFOTA contract

The Terms, the risks and administration

Special attention: • Do not alter the terms of a standard-form contract,

until after careful consideration of all (potential) consequences.

• If a CIF standard-form contract is used as the basis for a C&F sale, special provisions as to insurance are necessary.

• Do not (ab)use a standard-form contract for purposes for which it is not intended.

The Terms, the risks and administration

• Strings, Circles and Washouts

Normal string of contracts

A B C E F G H I D OIL

Wash out A B A

Circle A B D C E F G H A

The Terms, the risks and administration

Payment

• Together with delivery of the goods, payment forms the core of any commodity contract.

• FOSFA: CAD (Cash Against Documents)

• NOFOTA: provides possibility to pay in advance

Arbitrations

• Although your trade is done under Fosfa or Nofota, always refer specifically to the rules of arbitration

• Do not step into other legal procedures • Monitor and secure time bars – follow the Rules for Arbitration • If required call in legal assistance • NOFOTA: arbitration committee appoints 3 arbitrators • FOSFA: both parties appoint an arbitrator and the association

appoints 1 referee (if necessary) • Why arbitration?: quick, cheap and fair (combination of legal

and experienced business people)

Arbitrations

Interface with Food and Feed Safety

• Clauses specifically refer to quality and quality complaints • Reference is made to EU Directives concerning hygiene of

foodstuffs and acceptable previous cargo lists • NOFOTA and FOSFA standard method of analyses • Technical Committee • Criteria for recognized superintendents, laboratories and

storage companies (audit programme) • Heating instructions • Quality specifications

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Thank you for your attention.