Industry Insight: Analysing the BIMCO Bunker Contract

BunkerEx Co-Founder and CEO Ishaan Hemnani. Image Credit: BunkerEx

"Should I use the BIMCO contract for my bunker purchasing?"

As brokers, this is a question we are asked more and more as time goes on. So we thought it best to write about the more interesting clauses of the contract, based on our experience. Below we explain what BIMCO is and discuss the more contentious points of their standard bunker contract.

What is BIMCO?

BIMCO is a members club for almost anyone connected to shipping (owners, suppliers, agents and brokers). The idea of BIMCO has always been to secure better deals and create standardised agreements for the shipping industry. Members come together to agree on terms and connect with one another. Each member has certain voting rights to try and create fair standards that accurately reflect the view of their members.

BIMCO stands for "The Baltic and International Maritime Council", although it is truly international now so some in the industry refer to it simply as 'IMCO' (we're not so sure that will stick…).

Bunker Contract

In 2015, BIMCO published a standard set of terms for the delivery of marine fuels. The problem was that as their members have more ship owners than bunker suppliers, the terms were seen as 'buyer friendly' and most suppliers refused to adopt certain aspects of them. Although this is slowly changing, below we discuss what we've experienced as the more contentious points of the contract.

1. 30 days to make a quality claim

BIMCO allows shipping companies up to 30 days after delivery to submit a quality claim on the bunker fuel. Their reasoning is that it takes time for the samples to be sent to labs, tested, and the results reported back - especially from more remote ports. Therefore owners and charterers should be given a sufficient amount of time to lodge a claim.

The Supplier's View - most suppliers allow about 15-20 days after delivery to submit a quality claim (although we have seen as low as 7 days from some large traders). 30 days is unreasonable to a supplier as they say that by then the vessel would probably have co-mingled the fuel or not treated the fuel properly in their own tanks. Remember, suppliers don't want to be responsible for an owner/charterer mishandling the fuel on their end.

As brokers, if the supplier has tight deadlines we can help to obtain a quick turnaround of lab analysis or failing that at least test the more suspect parameters within the time frame. Lastly, we can always help to negotiate with the supplier on your behalf. If you would like further assistance with this, email us at brokers@bunker-ex.com.

2. 14 days to add to a quantity claim

Quantity shortage claims must be noted on the BDN or via LOP at the time of delivery. However BIMCO terms state that the buyer is allowed to submit supporting documents to the claim up to 14 days after delivery. This allows them time to properly analyse the shortage, sound gauges and measurements before submitting their documents to the supplier.

The Supplier's View - claims must be noted at the time of delivery (on the BDN or by accompanying LOP). Following that, supplier's terms either make no mention of the time allowed to submit the quantity claim or match the quality timeframe (meaning approximately 7-15 days). This is not unreasonable as they argue that the shortage was known from the time of delivery so no extra allowance is required.

Using a broker means we can help go through the details and submit a claim quickly and efficiently. We also have technical guidance on standby should it be required.

3. Where to draw the sample

There are two choices: at the bunker barge's manifold or the receiving vessel's bunker manifold. BIMCO allows flexibility for both parties to decide based on what is more "practical" (e.g. if access to the receiving vessel is restricted, it should be at the barge). Theoretically, it shouldn't matter unless there is something contaminating the fuel in the hose.

The Supplier's View - quite simply, suppliers will always fight to have the tests done at the bunker barge's manifold. This is because they do many more bunker deliveries than the vessel receives and so have a better defined process for sampling. It also de-risks the supplier from any potential contaminant on the receiving vessel's side.

As brokers, our view is that as long as the connecting hose is blown prior to pumping or the last 3 deliveries from the barge are of the same specification, then sampling at the barge's manifold is not an issue provided a crew member from the vessel or a surveyor is present.

4. Number of samples to draw

MARPOL Annex VI sets out standards for sampling. BIMCO follows these and says that 5 samples should be drawn:

• 2 for the supplier.
• 2 for the buyer (kept on the receiving vessel).
• 1 for MARPOL (kept on the receiving vessel).

The Supplier's View - many suppliers only insist on drawing 3 samples which does not include a MARPOL sample:

• 2 for the supplier.
• 1 for the buyer.

As brokers, our view is that the more samples the better as some can be contaminated or tampered with, and 5 samples will be more representative of the delivery. It costs little extra to take 2 additional samples, therefore we always advise on 5 samples. This also complies with MARPOL Annex VI.

5. Title of the bunkers

BIMCO's terms state that as soon as the vessel has received the bunkers, they own the risk of the fuel. However title shall only pass when payment of the bunkers has been received by the seller.

The Supplier's View - title of the bunkers shall only be relinquished to the vessel once payment has been received by the physical supplier. Beware, as using a trader in the middle means the vessel risks paying twice (think back to the OW aftermath). Even though the buyer pays the trader, they may not have title of the bunkers!

Our view is to contract with the physical supplier directly using a broker. This protects the buyer from paying twice for the bunkers whilst still benefiting from expert advice to ensure a smooth delivery. If you absolutely insist on using a trader, have it in writing that you will only pay the trader once you have proof that they have paid the physical supplier for the delivery.

Conclusion

In the end, the BIMCO contract is normally used merely as a guideline. Ultimately, a contract is only enforceable if both parties agree to it. However even if suppliers don't agree to the BIMCO contract for the reasons explained above, it's content can be very useful to highlight where the risk lies for ship owners and operators.

For more advice on bunker clauses or to learn more about how to safely purchase your bunkers, visit us at www.bunker-ex.com or email us at brokers@bunker-ex.com.

More information on BIMCO can be found on their website at www.bimco.org.