More than 80 per cent of the world in cereals and a significant proportion of trade in animal feeds move on the terms of GAFTA contracts. GAFTA has more than 900 members in 80 countries, including India. GAFTA membership is diverse including importers, exporters, brokers, dealers, manufacturers, processors, millers, brewers, distillers, analysts, superintendents, forwarding agents, arbitrators and solicitors.
This diverse membership helps GAFTA to resolve many trade issues relating to contracts and arbritration, quality standards, quantity, price, delivery period, insurance, sampling and analysis, default, problems and exceptional circumstances and other trade related issues. GAFTAs services in trade are designed to protect the interests of its members.
GAFTA deals with trading terms like cost, insurance and freight (CIF), free on board (FoB), Tale Quale which means that the buyer agrees to accept the goods as they come provided they are shipped initially in good condition and Rye terms which means that the condition of goods on arrival is guaranteed by the seller.
According to new changes for difference in contracted quantity shipped under CIF, the tolerance will be at the sellers option while under FoB it will be at the buyers option. If the sale of goods is on a certificate final terms as to quality then the buyer may not be able to reject goods. Whilst he may only be able to claim allowances for deficiency in quality he may nevertheless be able to reject the goods on the basis of misdescription if the crop was old and not new.
GAFTA rules says that it is very common to see reciprocal allowances or non-reciprocal allowances in a contract of sale setting out various monetary price adjustments that will apply should the product not meet its basic quality specifications like clause 5 of GAFTA 100 unless the parties have agreed to the provision for final certificates set out in lines 61/62 of GAFTA 100.
It is most important therefore that when agreeing to a sale as per GAFTA 64 terms and the parties should ensure that they delete which option is inappropriate. If they agree that the sale is on certificate final terms as to quality in clause 5 then they must delete the FAQ provision and vice-versa. Similarly, in GAFTA 100, the parties must take care to ensure that either the allowance or the certificate final terms in clause 5 are deleted as they are mutually incompatible.
Regarding new changes in the delivery of goods, the GAFTA contracts says, the contract period of delivery shall, if desired by buyers, be extended by an additional period of 21 consecutive days, provided that buyers give notice in accordance with the notices clause not later than the next business day following the last day of the delivery period.
For exceptional situations, new changes in GAFTA rules says sellers shall not be responsible for delay in shipment of goods or any part thereof occassioned by any Act of god, strike, lockout, riot or civil commotion, combination of workmen, breakdown of machinery, fire, or any cause comprehended in the term force majeure.
If delay in shipment is likely to occur for any of the above reasons, the shipper shall give notice to the buyer...within seven consecutive days of the occurrence, or not less than 21 consecutive days before the commencement of the contract period, whichever is the later...if shipment be delayed for more than 30 consecutive days extension, the contract shall be considered void. Buyers shall have no claim against sellers for delay or non-shipment under this clause, provided the seller shall have supplied the buyers, if required, satisfactory evidence justifying the delay or non-fulfilment.