Avoiding risks in exporting coffee by establishing Model Contract
08/11/2013 15:15
Although being the second coffee exporter, Vietnamese coffee exporting companies are dominated by the importers when drafting the contract. Grasping that Vietnamese companies flinch the legal conflict, some importers make problems in the contracts intentionally to damage to Vietnamese exporters.

This is the opinion of VICOFA’s representative at the training program “Improving competitiveness of Vietnamese coffee exporters in the integration context” held in Ho Chi Minh City on 14 of May.

Both domestic and foreign contracts are disadvantage

According to Mr. Nguyen Huu Chi, the Special Commissioner of Competition Council, Vietnamese exporters haven’t paid attention to the legislation work of the contracts.

For the domestic contracts, the exporters sign with the domestic suppliers too simply, even though they don’t sign domestic contracts, when conflicts arise, the breach party can not complain, Mr. Chi said.

For the export contracts, Vietnamese exporters follow the ones of the importers. These contracts are based on the common conditions of ECC or are drafted by the importers. Thus, the main purpose is to ensure the importer’s interest which have disadvantages to the exporters.

Some disadvantages that Mr. Chi shows are quality, damaged coffee or the basic differences of quality, the importers have the right to cut down cash… by making bills. For the weighing time at destination and complaint deadline, although the ECC’s conditions cause disadvantages to Vietnam, there are some contracts defining this longer than ECC’s. The research carried by VICOFA shows most contracts use CAD payment method, no contract uses L/C method.

The fact of Vietnamese coffee companies bankruptcy during the past years shows that when the coffee price decreases, agencies and private supplying coffee enterprises go bankrupt, when the price increases the exporters are lost or go bankrupt.

Mr. Luong Van Tu, Chairman of VICOFA said, one of coffee exporters’ difficulties is that there is no unified export contracts. Each exporter has their own different contract so when the conflict arises Vietnamese exporters usually face with disadvantages in negotiation.

Mr. Tu added, although being the second coffee exporter, the coffee price changes expeditiously so trading is not effective. One reason of those is that the export companies does not meet the international standards so they always get disadvantages in trading. Thus, when trading the Vietnamese exporters should improve themselves and fight against being imposed.

Need common regulations in export contracts

In the world, Brazil is the biggest exporter and also has model contracts with the conditions drafted by themselves. The same as USA.

To reduce damage and risk for exporters, Vicofa gives the common conditions for export contracts, including the conditions of weight, package, quality, payment, arbitration.

Of which, there are some remarks such as the weigh conditions will be determined at the departure port. The buyers can require inspecting right when weighing and the sellers have to inform the buyers in advance and pay for this.

For the quality conditions, the coffee quality should be correspondent to TCVN 4193:2001 and to what are described in the contracst. When being delivered, if the buyers find the coffee not correspondent to the samples, the buyers can require to appraise. The Appraise Letter must be certified by a prestigious and objective organization and accepted by the buyers.

For the payment conditions, the buyers have to open L/C without being canceled following the seller’s instructions and at the banks pointed by the buyers. For the arbitration conditions, in case without unification, two parties can bring to court at the international arbitration center in Vietnam, applying commercial law of Vietnam and Vienna convention of international commodities purchasing, approved in Viennain 1980.

The researcher group will collect the ideas of the government departments, VCCI, exporters to complete and submit to VICOFA’s Board to launch the model, VICOFA said,.

Source: Vneconomy

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