One of our tasks is to promote, wherever possible, the use of the official International Contracts.
Let us explain a little more about them ...
There are two ... the International Contract No.6 for Raw Hides and Skins [which also includes Crust] and No.7 for Finished Leather. There are also Short Form versions. These are available on this page. There are three formats for use with either a typewriter, laser printer or computer.
In saying "we" have two contracts, we are referring to the International Council of Tanners as well as the International Council of Hides, Skins and Leather Traders Associations. These contracts are the outcome of continuous deliberation, drafting and revision between the councils. Annually, the Contracts Committees of both Councils review the contracts to ensure that they give as comprehensive a coverage to the entire leather industry as possible - whilst remaining fair to both the Buyer and Seller alike.
Over the years the collective wisdom of the industry has been brought to bear upon these documents. The International Contract is no short-term wonder. It has endured. It has been successfully and successively upheld in courts of law all over the world for many years.
Within the contract framework we now include the use of INCOTERMS where applicable. INCOTERMS provides a set of international rules for the interpretation of the most commonly used foreign trading terms. This therefore reduces the uncertainties of different interpretations of such terms in different countries.
Sadly there are still many organisations and/or companies who believe that they can do without the official contract. They are quite happy to state on their own ‘house contracts’ that "terms and conditions are in accordance with the International Contract Number ........." whichever is currently relevant. Usually these ‘house contracts’ state neither the place nor the Authority under which arbitration, should it become necessary, will be held.
TThe issue of such ‘house contracts’ is not acceptable. Firstly, to refer to either the International Contract No. 6 or 7 without using the actual printed contract form is a violation of the copyright held by our Council. Secondly, should the matter of a claim be unresolved amicably, it would automatically become impossible to settle that claim through normal trade arbitration procedures. And going one step further, in the case of litigation, a judicial Court would not accept that sufficient information appertaining to the business had been conveyed from/to either Buyer/Seller. As a result the case would be dismissed. Most, if not all, Arbitration Centres in the world will no longer conduct arbitration procedures where the full or approved short form contract has not been used.
A pretty good case for using the International Contract forms you would think ... and quite correctly! It is extremely short sighted that some companies persist in their refusal to use either the full contract or the approved short form version. The International Contract contains the detail to which the Buyer/Seller have agreed and it is also an insurance over the goods that you have bought/sold in that you know for what you are covered.
The cost per contract is minimal compared with the cost of one container or, indeed, the many containers to which the one contract may apply. We hardly need to remind you of the value, in today’s trading terms, of one container of skins or hides! You are comparing a few $US cents with thousands of $US dollars - or their equivalent!
Fortunately, today, there are people of sense who insist that they will only sell ‘on the International Contract’. On the other hand, there are also those who demand the right to purchase in the same way. They both realise the value of selling and buying ‘on the International Contract’.
The question most frequently asked is, "What does it do?" and "What should I expect to get out of using them?". The quick answer is ... it allows you to sleep at night!
You know that in the event of the many problems which can occur, particularly, but not solely, with international trade, you have within the International Contract specific rules and regulations which set out the way in which these problems can be suitably resolved. Should the Seller/Buyer and/or Buyer/Seller be unable to agree then they can make recourse to the official arbitration and appeal procedures within the trade - which normally come at a fraction of the cost of instigating legal procedures!
In effect, the International Contracts are a form of ‘TRADING MANUAL’ which you need to use and read to understand what you are actually covered for.
Let us take a look at one ....
Where "Seller", "Buyer" and "Date of Contract" is typed that should be self-explanatory. Below these you will see "1 : Particulars" and the first thing which will catch your eye is the large, blank space. This is the space where Buyer and Seller can insert any specific details or particulars to which they have both agreed.
For example [and this is a hypothetical instance but well illustrates the point] should the Buyer of a container of hides wish to receive only black and white hides and the Seller has agreed to supply only black and white hides, then, this additional specification can be inserted into the rather large space you see on the blank contract form. It then becomes binding on the Seller to supply only black and white hides.
If the delivery is subsequently found to include other colours such as brown or grey then the goods are deemed to be an incorrect tender and should be rejected. This point is exaggerated, of course, in order to highlight what can be included if both parties to the contract have specifically agreed a detail from the outset.
At the back of the International Contract form there are various Annexes as they apply to Raw Hides and Skins [Annexe A]; Pickled Material [Annexe B]; Wetblue Material [Annexe C]] and Chrome, Vegetable Tanned and Other Unfinished Leather in Dry or Crust Condition [Annexe D].
Returning to "1. Particulars", whichever Annexe[s] applies to the material contracted for the purchase or sale, then you must insert the appropriate Annexe letter after "We the above-mentioned seller, and we, the above mentioned buyer, have today contracted a sale/purchase on the terms and conditions of this contract and of Annexe ........"
On the question of Arbitration and Appeal the relevant particulars are provided at the bottom of this same page after the large space.
Now the advantages of the International Contract can start to become apparent. The Contract is asking the questions which should have been mutually agreed between the two contracting parties during their negotiation of the business in hand. In short, it is covering the parties for all foreseeable eventualities. To use an ordinary commercial letter-headed paper on which is written what is believed to be an adequate note of the details of the business which has been concluded, rarely includes reference to place of inspection, place of arbitration, place of appeal and the arbitration authority according to whose rules and regulations arbitration and appeal should be carried out.
"Place of Inspection" ... Why leave it blank? Why not cover yourself? You could say: "At Buyer抯 works" which would not constitute a problem since it is likely to be the least problematical venue for all concerned.
"Place of arbitration" ... Again why leave it blank? It is normal practice within the trade to have arbitration at one of the established arbitration centres. Without any particular bias towards any individual arbitration centre, we shall say "FRANCE" for the purposes of this illustration. Then we would add "according to the Rules of the Syndicat General des Cuirs et Peaux". This makes it quite precise - otherwise it could be inferred that it is a matter for a French Court.
"Place of Appeal" ... Following on from the above example we would then say "France" and then continue with the words "according to the Rules of the Syndicat General des Cuirs et Peaux.
"State Arbitration Authority" ... Here again ... do not leave it blank! As a follow on from "France" you should state the authority. In this case it is "Syndicat General des Cuirs et Peaux". Be precise and leave no doubt as to what you mean.
We are therefore trying to highlight that, in using the International Contract Form, the spaces which are left for you to complete remind you of the particular information required to provide maximum protection in the event of problems at a later date.
Turning back to Page 1 of the International Contract Form you can see down the left hand side a quantity of small print. Ignore this at your peril! It is there to help you and not to confuse you! Here again the International Contract is seeking to remind you of the necessary details you need to insert when making out the contract.
It says, "State here: Quantity, Mark/Description, Quality/Selection/Chemical Analysis, Weight/Area/Substance, Price, Weight and Measurement Terms ...." and so on ... all vital information! It concludes, "Incoterms 1990 to apply - any other particulars.".
We can continue through the document. Ah! but you say, "So much fine print ... we’ll never understand all that!". But the International Contract is one of the main ‘tools’ of our trade. We are therefore urging you to study it - if only a bit at a time. You will be amazed by what there is to learn from it. As we said before, it really should be regarded as a "Trade Manual" or "Guide to Trading".
The text of the International Contract sets out, quite clearly, the rules you are working to and, by virtue of this fact, the rules the ‘other guy’ is working to. It cuts both ways! As such the International Contract is a form of security. . There can be no misunderstanding - the wordings are quite precise.
"2. Definitions": Clauses 2.1 to 2.11 are very clear. Likewise with "3. Quality", Clauses 3.1 and 3.2 spell out that "Goods to be of Fair Average Quality of the mark and/or description. Fair average Quality means that the goods must conform to the quality standards that are normal for the products of the origin indicated in the Contract. For any inferiority of quality an allowance to be made.....", etc..
This should act as words of caution to those wishing to trade across the world’s markets. Each origin or goods from recognised and designated geographical regions of hide and skin supply have their own standards and specifications.
Likewise certain well-known and established Shippers?Marks carry individual gradings and specifications. What applies to one does not necessarily apply to another. But to know these things is part of what makes a successful trader. These things are not learnt overnight - as many of you will already know!
"4. Quantity"; "5. Marking" and "6. Destination and Freight" are all referred to in order to avoid ambiguity. Coming to "7. Freight Variations", in previous contracts we had a problem regarding who should or should not pay any freight increases which were made by the Shipping Companies or carriers after the contract was agreed.
Skipping over "8. Shipment" and "9. Notices of Shipment", which you can read on your own, to "Risk and Title". Clauses 10.1 to 10.4 are essential reading particularly as they refer to current trading conditions in which bankruptcies, receiverships and administration have become, sadly, more common. As you all know the task of identifying your own goods, once they are in the hands of the Buyer, can be very difficult indeed. In fact, the great question often asked is, "At what point does title to the goods pass from Seller to Buyer?"
These four clauses set out your rights and privileges accordingly. Precautions should be taken at all times to ensure you retain identity of your own goods.
Under "11. Insurance" the procedures to be adopted are highlighted. You must know what you are doing! Clause 11.1 sets out to how the goods are sold. If it is your responsibility to cover the insurance it is a reminder to you to do so for it states, "Seller to provide policies/certificates of marine insurance including Institute Commodity Trade Clauses (A), Institute War Clauses (Commodity Trades) and Institute Strikes Clauses (Commodity Trades), covering the goods at the contract price plus twenty per cent and, where applicable, to state: "On deck cargo held covered at a premium to be arranged (any additional premium for Seller’s account) and to provide payment of all agreed claims in the currency of the contract.", etc.. If we were to be very honest it takes a very experienced trader to think of all these points should they be necessary!
Proceeding to "12. Documents" and "13. Invoicing" again, everything is spelt out. Clause 12.2 could have been considered very appropriate in the light of recent European legislation as set out in the Balai Directive 92/118. This Directive was responsible for the introduction of new sanitary certificates and controls for imported goods from third countries to those of the European Union. However such clauses were included in the contract long before 1998 when the E.U. actually started to apply the Directive.
You can read, "If sanitary certificates, certificates of origin and/or other certificates are required and are obtainable in the country of shipment and /or origin, these to be supplied at the seller’s expense. Consular invoices [if requested by buyer after date of contract] and their legalisation fees for buyer’s account. Buyer to give seller in good time a detailed list of the documents required ...." and so on, again. The objective is to make the Buyer give full details to the Seller of any and all documentary requirements to allow the import to be freely admitted at the destination country.
Again moving on to "14. Payment" you will see that there is no complicated jargon which defies comprehension about the International Contract. In this section the wording leaves no-one in any doubt about what is required. Likewise with "15. Weighing and Taring" and "16. Measurement". In addition, where further clarification is required, it is set out in the Annexes. For raw hides and skins, for example, Annexe A.1 "Weighing and Taring" deals with more particular aspects of this which are relevant..
Understandably a different set of rules must apply in each of the cases of dry, dry salted and wetsalted material. The same rate of percentage allowance would not work. Similarly the rules governing measurement vary with the different conditions in which the hides or skins are sold. You hardly need to think about a pickled skin, say, and a vegetable tanned crust skin to realise that they do not handle in the same way. The "stretch factor", to coin an expression, is far greater with pickled skins. So ... turning once again to the end of the International Contract you will see that there are, again, specific rules applicable to measurement in the case of the different materials covered by Annexes B, C and D.
When one considers the, sometimes, immense amount of monies tied up in contracts, responsibility for trading hides and skins should be taken by trained and knowledgeable people. In certain cases the basis of that knowledge may be acquired through courses of study at colleges, but, in many other instances it is built up over a lifetime of direct trading experience.
Never is such information more valuable than when it comes to disputes. In the International Contract procedures for handling disputes are set out in "17. Inspection", "18. Claims", "19. Rejection" and "20. Default". But here again, more specific information relating to these subjects is given in the Annexes dependant upon the type of goods being traded.
"21. Notice of Force Majeure", or a declaration of certain circumstances which are deemed to be beyond the control of the Seller and which excuse a party from performing his part of a contract. This is simply covered by "A party claiming force majeure to give notice as soon as possible and, if required, to furnish satisfactory evidence of force majeure." Usually this means that shipment cannot be effected. War, floods, storms, and earthquakes are some of the more common reasons for declaring force majeure.
"22. Bankruptcy" is again a very relevant clause at this particular time given the global economic situation. You would do well to acquaint yourself with the content of these clauses. To some extent they have to be considered hand in hand with "10. Risk and Title" should the goods have already been shipped. Either way your rights are clearly set out.
The two penultimate clauses "23. Arbitration and Appeal" and "24. Proper Law of the Contract" cover what you should do in the event that amicable settlement negotiations prove to be unsuccessful. Here you are reminded of what you should have put, right at the beginning, in Clause 1 - Particulars. Clause 23.1 "Any dispute arising out of this contract to be settled by private treaty, if possible, failing which it shall be referred to arbitration according to the International custom of the trade and subject to the rules for arbitration and appeal obtaining in the places specified for that purpose in Clause 1." Whilst 23.2 is quite specific in stating that "No party may begin an action in the Courts under this contract until the dispute has been determined by arbitration as hereby provided ...." Clause 24.4 states, "The United Nations Convention on contracts for the International Sale of Goods (Vienna 1980) shall apply to this Contract.".
So you can see that the International Contract draws not only on the combined expertise of both the hide and skin traders and tanners but, also, INCOTERMS and The United Nations Convention (often referred to as the Vienna Convention).
Perhaps for those of you who may not be familiar with INCOTERMS, we should mention that it is published by the International Chamber of Commerce in consultation with its Commercial Practices Commission and Trade Terms Working Party.
Finally we have "25. Text"which simply applies to cases where language translation errors may arise. English is the definitive text.
At this point we hope you may begin to realise why we are so enthusiastic about the International Contract. We see it operating successfully throughout most parts of the world. As it has evolved over the years its content has become more comprehensive to a point where nearly all Courts of Law rule in its favour and uphold the arbitration rulings based upon it. In fact it is generally considered to be one of the finest commodity contracts in use today throughout the world!