CHAPTER 1.

INTRODUCTION

International trade is the exchange of capital, goods, and services across international borders or
territories, such trade represents a significant share of gross domestic product (GDP). While
international trade has existed throughout history (for example Uttarapatha, Silk Road, Amber Road,
scramble for Africa, Atlantic slave trade, salt roads), its economic, social, and political importance has
been on the rise in recent centuries. Increasing international trade is often seen as the basic meaning of
"globalization". In order to meet the needs of the growth and expansion of international trade, many
international principles and practices have been born. In this paper, the research team has studied a
part of GAFTA - an international trade association with over 1900 members in 98 countries. Its aim is to
promote international trade in agricultural commodities, spices and general produce, and to protect its
members’ interests worldwide. The authors analyzed terms and conditions which are mostly based on
GAFTA of a specific contract between a Vietnamese company and a US’s company with a view to finding
out the risks and advantages of both parties.

2.1 GAFTA

The Grain and Feed Trade Association (GAFTA) is an international trade body whose members include
traders, brokers, lawyers and other professionals involved in the grain industry. The organization has
members in over 98 countries worldwide and provides contract management for approximately 80
percent of all grain shipments globally and international arbitration service.

2.1.1 Mission

GAFTA’s aim is to promote international trade in agricultural commodities, spices and general produce,
and to protect our members’ interests worldwide. GAFTA prides itself on being an organization that is
run by t he trade, for the trade—and one of the core aspects of its mission is to support the professional
development of its members. It provides in-depth training to help members understand the intricate
details of complex grain trading contracts, which is vital to ensure mutually beneficial trades and
minimize the risk of disputes.

2.1.2 Origins

GAFTA can trace its origins back to 1878 when the London Corn Trade Association (LCTA) was
established by members of the corn trade to protect their interests. The LCTA sought to achieve this
through the adoption of standard forms of contract, drawn up by the association, with any disputes
arising out of these contracts being settled by arbitration rather than legislation. Disputes were referred
to London and conducted under English Law.

2.1.3 Development

In 1906, a group of traders broke away from the LCTA and formed a new more specialised association,
the London Cattle Food Trade Association (LCFTA), for those trading in vegetable proteins used as
animal feedingstuffs. In 1965, the LCFTA dropped ‘London’ from its title, reflecting growing
internationalization. In 1969, merger talks commenced between the LCTA and CFTA. The outcome of
these talks was the formation of a new joint association, the Grain and Feed Trade Association in 1971.
2.1.4 Product

GAFTA provides a wide range of services, which are Contracts, Arbitration, Trade Assurance, Trade
Policy, Training and Events for the Grain and Feed Trade.

- Contract: GAFTA develops the standard forms of 230 contracts on which it is estimated that 80% of the
world`s trade in grain is shipped and is keen to encourage the further use of its contracts within the
trade.

- Arbitration: GAFTA's arbitration service provides parties who use our standard forms of contract with a
system to resolve trade disputes in a fast and efficient manner.

- Trade Assurance: The GAFTA Trade Assurance Scheme (GTAS) is available to all companies operating in
international grain and feed trades. It covers each stage of the trading and logistics supply chain from
farms in the country of origin to delivery at final end-user in the country of destination.

- Trade Policy: GAFTA's Trade Policy service represents members' vie ws to authorities by providing
informed opinions on legislative and policy developments through the publication of regular material on
the current grain market and policy updates on trade issues.

- Training: GAFTA currently offers two learning routes, each of which suits a different type of student,
whether you prefer face-to-face training or the comfort to study from home in your own time: GAFTA
Professional Development (GPD): Face-to-face training at locations worldwide.

- Distance Learning Programme (DLP): Online training that can be studied at a time to suit you in any
location that you choose.

2.2 GAFTA 100

Sellers shall not be responsible for delay in shipment of the goods or any part thereof occasioned by any
Act of God, strike, lockout, riot or civil commoti on, combination of workmen, breakdown of machinery,
fire, or unforeseeable and unavoidable impediment to navigation, 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 serve a notice on
Buyers within 7 consecutive days of the occurrence, or not less than 21 consecutive days before the
commencement of the contract period, whichever is the later. The notice shall state the reason(s) for
the anticipated delay. If after serving such notice an extension to the shipping period is required, then
the Shipper shall serve a further notice not later than the last day of the contract period of shipment
stating the port or ports of loading from which the goods were intended to be shipped, and shipments
effected after the contract period shall be limited to the port or ports so nominated.

If shipment is delayed for more than 30 consecutive days, Buyers shall have the option of canceling the
delayed portion of the contract, such option to be exercised by Buyers serving notice to be received by
Sellers not later than the first business day after the additional 30 consecutive days.

If Buyers do not exercise this option, such delayed portion shall be automatically extended for a further
period of 30 consecutive days. If shipment under this clause is prevented during the further 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 that Sellers shall have supplied to Buyers, if
required, satisfactory evidence justifying the delay or non-fulfillment.

2.3 GAFTA 125

GAFTA 125 is arbitration rules. Any dispute arising out of a contract or arbitration agreement, which
incorporates or refers to these Rules, shall be referred to arbitration, and arbitrator(s) or board of
appeal, as the case may be, will proceed to determine all issues put before them.

From 1st September 2016, the new version of the GAFTA 125 Rules of Arbitration takes effect in all sale
contracts referencing or incorporating the rules.

The Rules are widely used among traders in soft commodities who are and are not members of GAFTA.
Although the changes to the Rules are not extensive, many of them will be welcomed by those involved
in the commodities industry, as they attempt to deal with some of the practical problems encountered
during the arbitration process.

The changes, having been drawn up by a committee representing the trade, highlight the benefits of a
trade organisation which draws on the practical experience of its members.

* Changes to the Rules

Some of the most important changes to the Rules of Arbitration are summarised below:

(i) GAFTA has sought to dispose of and clarify some of the difficulties created by the time limit
associated with quality and condition disputes. The new rules seek to do this by re-naming the heading
for Rule 2.1 and disposing of the old Rule 2.1. (b) and (c).

The aim of the change is to attempt to ensure that the time limits contained in Rule 2.2 (1 Year) apply to
the majority of claims. Quality and Condition disputes are now subject to a one-year time limit rather
than 21 days.

GAFTA has however maintained the 21-day time limit for commencing arbitration for circumstances
where one of the parties (usually the buyer) requires a GAFTA arbitrator to analyse samples taken for
the purposes of resolving a dispute.

(ii) GAFTA has clarified that they will now appoint a sole arbitrator/arbitrator in default (under Rule 3)
upon receipt of the first written submissions from the claimants (filed/served in line with the
requirements of Rule 4).

(iii) GAFTA has clarified that if the requisite deposit is not received by them within 60 days from the date
of request the claim will be waived/time-barred (Rule 4.1).

(iv) The Rules now give tribunals greater powers to consolidate or hold concurrent proceedings in the
event that one of the parties does not agree (Rule 7). This power has also been extended to the appeal
board (Rule 12).

(v) GAFTA has included a new provision covering cancellation costs (Rule 16) in the event that the
parties do not proceed with the arbitration. The new provisionalso provides a formula for assessing such
costs.