Schedule 9

Freight regulations
Table of Contents
1. Preface and Scope.........................................................................................................................3
1.1. Introduction...........................................................................................................................3
1.2. Definitions..............................................................................................................................3
2. Spot Chartering..............................................................................................................................7
2.1. Introduction...........................................................................................................................7
2.2. Regular Process Flow.............................................................................................................7
2.2.1. Requirement Check........................................................................................................7
2.2.2. Prepare Order................................................................................................................8
2.2.3. Receive Proposals........................................................................................................10
2.2.4. Ship owner/broker Check............................................................................................11
2.2.5. Negotiation of terms....................................................................................................13
2.2.6. Approval.......................................................................................................................15
2.3. Exceptional Process Flows...................................................................................................16
2.3.1. Exception on Prepare order.........................................................................................16
2.3.2. Exception on Negotiation of terms..............................................................................17
2.3.3. Exception on Approval.................................................................................................18
3. COA Chartering – Contract..........................................................................................................19
3.1. Introduction.........................................................................................................................19
3.2. Process Flow........................................................................................................................19
3.2.1. Requirement Check......................................................................................................19
3.2.2. Prepare order...............................................................................................................20
3.2.3. Receive Proposals........................................................................................................22
3.2.4. Ship owner/broker Check............................................................................................22
3.2.5. Negotiation of terms....................................................................................................24
3.2.6. Approval.......................................................................................................................25

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 1. Preface and Scope
1.1. Introduction
Regulations for Freight Organisation for Supplier (hereinafter referred to as the Regulations)
establish the rules for the implementation of the procedures for the proper freight organisation of
Supplier.

The Regulations shall apply to Supplier’s employees providing the Chartering services to the
Customer.

Schedule 9 – Chartering (hereinafter referred to as Schedule 9) of the Regulations encompasses all

chartering activities (spot chartering and COA chartering – contracts and shipments) and describe
the regular process flows, main exceptional process flows where applicable and policies, including
but not limited to decision logic & KPIs.

The purpose of the organisation of the sea freight is to select the optimal carrier for sea freight
which could ensure the timely delivery of the goods to the customer at the lowest cost, in
accordance with the principles and standards of Customer.

1.2. Definitions
Shipment Plan – a monthly document drawn up in cooperation with Customer by the Supplier
containing the details of the planned shipments of the coming month.

Sales Plan – a monthly document drawn up by the Customer’s Sales Department containing the
details of the planned cargo deliveries of the coming month.

Monthly plans – Both the shipment plan and the sales plan

Export Shipping Schedule – a document drawn up by the Supplier’s employee based on the agreed
preliminary shipment plan for a month.

Sales Recap – summary of terms of a concluded transaction based on which the supply contract is
drawn up.

Fixture Recap – a sufficient form of the maritime shipping contract which contains the following
information:
- Name and details of the owners;
- Quantity and type of product;
- Type of packaging;
- Port(s) of loading;
- Period of presentation of a vessel for loading;
- Port(s) / region of discharge;
- Freight rate;
- Terms of payment for freight;
- Loading / discharging rates;
- Terms of submission of notice of readiness;
- Terms of calculation of the lay time;
- Demurrage / dispatch rate;
- Main technical characteristics of the vessel;
- Specific requirements for the vessel;
- Applicable law;
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 - Amount of the address commission and brokerage commission;
- Other important terms and requirements.

Charter–party – complete form of the maritime shipping contract.

Vessel's agent – a company hired by the ship owner for representation of the interests of the ship
owner in the port.

AXS Marine – an online resource which provides a variety of tools for calculations as well as
databases on maritime shipments from 2001.

Voyage Calculator – a tool (offered by for example AXS Marine, Softmar or Netpas) for the
economic analysis of a voyage operated by a particular vessel or a particular type of vessels in any
direction, which includes fully integrated and constantly updated databases of more than 86’000
vessels, 8’000 ports and anchorages; locations of all vessels in real–time mode; automatic table of
distances between ports; data on the cost of fuel and port dues in all ports. When choosing
appropriate parameters for the calculation, the data are automatically uploaded from the system
and are included in the calculation.

Ship Owner – Owner of at least one vessels (if chartering a barge then at least owner of one
bargebarge or larger for Europe lane, handysize or larger for other lanes) who in addition might
charter in ships

Register of Ship Owners – a centrally supported database of ship owners in Chartering Platform,
which is constantly updated for the time of the freight.

Black List of Ship Owners – a database of unreliable ship owners contained in the information
system. Updating of the list is carried out in cooperation with Customer by the Supplier’s employee
at least once a month.

Corridor – Cargo route from loading ports to specific continent / country (i.e. EU, SEA, Brazil, India,
Latin America, China, USA, Others)

Lane – Cargo route from specific loading port to specific discharge port

Shipment – Transportation of all cargo contained by a single ship sailing to one or multiple ports

Parcel – The product(s) delivered for one client in one discharge port

Cargo – The sum of all products that are loaded into the ship at the loading port

COA – Contract of Affreightment, long term contract between UKT and ship owners covering
multiple shipments

Icebreaker season – The period where icebreaker grade ships are required to ship from St.
Petersburg port

Panamax – Ship with deadweight tonnage of 70 – 85 MDWT

Ultramax - Ship with deadweight tonnage of 60 – 64 MDWT

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Supramax – Ship with deadweight tonnage of 52 – 58 MDWT

Handymax - Ship with deadweight tonnage of 42 – 50 MDWT

Handysize – Ship with deadweight tonnage of 20 – 40 MDWT

Mini bulker – Ship with deadweight tonnage of under 10 MDWT

Coaster – Shallow hulled vessels traveling within the same continent

Barge – Flat–bottomed boat built mainly for river and canal transport

Order – The application to the request for a vessel or contract to the shipping market

Fixture on subjects – When the vessel is fixed by Supplier with the ship owner, with disrespect of the
necessary approvals from the Customer – usually granting an extra 24 hours for approval, unless
agreed otherwise

Tripartite fixture recap – A fixture recap that is agreed upon by three parties, for example due to
payment to a third party or when cargo is shared with another company

KYC procedure – Know Your Customer procedure, a check to assure the counterparty (i.e. ship
owner/broker) is reliable. The KYC procedure is part of the reliability check performed in the Ship
owner/broker check phase of the chartering process

1.3.

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 2. Spot Chartering
2.1. Introduction
Spot chartering includes all activities related to chartering ships via the spot market. It starts with the
decision to arrange a spot market shipment based on the shipment planning towards signing the
contract, after which the shipment process can start. The goal of the spot chartering process is to
arrange ships for export of cargo according to the shipment plan for the lowest possible price with
the lowest possible risk on a spot basis.

The Spot chartering process consists of a regular process flow and main exceptional process flows,
enabled by speed or quality requirements. The regular process consists of checking requirements,
preparing the order, receiving proposals, checking ship owner/brokers, negotiation of terms, and
approval. All phases are discussed in more detail in this chapter.

The procedures related to Spot chartering are main guidelines of the process. Due to the volatile
nature of the shipping market, deviation from the process is possible. When deviations take place,
the Supplier’s manager shall reason the deviations in the fixture report to assure transparency.
Chapter 2.3. gives an overview of most common deviation practices, including boundaries and risk
mitigation strategies. However, it is acknowledged that individual shipment requirements could
result in deviations that are not described, where the responsibility of the Supplier’s manager lies in
proper reasoning in the fixture report and with that, Customer’s Board of Directors (CEO) is required
for these deviations.

2.2. Regular Process Flow

2.2.1. Requirement Check

Goal
The goal of the requirement check is to assure that the shipment details match the existing
restrictions & requirements.

Activities
Requirement check: for the requirement check, the Supplier’s manager obtains:
• Customer requirements from Customer’s sales
• Cargo readiness from Customer’s logistics
• Loading port restrictions from the loading agent
• Discharge port restrictions from the discharge agent

The responsible parties of (Customer’s sales, Customer’s logistics, loading agent and discharge
agent) verify the required information. When the characteristics match, the Supplier’s manager can
continue the search. If not, the Supplier’s manager will have to adjust the shipment details to fit into
requirements and restrictions until a consensus is reached.
When shipment details and/or requirements change, the Supplier’s manager will again check the
requirements to verify the shipment is possible.

Roles and responsibilities

The Supplier’s manager that is in charge of the corridor is key responsible of this process phase.
He/she takes care the requests for requirements are made in time, directly after initiation of the
process from the shipment plan and that the shipment details match with requirements and
restrictions.

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Customer’s sales and Customer’s logistics have the responsibility to provide the requested details on
time, as soon as possible within a maximum of 12 hours after the request, respecting time zone
differences.

2.2.2. Prepare Order

Goal
The goal of the request preparation is to enter the market on the right time and within specified
conditions to assure the lowest risk and rates

Activities
The request preparation phase consists of multiple activities. It translates the shipment details from
the previous phase towards an order request that is used in the receive proposal phase. All activities
listed are performed sequentially unless stated otherwise.

Evaluate market situation: When planning the terms of the placement of the Order in the freight
market, the Supplier’s manager has to be guided by the existing market forecasts and expert
evaluation of the situation on the freight market. If there are forecasts for a stable or declining
market, the time of entry into the market shall be scheduled on 14-18 days before the planned date
of the ship’s arrival to the port of loading. If there are forecasts for a growing market, the placement
of the Order is carried out immediately upon drawing up of the Export Shipping Schedule or
coordination of all terms of the sales contract by the Customer’s Sales Department. The evaluation
of the market situation shall be guided by the following resources:
• The Voyage calculator program on the AXS MARINE Internet source for corridors and vessel
types the Baltic index publishes a freight rate for
• By sending a request on the market situation to not less than 5 ship owners or not less than
2 leading brokerage houses
• Relevant publications and analyses provided by leading brokerage houses and analytics
departments of shipowners.
• The Supplier’s manager will use the information of these sources to formulate his view on
the market situation. Gathering the information from the resources can be performed in
parallel to determining the basic rate.

Determine basic freight rates: Drawing up of the Order is preceded by a mandatory procedure for
determining the basic freight rate for the planned route. The basic freight rate is used by a
Customer’s trader, Supplier’s employee and the Customer’s CEO to assess the feasibility of the
transaction by comparing actual rates and budgeted rates towards the determined basic rates.
Determining the basic rate shall be guided by the following resources:
• The Voyage calculator program on the AXS MARINE Internet source for corridors and vessel
types the Baltic index publishes a freight rate for
• By sending a request on the market situation to not less than 5 ship owners or not less than
2 leading brokerage houses
The Supplier’s manager will use the information of these sources to formulate his view on the basic
freight rate. Gathering the information from the resources can be performed in parallel to assessing
the market situation.

Check eligibility: When drawing up the Order for provision of transport services, the Supplier’s
employee is obliged to make sure that the intended shipment is:

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 • Planned in the Shipment Plan for the month: if not planned, the Supplier’s manager shall
remind Customer’s sales and Customer’s logistics to update the Shipment plan,
• Approved by the Customer’s CEO via “Sales recap”: if the sales recap is not approved, the
Supplier’s manager shall remind Customer’s sales to arrange the approval,
• Carried out within the framework of concluded contract(s): if not within the framework, the
Supplier’s manager shall carry out the shipment within the right framework contract,
• The basic freight rate complies with the approved annual budget target: if basic rates are
higher, the Supplier’s manager will decide whether he/she has faith in better rates (e.g. due
to a large amount of ships in the region) before continuing. If so, he/she can try to get the
right deal by continuing the process. If not, the question of the feasibility of the future
freight transaction is raised for approval by the Customer’s CEO. If the deal is still assessed as
profitable enough, the plan is adjusted and the vessel search continues. If not, the Supplier’s
manager will act on the CEO’s direction (e.g. cancel the shipment or adjust details). The
order of the eligibility check activities is determined by the preference of the Supplier’s
manager. However, before requesting CEO approval for working with a higher than
budgeted basic freight rate, other areas of the eligibility needs to be in order.
Exceptional processes exist for this activity and can be found in chapter 2.3.1.

Prepare order request form: The list of mandatory requirements for drawing up of the order
includes:
• Quantity and type of products,
• Type of packaging,
• Port(s) of loading,
• Period of presentation of a vessel for loading;
• Port(s) / region of discharge,
• Loading / discharging rates,
• Main technical characteristics of the vessel.

Roles and responsibilities

The Supplier’s manager that is in charge of the corridor is key responsible of this process phase.
He/she performs the market evaluation, determines the basic freight rates, checks the eligibility and
prepares the order request form.

Other parties responsible of Customer’s logistics to assure the shipment is planned, Customer’s sales
to assure the shipment is approved and Customer’s CEO to provide direction when shipments are
not profitable enough.

Decision logic

Determine basic rate: The final basic rate is determined by taking the average of the provided basic
freight rate estimates from ship owners and/or brokers and adjustment based on the other
resources used. When an outlier is provided (i.e. an estimate that deviates approximately more than
20%), the reason of deviation is requested to find out possible abnormalities in the market and the
estimate is considered invalid if no good reason is provided.

Check basic rates versus budgeted: The basic rate should be lower, equal or not higher than 15%
than the budgeted rate. If the basic rate is higher than this boundary, the Supplier’s manager can
decide to continue the search if there are indicators that the actual freight rate will be lower than
the basic freight rate. Examples of these scenarios are:
• A lower rate offer is already received by a ship owner or broker
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 • Multiple ships are spotted within the region
When continuing the search with higher basic rates, the Supplier’s manager should mention the final
deviation of actual rate versus budgeted rate in the CEO approval request. If there is no faith in
better rates, the Customer’s CEO will assess whether the process can continue or not.

2.2.3. Receive Proposals

Goal
The goal of the receiving proposal phase is to make sure proposals are received on time and with the
best possible deal.

Activities
The receive proposal phase consists of multiple activities that translate the order request form
towards a longlist of potential vessels, containing all proposals received via ship owners and brokers.
All activities listed are performed sequentially.

Send/accept order request: The Supplier’s manager sends/accepts the application request to/on the
Chartering Platform.

Receive proposals: Receipt of offers via Chartering Platform.

Analyse quality: the Supplier’s manager can continue the process. If the Supplier’s manager has the
opinion too few proposals are received, he/she can decide to:
- Gather more information by talking to brokers and ship owners;
- Talk to Customer’s traders to relief customer requirements (e.g. laycan) to attract more
proposals;
- Send reminders to ship owners and/or brokers

Roles and responsibilities

The Supplier’s manager that is in charge of the corridor is key responsible of this process phase.
He/she sends the order request, receives the proposals an analyses the quality of the deals.

2.2.4. Ship owner/broker Check

Goal
The goal of the ship owner/broker check phase is to make sure the ship owners meet all shipment
requirements, reliability requirements and financial requirements.

Activities
The ship owner/broker check phase consists of multiple activities that translate the long list of
proposals towards a short list of possible ship owners.

Check Reliability: Reliability check should be performed in line with Customer’s KYC procedure.

Check basic rates: If the freight rate is higher than the basic rate the Supplier’s manager can extend
time for collecting proposals on the Chartering Platform. The reasoning for exceeding the basic rate
without sending a new request is prepared and will be attached to the fixture report before CEO
approval.
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Check requirements: The Supplier’s manager checks the shipment details with the requirements and
restrictions that are set in the check requirement phase. When the requirements do not match, the
Supplier’s manager considers whether the deal is interesting enough to discuss changing customer
requirements with Customer’s sales in order to adapt them. If possible, requirements are changed
and if not, the proposal will be excluded.

Pre-negotiate: The Supplier’s manager starts pre-negotiation with all ship owners that submitted a
proposal in order to:
• Investigate the willingness of ship owners to lower their price
• Investigate the flexibility of the ship owners in terms of laycan and other requirements
• Investigate the possibility of extra options like discount on additional cargo or a discount
when multiple voyages are done through the same ship owner

Create fixture report: All the offers received are entered in the Fixture Report. The Report shall
contain:

General information:
• Name of the regional office responsible for the shipment,
• Start of vessel search,
• Expected fixture date,
• Charter party date,
• Total quantity of product
• Type of products,
• Presentation of the vessel for loading (laycan),
• Port(s) of loading,
• Port(s) / region of discharge,
• Cargo sharing with third party details
• Budgeted rate
• Basic rate, including component split
• Loading / discharging rates
• Demurrage / dispatch rates
• Address commission
• Account details of new ship owners
• The market trend (increasing, stable, decreasing)
• Contract type
• Vessel type
• Approvals for cargo readiness, regional readiness, and loading port readiness
• Process exceptions and reasoning
• Supplier’s Manager’s comments

Per offer information:

• Name of the vessel,
• Period of presentation of the vessel for loading offered by the ship owner,
• The route of the vessel (if relevant) – applicable to shipments in the direction of India, China
and South-East A,
• Expected quantity that can be loaded,
• Initial freight rate proposed by the ship owner,
• Final freight rate set with the ship owner

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 • Name of the ship owner,
• Name of the broker, if applicable
• Supplier’s Manager’s comment

Roles and responsibilities

The Supplier’s manager that is in charge of the corridor is key responsible of this process phase.
He/she performs the reliability, basic rate, and requirement check and also performs the pre-
negotiation.

When details of the offer do not match requirements set in the check requirement phase,
Customer’s sales will negotiate with customers to try to change requirements.

Decision logic
Reliability check: When assessing reliability of new ship owners, Supplier’s managers will evaluate
whether the counterparty is reliable or not. The decision to rate a ship owner as positive can be
made if at least the following criteria are met:
• The company details are provided by one of the contacted parties (legal and actual address,
the latest transactions with an indication of freighters, names of the vessels)
• At least one positive feedback is provided by a broker or at least two positive feedbacks
from other charterers
• No negative feedback is provided

Check basic rates: If the offered rate is higher than the basic rate, the decision to send a new order
request or continue with a higher proposed depends on:
• The offered rates versus basic rates
• The amount of proposals received
• The amount of ships within the loading port area
• Time available between current time and desired laycan
• New information received since the process step “Analyse quality of deals”
Due to volatility of the market, no hard go or no-go logic is identified and the decision is based on
the experience of the Supplier’s manager.

Check requirements: If shipment characteristics offered do not match requirements, the Supplier’s
manager decides whether it is feasible to consider changing customer requirements. This decision is
based on:
• Whether the offered rate in the proposal is competitive compared to other proposals
• Whether the requirements deviate significantly or slightly

2.2.5. Negotiation of terms

Goal
The goal of negotiation of terms is to further optimize the offered deals and to end up with the
lowest freight rate possible.

Activities
The negotiation of terms phase consists of multiple activities that translate the short list of ship
owners (fixture report) to agree upon main terms. All activities listed are performed sequentially
unless stated otherwise.

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Let best ship owner/brokers compete: When multiple deals are in the same range of quality, the
Supplier’s manager will send a request to the ship owners to provide their best deal possible within
one hour or less time. The deal that has the lowest price while meeting all requirements in the ship
owner/broker check will be the main candidate for further negotiation.

Consider increase of cargo: If the contracting vessel has the opportunity to take on board more
cargoes than the agreed contractual amount, the Supplier’s manager employee additionally
discusses the possibility of increasing the quantity of the goods to the fully loaded vessel with the
Customer’s trader responsible for the shipment and the Customer’s logistics manager responsible
for the regional warehouse, if applicable. The Customer’s trader then assesses the opportunity to
increase the quantity of the cargo to the customer (i.e. sell more) and the Customer’s logistics
manager assesses the opportunity to take more cargo in the warehouse. The Customer’s trader and
Customer’s logistics manager send the response and, if applicable, reason of refusing taking on
additional cargo to the Supplier’s manager by e-mail. If it is possible to increase cargo by selling more
to the customer or if it is beneficial to send more cargo to the warehouse in the region, the
Supplier’s manager negotiates with the ship owner on obtaining discounts on the freight rate in
proportion to the increased quantity. If this results in a positive case, the cargo will be increased by
the Supplier’s manager.

Negotiate with best ship owner/broker: Upon evaluation of the offers and parallel with possible
consideration of cargo increase, the Supplier’s manager negotiates with ship owner(s) which offered
the best conditions for the purpose of further optimisation of the conditions, reduction of the cost of
freight, and time for approval of the main terms. The results of the negotiations are recorded in the
Fixture Report, including ship owner. Regardless of the type of communication used in negotiations
with ship owners and/or brokers, the Supplier’s managers are required to record the information
received by sending/receiving the relevant message via e-mail by using the common Customer’s
address (chartering@uralkali-trading.com).

Approval fixture terms from owner: The Supplier’s manager conducts discussions on an agreement
with the selected ship owners regarding fixing the vessel for shipments. Before entering the approval
stage, the ship owner should have fixed its vessel on subjects.

Ship owner/broker selection: Selection of the optimal vessel is carried out by the Supplier’s manager
responsible for the corridor based on the lowest price offered, provided that the carrier complies
with other requirements of the Order. If the agreement has been reached, the main terms are send
as recap to the ship owner and charterer (either by the broker, ship owner or Supplier’s manager).
The results of the agreed terms are entered in the Fixture Report.

Discuss discharge rate: Once the ship owner/broker is selected and main terms are agreed upon, the
Customer’s trader from the responsible region discusses the final discharge rate with the customer.

Roles and responsibilities

The Supplier’s manager that is in charge of the corridor is key responsible of this process phase.
He/she performs the negotiation, arranges fixture terms and selects the ship owner/broker.

When increasing cargo to customers or warehouse improves the terms, Customer’s sales (for
customer) and Customer’s logistics (for warehousing) will reconsider this option.

Customer’s sales is responsible for discussing discharge rates with customers.

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Decision logic
Negotiate with best ship owner/broker: After the best ship owner competed, the Supplier’s manager
has to decide what counterparties to finalize fixture with on basis best freight received for
technically acceptable vessel and dates.

Consider increase of cargo: The decision to increase cargo to customers and/or warehouse is based
on whether it results in a neutral or positive business case. The Customer’s trader responsible for the
region will make the final decision on cargo increase to customers while Customer’s logistics will
make the final decision for cargo increase to a warehouse. The overarching variable is what discount
can be received for shipment of additional cargo. When warehouse shipments are considered, the
discount offered is compared to the expected warehouse costs (warehouse costs over the entire
expected period of time). If the total business case is positive and the shipments are possible (i.e.
customers agree and/or there is space in the warehouse), the cargo will be increased.

Select ship owner/broker: The decision what ship owner/broker to select is in the basis determined
by the lowest price possible while taking into account that requirements need to be met. The
decision to choose a non-lowest price proposal can be performed if reasoning is provided in the CEO
approval request.

2.2.6. Approval

Goal
The goal of the approval phase is to assure the deal can be performed and the deal is in line with
expectations of the Customer.

Activities
The approval phase consists of multiple activities that translate the main terms to signed
contract/concluded deal. All activities listed are performed sequentially unless stated otherwise.

Approval requests: Based on the agreed terms, the Supplier’s manager draws up a nomination of the
preliminary fixed vessel and sends it to approve the following three aspects:
1. Cargo readiness via the Customer’s logistics department
2. Regional readiness via the regional office Customer’s trader or regional office logistics of
the Customer
3. Loading port readiness via the loading port agent
If the nomination is refused on one of the areas, the Supplier’s manager assesses the issue to find a
possible solution. If a solution can be found within the requirements, the solution is carried out and
a recap is attached to the CEO approval request. If no solution can be found, the reasoning of
disapproval is attached to the CEO approval request for CEO decision.

Reminders and extension: When approvals are not expected on time, the Supplier’s manager will
send a reminder to the approvers. Simultaneously, the ship owner is asked extension from the set
approval period. When granted, the Supplier’s manager will assure all approvals are received before
the new deadline is reached. If no extension is granted, the Supplier’s manager will see whether
there is another ship owner in the fixture report that offers a deal similar to the current. If so, the
ship owner on the fixture report will be contacted. If not, a new search is started.

CEO approval: Upon receipt of approval from all the concerned departments, the Supplier’s manager
shall receive the final approval of the Customer’s CEO by sending him/her the appropriate e-mail

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request. The list of mandatory requirements/documents required for the request includes the
following:
• Confirmation of the sender (in electronic form),
• Confirmation of the buyer (in electronic form),
• Confirmation of the Customer’s trader from the regional office responsible for the shipment
(in electronic form),
• Filled in Fixture Report with the justification of the selection of the carrier/vessel (in Excel
format).
The Customer’s CEO shall assess whether the approval is granted. If the approval is refused, the
Supplier’s manager shall act on the CEO’s decision (e.g. refine the deal or terminate the deal)
Exceptional processes exist for this activity and can be found in chapter 2.3.5.

Administration: After the receipt of the approval of the vessel from the Customer’s CEO, the
Supplier’s manager arranges the conclusion of the contract of carriage with the ship owner (charter-
party). The Supplier’s manager sends a copy of the contract of carriage (clean fixture recap or
charter-party) to the archives office in electronic form.

Roles and responsibilities

The Supplier’s manager that is in charge of the corridor is key responsible of this process phase.
He/she fixes the approval requests, CEO approval and administration.

Decision logic
Ask approval: The approvals for cargo readiness, regional readiness and loading port readiness
should be based on the specifics related to the approval, meaning that:
• Export organisation or Logistics department of Customer approves solely on cargo readiness
• Customer’s regional office Customer’s trader or Customer’s logistics approves solely on
regional readiness
• Loading port agent approves solely on loading port readiness

Ask CEO approval: The Customer’s CEO will judge whether the chartering should be approved. The
areas of interest that are judged by the Customer’s CEO are identified as:
• Offered rate versus basic rate and budgeted rate
• Market situation
• Whether the lowest price is chosen
• Buyer conformation
• Use of exceptions within the process
• Reasoning of deviation from areas of interest

2.3. Exceptional Process Flows

For specific speed and/or quality requirements, exceptional process flows are identified to match the
process to the requirements. This chapter describes the differences in process steps for the
exceptional flows and the guidelines the Supplier’s manager uses for using exceptional flows. Use of
an exceptional process flow always has to be mentioned and reason has to be provided in the CEO
approval request, including how it matches the guidelines.

2.3.1. Exception on Prepare order

Check Eligibility

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Guidelines for use of exceptional flow: Moving on without Customer’s sales approval, the shipment
being planned, or by a simplified basic freight rate determination is possible when the difference
between current time and maximum allowed time of ship arrival is 9 days.

Risk mitigation strategy: To mitigate risk of commitment without being able to deliver, the following
mitigation strategies are used when deviating:
• Written confirmation of the Customer’s sales approval has to be received from Customer’s
sales
• The sale still has to be approved before signing the contract with the ship owner
• Written confirmation of the shipment being planned has to be received from Customer’s
logistics
• The shipment still has to be planned before signing the contract with the ship owner
• During the remainder of the process, a second opinion on basic freight rates is requested
from at least one broker or ship owner

Receive proposals

Deviations: When a deal is offered with a strict time constraint, the mandatory waiting time of 6
hours can be neglected to assure that the deal can be made in time.

Guidelines for use of exceptional flow: Moving on in the process without the mandatory 6 hours
waiting time is possible if the difference between current time and expiration of the deal is less than
6 hours and the deal is at least 10% lower than the basic freight rate. In addition, this exception
cannot be used in combination with the simplified basic freight rate exception.

Risk mitigation strategy: To mitigate risk of commitment without striking the best deal possible, the
following mitigation strategies are used when deviating:
• Before actually signing the deal, the remaining received proposals are analysed to assure the
best deal is still in place
• If other proposals come in during the remainder of the proposals, they are included in the
fixture report attached to de CEO approval

2.3.2. Exception on Approval

CEO approval

Deviation 1: When speed requirements are high, the Supplier’s manager can request an approval
with assumptions parallel to the approval of cargo readiness, regional readiness, and port readiness.
In this case, the CEO approval is based on all other requirements and automatically in place if the
other approvals are provided.

Guidelines for use of exceptional flow: Asking parallel approval with assumptions is possible when
the difference between current time and expiration time of approval is 12 hours.

Risk mitigation strategy: To mitigate the risk of commitment without being able to perform the
shipment, the following risk mitigation strategy is in place:
• When one of the approvals is refused, CEO approval is automatically cancelled
• After the other approvals are confirmed, the Supplier’s manager will write an appropriate e-
mail to the sole Customer’s CEO with confirmation of the other approvals as proof

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 3. COA Chartering – Contract
3.1. Introduction
COA chartering – Contract includes all activities related to arranging contracts of affreightment
(COAs) with ship owners. It starts with the decision to arrange a COA contract based the CEO plans
towards signing the contract, after which COA Chartering – Shipment process can start. The goal of
the COA chartering - Contract process is to arrange contracts for export of cargo for the lowest
possible price with the lowest possible risk. COAs are used, among others, to mitigate price volatility
risk.

The trigger to start a COA search is set when the CEO makes the decision to do so in the quarterly
meeting or monthly plan.

The COA chartering – Contract process consists of a regular process flow. The regular process
consists of checking requirements, preparing the request, receiving proposals, checking ship
owner/brokers, negotiation of terms, and approval. All phases are discussed in more detail in this
chapter.

Due to the predictability of entering the COA contract market, exceptions are not expected within
the COA chartering process and will not occur, unless approved by CEO approval.

The COA chartering – Contract process shows a lot of similarities with the Spot chartering process.
Therefore, activities that are the same will be marked with a green title.

3.2. Process Flow

3.2.1. Requirement Check

Goal
The goal of the requirement check is to assure that the shipment details match the existing
restrictions.

Activities
Requirement check: For the requirement check, the Supplier’s manager obtains:
• Volume restrictions from Customer’s sales
• Cargo restrictions from Customer’s logistics
• Loading port restrictions from the loading agent
• Discharge port restrictions from the discharge agent

The responsible parties (Customer’s sales, Customer’s logistics, loading agent and discharge agent)
verify the required information. When the characteristics match, the Supplier’s manager can
continue the search. If not, the Supplier’s manager will have to adjust the shipment details to fit into
requirements and restrictions until a consensus is reached.

Roles and responsibilities

The Supplier’s manager that is in charge of the corridor is key responsible of this process phase.
He/she takes care the requests for requirements are made and that the details match with
restrictions.
Customer’s sales, Customer’s logistics, loading agent and discharge agent have the responsibility to
provide the requested details.

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 3.2.2. Prepare order

Goal
The goal of the request preparation is to enter the market on the right time and within specified
conditions to assure the lowest risk and rates

Activities
The request preparation consists of multiple activities that translate the shipment details towards an
order request. All activities listed are performed sequentially unless stated otherwise.

Evaluate market situation: When planning the terms of the placement of the Order in the freight
market, the Supplier’s manager has to be guided by the existing market forecasts and expert
evaluation of the situation on the freight market. If there are forecasts for a stable or declining
market, the time of entry into the market shall be scheduled when the market situation improves. If
there are forecasts for a growing market, the placement of the Order is carried out immediately
upon request of COA search. The evaluation of the market situation shall be guided by the following
resources:
• The Voyage calculator program on the AXS MARINE Internet source for corridors and vessel
types the Baltic index publishes a freight rate for
• Relevant publications and analyses provided by leading brokerage houses and analytics
departments of shipowners.
The Supplier’s manager will use the information of these sources to formulate his view on the
market situation. Gathering the information from the resources can be performed in parallel to
determining the basic rate.
When the time of market entry is determined, the Supplier’s manager sets a goal for the expected
time of COA fixture based on the market situation.

Determine basic freight rates: Drawing up of the Order is preceded by a mandatory procedure for
determining the basic freight rate for the planned route. The basic freight rate is used by a
Customer’s trader, Supplier’s employee and the Customer’s CEO to assess the feasibility of the
transaction by comparing actual rates and budgeted rates towards the determined basic rates.
Determining the basic rate shall be guided by the following resources:
• The Voyage calculator program on the AXS MARINE Internet source for corridors and vessel
types the Baltic index publishes a freight rate for
• By sending a request on the market situation to not less than 5 ship owners or not less than
2 leading brokerage houses
The Supplier’s manager will use the information of these sources to formulate his view on the basic
freight rate. Gathering the information from the resources can be performed in parallel to assessing
the market situation.

Check COA options: On the basis of the market situation and the requirements, the Supplier’s
manager will draw COA options that should be applicable, including at least:
 Corridors that need to be covered and the required distribution between corridors
 Vessel types that need to be covered and the required distribution between vessel types –
including icebreaker characteristics
 The desired obligations of Customer for the COA (i.e. how much shipments to obligate to)
 The type of COA (fixed price or tied to Baltic index)
Before sending the order request, the Supplier’s manager discusses the proposed options with the
Customer’s Key person.

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Check eligibility: When drawing up the Order for provision of transport services, the Supplier’s
employee is obliged to make sure that:
• The program status is fixed: if not, the Supplier’s manager will remind Customer’s sales
and/or Customer’s logistics to fix the program status and waits for fixture,
• The basic freight rate complies with the approved annual budget target: if basic rates are
higher, the Supplier’s manager will decide whether he/she has faith in better rates (e.g. due
to specific market intelligence) before continuing. If so, he/she can try to get the right deal
by continuing the process. If not, the question of the feasibility of the transaction is raised
for approval by the Deputy Customer’s CEO. If the deal is still assessed as profitable enough,
the plan is adjusted and the vessel search continues. If not, the Supplier’s manager will act
on the CEO’s direction (e.g. cancel the COA search or adjust details).
• The order of the eligibility check activities is determined by the preference of the Supplier’s
manager. However, before requesting Customer’s CEO approval for working with a higher
than budgeted basic freight rate, other areas of the eligibility needs to be in order.

Prepare order request form: The list of mandatory requirements for drawing up of the order
includes:
• Performing vessels restrictions
• COA period
• Number of shipments per time period
• Spread over ship sizes and destinations
• Loading and discharge ports
• Freight rates
• Premiums (e.g. due to number of ports)
• Ice restrictions clause
• Charter Party Proforma

Roles and responsibilities

The Supplier’s manager that is in charge of the corridor is key responsible of this process phase.
He/she performs the market evaluation, determines the basic freight rates, checks the eligibility and
prepares the order request form.

Other parties responsible are Customer’s logistics and Customer’s sales to assure the program is
fixed and Customer’s CEO to provide direction when the COA is not profitable enough.

Decision logic
Determine basic rate: The final basic rate is determined by taking the average of the provided basic
freight rate estimates from ship owners and/or brokers and adjustment based on the other
resources used. When an outlier is provided (i.e. an estimate that deviates approximately more than
20%), the reason of deviation is requested to find out possible abnormalities in the market and the
estimate is considered invalid if no good reason is provided.

Check basic rates versus budgeted: The basic rate should be lower or equal than the budgeted rate.
If the basic rate is higher than this boundary, the Supplier’s manager can decide to continue the
search if there are indicators the actual rate will be lower than the basic rate. Examples of these
scenarios are:
• A lower rate offer is already received by a ship owner or broker
When continuing the search with higher basic rates, the Supplier’s manager should mention the final
deviation of actual rate versus budgeted rate in the CEO approval request.
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 3.2.3. Receive Proposals

Goal
The goal of the receiving proposal phase is to make sure proposals are received on time and with the
best possible deal.

Activities
The receive proposal phase consists of multiple activities that translate the order request form
towards a longlist of potential vessels, containing all proposals received via ship owners and brokers.
All activities listed are performed sequentially.

Send/Accept of order request: The Supplier’s manager sends/receives the order from the Customer
on the Chartering Platform.

Receive proposals: Receipt of offers from brokers regarding ship owners as well as receipt of offers
from ship owners is carried out by the Supplier’s manager in the time specified in the Order but not
less than the time specified in the order request after sending.

Analyse quality: Once at least 6 hours have passed after the request, the Supplier’s manager can
continue the process. If the Supplier’s manager has the opinion too few proposals are received,
he/she can decide to:
- Gather more information by talking to brokers and ship owners;
- Talk to Customer’s traders to relief customer requirements (e.g. laycan) to attract more
proposals;
- Send reminders to ship owners and/or brokers

Roles and responsibilities

The Supplier’s manager that is in charge of the corridor is key responsible of this process phase.
He/she sends the order request, receives the proposals an analyses the quality of the deals.

3.2.4. Ship owner/broker Check

Goal
The goal of the ship owner/broker check phase is to make sure the ship owners meet all COA
restrictions, reliability requirements and financial requirements.

Activities
The ship owner/broker check phase should be performed in line with Customer’s KYC procedure.

Check basic rates: If the freight rate is higher than the basic rate the Supplier’s manager discusses
with other Supplier’s managers whether a better rate could be expected based on new proposals. If
so, the Supplier’s manager starts a new search. If not, such rate eventually needs to be approved via
the CEO approval. The reasoning for exceeding the basic rate without sending a new request is
prepared and will be attached to the fixture report before CEO approval.

Check restrictions: The Supplier’s manager checks the COA details with the restrictions that are set in
the check requirement phase. When the restrictions do not match, the Supplier’s manager excludes
the proposal from the search.

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Pre-negotiate: The Supplier’s manager starts pre-negotiation with all ship owners that submitted a
proposal in order to:
• Investigate the willingness of ship owners to lower their price
• Investigate the flexibility of the ship owners in terms of other requirements

Create fixture report: All the offers received are entered in the Fixture Report. The Report shall
contain:
General information:
• Start of COA search,
• Expected fixture date,
• Charter party date,
• Basic rate, including component split
• Loading / discharging rates
• Address commission
• The market trend (increasing, stable, decreasing)
• Approvals checks
• Process exceptions and reasoning
• Supplier’s manager comments
• Options for COA (e.g. specific vessel type or routing)

Per offer information:

• Initial freight rate proposed by the ship owner,
• Final freight rate set with the ship owner
• Name of the ship owner,
• Name of the broker, if applicable
• Supplier’s manager comment

Roles and responsibilities

The Supplier’s manager that is in charge of the corridor is key responsible of this process phase.
He/she performs the reliability, basic rate, and restriction check and also performs the pre-
negotiation.

Decision logic
Check basic rates: If the offered rate is higher than the basic rate, the decision to send a new order
request or continue with a higher proposed depends on:
• The offered rates versus basic rates
• The amount of proposals received
• New information received since the process step “Analyse quality of deals”
Due to volatility of the market, no hard go or no-go logic is identified and the decision is based on
the experience of the Supplier’s manager.

3.2.5. Negotiation of terms

Goal
The goal of negotiation of terms is to further optimize the offered deals and to end up with the
lowest freight rate possible.

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Activities
The negotiation of terms phase consists of multiple activities that translate the short list of ship
owners (fixture report) to agree upon main terms. All activities listed are performed sequentially
unless stated otherwise.

Let best ship owner/brokers compete: When multiple deals are in the same range of quality, the
Supplier’s manager will send a request to the ship owners to provide their best deal possible within
one hour or less time. The deal that has the lowest price while meeting all technical requirements
and dates will be the candidate for further negotiation.

Negotiate with best ship owner/broker: Upon evaluation of the offers, the Supplier’s manager
negotiates with ship owner which offered the best conditions for the purpose of further optimisation
of the conditions, reduction of the cost of freight. The results of the negotiations are recorded in the
Fixture Report, including ship owner name. Regardless of the type of communication used in
negotiations with ship owners and/or brokers, the Supplier’s managers are required to record the
information received by sending/receiving the relevant message via e-mail by using the common
Customer’s address (chartering@uralkali-trading.com).

Approval fixture terms from owner: The Supplier’s manager conducts discussions on an agreement
with the selected ship owners regarding fixing the COA for shipments. Before entering the approval
stage, the ship owner should have confirmed to be able to compliant to the COA.

Ship owner/broker selection: Selection of the optimal carrier is carried out by the Supplier’s manager
responsible for the corridor based on the lowest price offered, provided that the carrier complies
with other requirements of the Order. If the agreement has been reached, then the result of fixing
the vessel is a summary of agreed terms – Recap of main terms drawn up by the broker, the ship
owner or the Supplier’s manager and sent by e-mail or fax to the ship owner and Charterer. The
results of the agreed terms are entered in the Fixture Report.

Roles and responsibilities

The Supplier’s manager that is in charge of the corridor is key responsible of this process phase.
He/she performs the negotiation, arranges fixture terms and selects the ship owner/broker.

Decision logic
Negotiate with best ship owner/broker: After the best ship owner competed, the Supplier’s manager
has to decide what counterparties to continue negotiating with. The Supplier’s manager decides
what parties are included in the final negotiations with at least the following guidelines in place:
• The ship owner with the lowest rate for technically acceptable fleet.
• The ship owners that are less than 15% more expensive than the ship owner with the lowest
rate. However, ship owners that specifically mentioned not to be willing to lower prices
further based on the pre-negotiation or competition phase can be excluded from this list.

Select ship owner/broker: The decision what ship owner/broker to select is in the basis determined
by the lowest price possible while taking into account that requirements need to be met. The
decision to choose a non-lowest price proposal can be performed if reasoning is provided in the CEO
approval request.

3.2.6. Approval

Goal

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The goal of the approval phase is to assure the deal can be performed and the deal is in line with
expectations of the Customer.

Activities
The approval phase consists of multiple activities that translate the main terms to signed
contract/concluded deal of the Customer. All activities listed are performed sequentially unless
stated otherwise.

Regional office approval: Based on the agreed terms, the Supplier’s manager draws up a nomination
of the preliminary COA and sends it to approve regional readiness via the Customer’s regional office
trader.

If the nomination is refused on one of the areas, the Supplier’s manager assesses the issue to find a
possible solution. If a solution can be found within the requirements, the solution is carried out and
a recap is attached to the CEO approval request. If no solution can be found, the reasoning of
disapproval is attached to the CEO approval request for CEO decision.

CEO approval: Upon receipt of approval from the Customer’s regional trader, the Supplier’s manager
shall receive the final approval of the Customer’s CEO by sending him/her the appropriate e-mail
request. The list of mandatory requirements/documents required for the request includes the
following:
• Confirmation of the Customer’s trader from the regional offices (in electronic form),
• Filled in Fixture Report with the justification of the selection of the carrier/vessel (in Excel
format).
If the approval is refused, the Supplier’s manager shall act on the CEO’s decision (e.g. refine the deal
or terminate the deal)

Administration: After the receipt of the approval of the COA from the Customer’s CEO, the Supplier’s
manager arranges the conclusion of the contract with the ship owner (COA). The Supplier’s manager
sends a copy of the contract (COA) to the archives office in electronic form.

Roles and responsibilities

The Supplier’s manager that is in charge of the corridor is key responsible of this process phase.
He/she fixes the approval requests, CEO approval and administration.

Decision logic
Ask approval: The approvals for cargo readiness, regional readiness and loading port readiness
should be based on the specifics related to the approval, meaning that:
• Customer’s Regional office trader or Customer’s logistics approves solely on regional
restrictions (e.g. sales volume restrictions)

Ask CEO approval: The CEO approval is granted by the Customer’s CEO. The areas of interest are
identified as:
• Offered rate versus basic rate and budgeted rate
• Length of the COA
• Number of shipments within the COA
• Corridor specifics of the COA
• Whether the lowest price is chosen
• Market forecasts (i.e. if market declines, COA might not be beneficial)

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