On the 30 May 2012 Global Ore launched its physical iron ore trading platform and the Standard Iron Ore Trading Agreement (“SIOTA”). Global Ore’s aim is to use SIOTA as a standard master trading contract to improve both liquidity in and develop the physical iron ore trading market.
SIOTA closely follows the format of Global Coal’s Standard Coal Trading Agreement (“SCoTA”) V8 both in its structure in its use, but differences remain between them as the physical iron ore market involves different markets, participants and pricing.
Stephenson Harwood have produced a Guide which provides a brief overview of SIOTA and draws on and makes comparisons with SCoTA V8, highlights of which are detailed below.
SIOTA is protected by copyright and copies can be obtained from Global Ore upon agreeing to the terms of their Produce Usage Agreement.
SIOTA is structured as a master trading agreement. It comprises Parts 1 (Agreement and Execution), and 2 (Terms and Conditions), Appendix 1 (the SIOTA Transaction Summary) and Appendix 2 (Part 1 clauses applied by agreement and Part 2, other provisions that the Parties agree), and a Relevant Iron Ore Standard Specification or “RIOSS”. This is identified as “CFR QINGDAO” and in which seven different specifications are identified: QINGDAO 65, QINGDAO 63.5A, QINGDAO 63.5, QINGDAO 62, QINGDAO 62S, QINGDAO 58 LAPS, and QINGDAO 58.
FOB and CIF/CFR delivery terms are used. However:
- A distinction is made between deliveries (a) CIF/CFR terms and where the Discharge Port is within the PRC and (b) FOB terms or where CIF/CFR terms apply and the Discharge Port is outside the PRC. This distinction is recognised in Clause 7 (Title and Risk where retention of title clauses are used), Clause 8 (Weighing, Sampling, Analysis), Clause 9 (Quality and Contamination), and Clause 12 (Payment) all of Part 2. An important point to note is that there is an election by consent under Part 1 of Appendix 2 providing for new Clauses 7, 8, and 12 identified in Part 1 of Appendix 2 to replace the same clauses in Part 2 where the delivery is under (a). These clauses and their differentiation need to be examined carefully.
- “Arrival Period” and “Delivery Period” (as defined) are the delivery periods used for CIF/CFR and FOB Transactions respectively. “Arrival Period” denotes the arrival of the Vessel at the named Discharge Port. “Delivery Period” denotes period during which the Vessel is to arrive at the Load Port and for loading to commence.
- Clause 3.5 provides that “Time shall be of the essence for the purposes of this Agreement”. The application of Clause 3.5 when addressing any remedy available to either the Seller or Buyer under any common law right to treat a late delivery as repudiatory or in the use of Clause 13 (Failure to Deliver or Take Delivery) needs to take into account Paragraph 1 of the RIOSS (“Obligations”).
- Clause 12 (Payment) provides for payment by either irrevocable letter of credit or cash against documents and unless agreed payment shall be made by the former. Clause 12 specifies the terms upon which payment under either irrevocable letter of credit or cash against documents.
- Clause 12 introduces the concept of payment for a “Combo Shipment” for individual parcels of iron ore with different RIOSS specifications.
- Clause 16 provides that all disputes are to be referred to arbitration in Singapore under the Rules of the Singapore International Arbitration Centre (SIAC Rules) and Clause 25 provides that English law shall be the applicable law.
- Clauses 3 (Obligations), 4 (Representations, Warranties and Undertakings), 5 (Delivery), 6 (Vessel Acceptance), 10 (Rejection of the Shipment), 13 (Failure to Deliver or take Delivery) 14 (Termination, Suspension and Illegality), 15 (Force Majeure), 17 (Assignment or Novation), 18 (Agents), 19 (Confidentiality), 20 (Exclusion of Certain Warranties and Conditions; Limitation of Liability; Entire Agreement), 21 (Notices and Communication), 22 (Waiver), 23 (Amendments) and 24 (Exclusion of Third Party Rights) all broadly follow the equivalent clauses in SCoTA 8.