- GAFTA Contract defines key FOB terms for international rice trade.
- The contract outlines shipment, payment, risk, force majeure, and dispute resolution procedures.
The Grain and Feed Trade Association (GAFTA) Contract No. 120 is a standard Free on Board (FOB) contract used for international rice trade. Effective from 1 July 2026, the contract establishes the responsibilities of buyers and sellers covering quality, shipment, payment, inspection, risk transfer, dispute resolution, and force majeure. It provides a standardised framework that helps reduce disputes and ensures smooth execution of international rice shipments.
Goods, quantity and price
The contract applies to rice shipped either in bags or in bulk. When bagged, the rice must be packed in uniform export-quality bags capable of withstanding normal handling during transportation. Quantity is subject to a 5% more or less tolerance at the buyer’s option, with the required quantity to be declared two days before loading begins. If multiple deliveries are made, each shipment is treated as a separate contract while maintaining the agreed quantity tolerance. The contract price is quoted in US dollars per metric tonne (1,000 kg) on an FOB stowed and trimmed basis.
Quality requirements
The rice must conform strictly to the specifications agreed in the contract and comply with the standards of the country of origin. Delivery must be made in good condition. Quality is determined through certification by a GAFTA Approved Superintendent, with the inspection being final at loading unless otherwise agreed by both parties.
Vessel presentation and loading
The buyer is responsible for nominating a vessel and providing advance notice of its name, estimated readiness date, and cargo requirement. If necessary, the period for presenting the vessel may be extended by up to 21 consecutive days, provided the buyer gives timely notice. During this extension, storage and carrying charges become the buyer’s responsibility.
The seller is responsible for loading, stowing, and trimming the cargo at the loading port. The vessel must be clean, suitable for cargo, and loading follows the customs of the port unless otherwise agreed. Bills of lading serve as proof of delivery unless evidence indicates otherwise. Provisions are also included for laytime, demurrage, dispatch, vessel congestion, fumigation, and overtime charges.
Inspection, insurance and transfer of risk
Inspection covering quality, weight, condition, and packaging must be carried out before loading by a GAFTA Approved Superintendent, with costs borne by the seller. The resulting certificate is final regarding these aspects.
Marine and war risk insurance, including coverage for strikes, riots, and civil commotions, is arranged by the buyer. Buyers must provide insurance confirmation at least five days before the vessel’s expected readiness. If they fail to do so, the seller may arrange insurance at the buyer’s expense. Risk transfers from the seller to the buyer once the goods pass over the ship’s rail during loading.
Payment and documentation
Payment is made through an irrevocable, confirmed letter of credit payable at sight for the full invoice value. The buyer is responsible for opening the letter of credit within the agreed timeframe and covering all related banking charges. Documents required for payment include commercial invoices, clean onboard bills of lading, certificates of weight, quality, condition, packing, origin, fumigation, and phytosanitary certification. Minor clerical errors cannot be used as grounds for delaying payment, while unreasonable payment delays may attract interest.
Export responsibilities and certification
The seller is responsible for export customs clearance, export duties, taxes, levies, and obtaining any required export licence. Weighing, sampling, and analysis are conducted according to GAFTA Rules, with buyers having the right to attend during loading. Where agreed, fumigation follows GAFTA Fumigation Rules.
Force majeure
The contract defines force majeure events such as export prohibitions, blockades, terrorism, war, strikes, riots, machinery breakdowns, fires, natural disasters, and transportation disruptions. If such an event prevents performance, the seller must notify the buyer within the specified timeframe. Performance is suspended during the force majeure period, and if disruption continues beyond the prescribed period, buyers may cancel the remaining unfulfilled portion of the contract. If conditions improve before cancellation, shipment timelines are adjusted accordingly.
Notices, default and insolvency
All contractual notices must be transmitted through email or other mutually recognised electronic communication methods. The contract outlines procedures for contract defaults, including establishing default prices, calculating damages, and resolving disagreements through arbitration. It also provides detailed provisions covering insolvency situations, including suspension of payments, bankruptcy, administration, or liquidation, along with procedures for contract settlement.
Arbitration and legal framework
Any disputes arising under the contract are resolved through GAFTA Arbitration Rules No. 125. Arbitration is mandatory before either party can initiate legal proceedings. The contract is governed by the laws of England, with English courts having jurisdiction over specified legal matters related to arbitration. The agreement also excludes the application of the United Nations Convention on Contracts for the International Sale of Goods (CISG) and Incoterms unless expressly stated. Provisions regarding phytosanitary certificates and analytical methods are also incorporated through relevant GAFTA rules.
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