Specifications and Trading Rules

SPECIFICATIONS AND TRADING RULES FOR THE IMPORTATION OF MEAT IN NORTH AMERICA

This Section contains definitions of certain terms and discussion of certain subjects which are important and in some respects unique, to the imported meat trade in North America. All of these materials contain rules which MICA's Board recommends to be followed in any situation where the contract has not provided otherwise.

I. Form of Contract

1.1 Contract creation. A contract of purchase and sale shall be signed and sent by the Buyer to the Seller, or the Seller to the Buyer, or both, and should be signed and returned. However, failure of the Seller or Buyer to sign and return the contract shall not defeat the contract nor signify that the party disputes the terms and conditions in the contract of purchase. Contract documents may be exchanged electronically.

1.2 Partial delivery. Partial delivery by the Seller establishes that the Seller is in full agreement with the stated essential terms, including quantity, unless otherwise specified in writing.

By accepting such partial delivery the Buyer is confirming he is also in agreement with same.

1.3 Incorporation of MICA guidelines. It is recommended that every contract contain the following clause:

"This transaction is governed by the terms and conditions embodied in the Specifications and Trading Rules for the Importation of Meat into North America of the Meat Importers Council of America, Inc., in force at this date."

1.4 Arbitration. It is recommended that a MICA arbitration provision, as set out below, be included in all contracts. If such clause is included, arbitration will be mandatory if there is a dispute between the parties. (See Section on Arbitration Rules.)

"Any controversy or claim arising out of or relating to this contract, or the breach thereof, shall be settled by arbitration by the Meat Importers Council of America, Inc., in accordance with the Arbitration Rules of the Meat Importers Council of America, Inc., and judgement upon the award rendered by the Arbitrator(s) may be entered in any Court having jurisdiction thereof."

1.5 Contract Checklist. In entering into a contract, Buyer or Seller ought to consider whether to make specific reference to the following matters. Essential terms, such as quantity and price, must be covered or there is no contract. Non-essential terms do not necessarily need to be stated for a contract to be binding, but they should at least be considered. The following Contract Checklist lists terms which should be considered for inclusion.

a. Every contract must have proper consideration, i.e., both parties must oblige themselves to perform some type of act. In other words, a set of promises must be exchanged.

b. The contract should specifically list the merchandise that is to be purchased, including the quantity. Additionally, especially in the case of meat, both parties should clarify the quality level at which the product will be deemed to be conforming to the contract, and any other factors which may be deemed important, such as country of origin, age of product, and so forth.

What assurances, if any, does the Buyer want as to the quality of the product from the Seller? What manner of inspection is the Buyer allowed to perform before taking delivery? The contract should set forth the documentary evidence of assurances which the Seller is required to provide the Buyer, such as a certificate of E. coli testing, or other health or veterinary certifications, and/or provide for any inspection that the Buyer may conduct on the product before the sale is final.

d. In many cases, the order is placed without reference to a specific load or shipment of meat, (ie TBN) and at some later time the Seller nominates the meat for the Buyer’s account. If the Buyer wishes to be assured of receiving a specific load or shipment of meat in advance, it should be agreed upon and set forth in the contract.

e. The contract should specify the price for the merchandise. If the price is flexible, it should make a reference to a given commodity market or other point of reference. To avoid dispute, the contract should also specify the time within which the Buyer is to pay, with reference to a specific event, such as delivery.

f. A contract should specify the point at which title, as well as risk of loss, will pass.

g. Both parties should consider shipping, freight, or other costs. In order to properly consider such items, the contracting parties may refer to an established trade term of sale (i.e., FOB Buyer’s plant) or Incoterm with which they are comfortable.

h. Does the Buyer wish to purchase additional insurance, or have such additional insurance be included as part of the contract of sale, i.e., rejection insurance, product liability insurance? If so, this should be specified in the contract.

i. What will constitute a breach of the agreement? Will there be provisions for the cure of such breach or for a discount in case of partial performance? Related concepts are cancellation and termination, both of which should be provided for by the parties.

j. Will time be of the essence? The time of delivery (or shipment) should be clearly set forth in the contract.

k. While parties involved in the sale of meat are often comfortable dealing on the basis of accepted trade practices or an established course of dealings between them, it is always best to endeavor to reduce contract terms to writing. In the event of a dispute, arbitration, or even litigation, it will make your claims under the contract much easier to prove. It is recommended that parties include a clause incorporating MICA guidelines as well as an arbitration clause, as set forth above in sections 1.3 and 1.4, respectively.

l. Product Specification. A carefully drawn contract will include an enumeration of the particulars of size, quality, anatomical identification, packaging, chemical lean, weight range, cutting lines, trim, animal diet, labeling, etc., that detail the Buyer’s requirements or the Seller’s guarantee of the contents of the consignment.

Typical detail referred to in manufacturing beef packs includes:

· Packaging -- bulk packed in poly lined standard export grade cartons each 60 lb. even weight.

· Chemical Lean (e.g., 90 CL).

· Primary category of livestock -- bull, cow, steer, veal.

· Anatomical region of the carcass from which the meat is derived (i.e., CF, CFH, CHUX, trim, etc.)

Typical detail referred to in chilled or frozen cuts packs might include:

· Product description (e.g., INCSO - inside, cap off).

· Size (e.g., weight range 10 -- 16 lb. or 10 lb. up).

· Quality -- (e.g., premium steer, grain/grass fed).

· Primary category (bull, cow, steer, etc.).

· Cutting lines (e.g., cap off).

· Trim (e.g., 1/4" trim).

· Packaging (e.g., individual wrapped, packed in poly lined catch weight cartons).

[Note: Some MICA members have traditionally referred to the AUS-MEAT “Handbook of Australian Meat” and the USA “National Meat Buyers Guide” by the North American Meat Processors Association, as standard references for manufacturing beef packs and cuts specifications.]

II. Definition of "Load"

2.1 It is common in the trade for purchase and sale contracts to specify quantity in terms of one or more "loads". In this case, the following definitions and guidelines apply:

2.2 Manufacturing beef (60 lb. even weight cartons). A "load" of grinding meat in 60 pound net weight cartons shall consist of 40,000 pounds plus or minus 5 percent, a range of 633 to 700 boxes.

2.3 Beef Cuts (catch weight cartons). A "load" of cuts or catch weight cartons shall consist of a minimum of 30,000 pounds and a maximum of 38,000 pounds.

2.4 These guidelines do not apply to bone-in goat and sheepmeat.

2.5 In the event of a discrepancy in these amounts, it will be the responsibility of the Seller to notify the Buyer prior to shipment.

III. C.I.F. ("Cost, Insurance & Freight")

3.1 A term of sale used in ocean shipments signifying that the price includes (i) the cost of goods, (ii) the freight to stated destination including terminal handling charge at origin, if any, (iii) insurance, and (iv) all charges at origin.

3.2 As used herein “insurance” means all insurance including - all risks marine, and (in Australia and New Zealand) rejection for entry by the Veterinary authorities of the importing country. It is a custom of the trade that the level of insurance be equal to 110% of the C&F value. (See Rejection Insurance § 10.2.) Particularly given the fact that some companies elect to self insure, Buyer should beware of who is actually providing the insurance.

3.3 Buyer (or Seller, for Buyer’s account) may wish to purchase additional insurance to cover various risks not normally part of CIF contract. (See Insurance, § X.)

3.4 The Terminal Handling Charge at destination is currently not the responsibility of the C.I.F. Seller.

3.5 Title to the goods in a C.I.F. contract normally passes with exchange of documents, which may or may not include exchange of moneys at that time (e.g., C.I.F. sight draft, C.I.F. net 7 days, etc.)

IV. Ex-Dock (or “X-Quay” or “X-Wharf”)

4.1 Ex-Dock - Usually means warehouse dock and usually means that the Seller makes the product available for pickup by the Buyer on the dock indicated. The Seller generally bears all the risk and costs of delivering the product onto the dock and placing the product at the Buyer’s disposal. Loading charges to move the product from the dock onto the conveyance are the Buyer’s responsibility.

4.2 Transfer of title in a warehouse is evidenced by creation of a new document of title and the product is put in the name of the Buyer. Once the transfer occurs, the Seller has no further control over the product.

4.3 West Coast - Product inspected at a dock facility (not in a warehouse) will be made available to the customer on the inspection dock, where it must be picked up. Charges after inspection, if any, accrue to the Buyer’s account. Title transfers upon pickup by Buyer’s designated truck and Bill of Lading signed.

V. F.O.B. ("Free on Board")

5.1 "Free on board" some location (for example, FOB shipping point; FOB destination) means that the invoice price includes delivery at Seller's expense to that location. The Seller must, at his own expense and risk, deliver the product loaded on a suitable conveyance designated by the Buyer at the place named in the contract. The Seller assumes all responsibilities and costs up to the point of delivery, including insurance, transportation, etc. Title to goods usually passes from Seller to Buyer at the F.O.B. location.

5.2 Ocean Transportation (FOB origin) - Seller is responsible for all costs to Free on Board the vessel in country of origin - including a) terminal handling charges at origin, if any b) wharfage or harbor dues, c) export taxes, and d) export or import quota. Title passes to Buyer upon negotiation of a full set of F.O.B. documents.

5.3 Land Transportation - (F.O.B. North America) - The Seller must at his own expense and risk, deliver the product loaded on a suitable conveyance designated at the place named in the contract. Title transfers to Buyer upon loading of the conveyance and signing of the conveyance Bill of Lading.

VI. Transfer in Storage (T.I.S.)

6.1 Under the T.I.S. term product is transferred to the Buyer while in warehouse, without being physically moved. The Seller is required to advise the warehouse promptly of the sale in writing. The warehouse then amends its records and documents of title to show that title to the property has changed from the Seller to the Buyer.

6.2 Buyer's taking possession of goods in a warehouse is accomplished through the act of creating another document evidencing the transfer of title from Seller to Buyer. The goods are put in the name of the Buyer, and Seller has no further control over the product.

6.3 Generally, if the warehouse charges storage on a daily basis, the Buyer is responsible for storage starting at the time when title changes or from an agreed date if any. If storage is charged on a monthly or other periodic basis, and a portion of future storage has been prepaid (or booked) at the time title shifts, the Buyer is not responsible for any part of the pre-paid storage.

6.4 Generally, The T.I.S. Buyer also receives any remaining free time of the Seller.

VII. Release in Storage

7.1 This term authorizes the Buyer to exercise certain authority over the goods, without receiving transfer of title to the goods. Such authority typically includes the right to receive details of the goods from the warehouseman, to test for fat, to inspect and to load out the goods subject to a payment/credit agreement with the Seller.

7.2 A "Release in Storage", as with other transactions designated "release", is distinguished from a "transfer" in that title to the goods passes to the Buyer upon transfer, whereas with Release in Storage, title of the goods remains with the Seller, until the Seller receives payment, or other arrangements have been made between the Buyer and Seller pursuant to the terms of sale, such as a sale on credit.

VIII. Release with Credit Hold

8.1 The term "credit hold" signifies that title remains with the Seller until a written instruction from the Seller to the warehouse stipulates a title transfer. The specific transfer involved in the transaction (i.e., "ex-dock," "transfer in storage," "FOB," "X-warehouse") remains unchanged, except that the meat will remain in the Seller's name until the credit hold is released by Seller normally by fax.

8.2 In Release with Credit Hold, any storage charges begin accruing to the account of the Buyer once the Seller "transfers" (i.e., releases) the merchandise in storage to the Buyer, but the Seller reserves the right to cancel the credit hold release if the Buyer fails to pay the Seller within the contracted time.

8.3 In Ex-Dock transactions, a common practice is to release with a credit hold Ex-Dock. In that case, title of the meat does not transfer until it is loaded on the Buyer's truck. The Seller can still withdraw its release of the meat up until the point where it is loaded on the Buyer's truck and the Bill of Lading signed. (See "Ex-Dock.")

IX. Terminal Handling Charge (T.H.C.)

9.1 Terminal Handling Charge (T.H.C.) is a charge for cargo services provided by an ocean shipping and/or receiving terminal. In "C.I.F." or "F.O.B.” country of origin transactions, the T.H.C. and all other expenses up to F.O.B. in the country of origin are the responsibility of the Seller. T.H.C. costs in the country of destination are normally the responsibility of the Buyer, unless a different arrangement is made. This also applies with respect to Ex-Dock transactions.

[Note: Some years ago MICA sought, unsuccessfully, to establish with the Federal Maritime Commission that US T.H.C. is part of the freight. Under current practice, T.H.C. must be viewed as a separate charge.]

X. Insurance

10.1 Several kinds of insurance might be involved with respect to meat. Examples include marine insurance, which protects against loss caused by all perils except those which are specifically excluded in the terms of the policy (“all risk marine” insurance), and rejection insurance. In CIF sales, the cost of such insurance is included in the price. (See section 3.2.) However, Buyers in both CIF and FOB sales may wish to purchase additional insurance.

10.2 Rejection Insurance is a special kind of insurance in the meat industry. It protects the importer/Buyer in the event the product is rejected by the USDA. Typically, the exporter purchases rejection insurance for the benefit of the importer/Buyer in the amount of 110% of the C&F value. With respect to shipments from Australia and New Zealand, rejection insurance is traditionally included in the CIF price. For other countries there is no clear rule. Rejection insurance is typically not included in the FOB price. (Note - buyer beware that some exporters self insure)

10.3 “Rejection.” There is no standard form of rejection insurance policy in the industry, therefore, the details of one policy may differ from another. Frequently the insurance carrier strictly construes the term “rejection” so as to relate only to product that is refused entry and stamped rejected by the USDA. In most cases, if the product has been stamped “Accepted and Passed” and has entered into commerce, any subsequent problem, such as a positive laboratory test for defects or a government recall, would not constitute “rejection” under the policy, unless the contract provides that such contingencies will be covered.

10.4 Product Liability Insurance. If it is established that a commercial product (e.g., meat) is a cause of harm to consumers or others because of a defect, it is possible that the seller, importer, producer and/or other person in the distribution chain could be held responsible. Product liability insurance protects against this peril

10.5 Public Liability Insurance. This type of insurance coverage protects against third party claims arising from the conduct, property and agents of the insured. Such policies are generally associated with businesses, associations, etc., which seek protection from legal liability arising from ordinary business activities.

XI. Labeling

11.1 In general. Labeling (marking) requirements with respect to imported meat are administered by both the US Customs Service and the USDA. While there may be conflicting country of origin marking requirements imposed by the USDA and Customs, Customs nevertheless asserts legal jurisdiction over all imported merchandise. The importer must be careful that the exporter satisfies both agencies’ requirements. A discussion of labeling and country of origin marking is contained elsewhere in this Handbook. (See Importing Meat, Labeling & Ciphers and US Port of Entry Procedures.)

XII. Age of Product

12.1 There is no uniform consensus within the industry concerning the permissible age of meat. If there is no established course of trade between the parties, it would always be advisable to consider specifying how old the product can be and still be considered good delivery in the contract between Buyer and Seller.

XIII. Time of Shipment

13.1 The Buyer shall be bound in the term of the Bill of Lading issued in respect of the meat providing that those terms and conditions are not in conflict with the terms and conditions of the Specifications and Trading Rules for the Importation of Meat into North America of the Meat Importers Council of America.

13.2 Shipment Date. The shipment date shall be the “shipped on board date” as stamped on the original Bill of Lading.

13.3 Domestic Delivery Period/Delivery Tolerance. Where the contract provides for arrival or domestic delivery in a specified month, the last day of the month is the last day of good tender under the contract. Where the contract provides for a part of a month, e.g., “mid-August,” the 10^th day to the 20^th day of the month is the last day of good tender under the contract. In the case of a longer contract, e.g., August - September arrival/delivery, the later month ending would apply. In all cases, a 7-day notification would be required.

XIV. Demurrage

14.1 Demurrage refers to the charges levied against the account of cargo when it has been left at a pier or terminal beyond a specified time. Demurrage charges on such cargo are borne by the party holding title to the goods at the time the charges are incurred.

14.2 If demurrage charges are incurred because documents of title are delivered late with respect to ocean shipments, the costs are borne by the Seller/shipper.

14.3 If demurrage charges are incurred because documents of title are delivered late with respect to ocean shipments, the costs are borne by the Seller shipper. (Although the Steamship line will hold the buyer (consignee) accountable for the charges, the costs should be borne by the Seller (shipper))

XV. Rejection by USDA

15.1 Nomination. Where the load, or partial load, has been nominated, the Seller is not obligated to deliver a replacement load (or part). (See Nomination, § XVII.)

15.2 Half-Load Rejected. Once a load is nominated by the Seller, delivery of a half-load (or portion) stands.

XVI. Full Set of Documents

16.1 Delivery of a full set of documents constitutes delivery of title.

16.2 CIF Mandatory Documents. Unless otherwise specified in the contract, a “full set of documents” in CIF transactions means the documents which are mandatory to accomplish importation, that is, the commercial invoice, bill of lading, and foreign health certificate, must be delivered to the Buyer by the Seller.

16.3 Ancillary Documents. In addition, a “full set of documents” may include any other ancillary documents required by the Buyer as part of the contract, such as an E. coli certificate, freezing certificate, TRQ certificate, country or origin certificate, fat testing certificate, and so forth.

16.4 FOB Country of Origin. Unless specified in the contract, a “full set of documents” in FOB country of origin transactions means the same mandatory documents set forth in section 16.2 with respect to CIF sales except that the Seller shall deliver a bill of lading marked “collect” to the Buyer, and may include the ancillary documents set forth in section 16.3.

XVII. Nomination

17.1 Nomination, generally. After a contract of sale has been entered into between merchants, but before delivery of the product, the Seller is required to “nominate” or designate the specific, identifiable load of product that is being delivered to Buyer in fulfillment of the contract. Nomination is accomplished by providing Buyer with notification of a vessel, voyage number, brand, and shipping mark, or a location, lot number, brand, and shipping mark. The seller cannot revoke a nomination once made in writing, unless mutually agreed upon between all parties.

17.2 Timely nomination. Seller must nominate the load in a timely manner. Normal industry practice is that: a) for CIF purchases, Seller should nominate the load prior to departure of vessel; and b) for FOB, Ex-dock, or T.I.S. sales, Seller must nominate the load seven days prior to anticipated delivery or tender.

17.3 Revocation. In transactions between traders, the Seller cannot revoke a nomination once made, unless mutually agreed upon between the parties.

17.4 Nomination/Tender of Short Load. The tender, or nomination, of a “load” outside the MICA “load” tolerances is not good reason for the Buyer to call Seller in default, as the Seller has the option to re-tender or renominate the correct contract quantity. (See Load, § II.)

17.5 However, if on subsequent tenders or nominations the Seller is unable to deliver the minimum quantity within the delivery or shipment period called for, then the Buyer can exercise their right to call the Seller in default. If a nomination is made by the Seller in good faith that the MICA “load” tolerances have been adhered to according to the documentation provided, and a carton shortage is later discovered at out-turn, then the delivery is still deemed to be a good delivery. However, Seller must make proper adjustments to the Buyer for the shortage. (See Shortages, § XVII)

XVIII. Shortages

18.1 Shortages (carton count). Unless otherwise specified, quality and quantity are final at destination for all FOB origin, CIF or Ex-Dock contracts.

a. For carton shortages recorded at import inspection, the FSIS tally recorded on the Form 9540-1 shall be the count recognized by the Buyer and Seller and the packing establishment (or the cold store where product is loaded) in the country of origin shall be held liable for the shortage.

b. For carton shortages realized at load out from the USA warehouse, the warehouse shall be liable for the shortage if the outbound tally is short with respect to the inbound tally.

19.2 A replacement shipment will be physically delivered to the Buyer at the point of rejection within two weeks of the Buyer's or Seller's demand therefor. The replacement shipment shall be equivalent to meat it replaces and, if the Buyer requires, shall be accompanied by a certified analysis showing that the meat is within specification. In this case, the Buyer cannot object if the requirement of an analysis makes it impossible to meet the two week delivery requirement, and delivery time shall be at least extended for purposes of certification. (See also Section of the Guidelines For The Settlement of Fat Claims (replacement load policy).)

XX. Force Majeure

20.1 Force Majeure refers to a superior or irresistible force, usually associated with insurance aspects of contracts. As a condition in contract, it relieves either party from obligations where major unforeseen events, which are outside the control of the parties and could not have been avoided by the exercise of due care, prevent compliance with provisions of agreement. Thus, if such a force occurs, performance under the contract is excused for the period of time that the cause is in effect. If the period of delay or prevention does not affect the entire quantity under the transaction then the quantity may be proportionately reduced commensurate with the period that performance is delayed or prevented. Examples of force majeure include fires, floods, strikes, acts of government, war, or other acts beyond the control of the parties. It is unlike an Act of God (or “vis major”) which holds that the act must be from “natural” causes and independent of the control of human action

XXI . Ciphers

21.1 USDA regulations prohibit parties from making unsubstantiated “claims” or representations on cartons of meat. Ciphers are “codes” which the USDA allows to be placed on cartons of meat to provide a means by which the parties to a transaction can identify their cartons subject to contract among themselves, without making any representation to the public as to the quality, contents, and so forth, of the meat contained therein. A discussion and list of “ciphers” is contained elsewhere in this Handbook. (See Handbook Section on ciphers for further details.)

XXII. Certification System (Quota)

22.1 Generally. Certification systems may be operated by, and at the request of, exporting countries that wish to control and monitor access to the U.S. Tariff Rate Quotas (“TRQ”). Under such system, U.S. Customs will allow in-quota treatment only for product covered by a certificate issued by the competent authority in the exporting country.

22.2 Export Certificate. The export certificate, to be valid, must meet the USDA requirements of 15 CFR 2012.3(b), in that the certificate must: 1) Be issued by or under the supervision of the government of the participating country; 2) Specify the name of the exporter, the product description and quantity, and the calendar year for which the export certificate is in effect; 3) Be distinct and uniquely identifiable; and 4) Be used in the calendar year for which it is in effect.

22.3 With respect to the requirement that the certificate be distinct and uniquely identifiable, above, the certificate must have a distinct and unique identifying number composed of three elements set forth in the following order: 1) The last digit of the year for which the export certificate is in effect; 2) The 2‑digit ISO country of origin code from Annex B of the HTSUS which identifies the participating country; and 3) Any 6‑digit number issued by the participating country with respect to the export certificate. 19 CFR 132.15(b).

22.4 Retention and submission of certificate to Customs. The export certificate must be retained by the importer for a period of at least 5 years from the date of entry, or withdrawal from warehouse, for consumption. It is not required (or permitted) to be filed with the entry, but the importer shall submit a copy of the export certificate to Customs upon request.

XXIII . Firm Offer / Firm Bid

23.1 A Firm Offer / Firm Bid is a Quotation or offer to sell or buy goods at a stated price and under stated terms, which is valid (or legally sufficient and binding) for a certain period of time, during which time it cannot be revoked by the Seller / Buyer.

23.2 It is generally trade practice in the imported meat industry that firm offers / firm bids made over the phone are only valid for the duration of the phone call unless otherwise stated. E.g. the party giving the offer / bid firm might guarantee that it valid for a specified period of time (ie 1/2hr, one hour etc). Firm offers can be revoked during the phone conversation but NOT after one party confirms acceptance of the quote.

23.3 Firm offers / Firm bids with a validity greater than a day or from one business day to the next (ie overnight) are usually made in writing.