Following the decision of Vietnamese importers to quarantine two container-load of oilmeal from India, apex trade body Solvent Extractors’ Association of India (SEA) has advised its 850 members to change the booking strategy from the existing cost-insurance-and-freight (CIF) to the free-on-board (FoB) basis.
Under FoB the seller has to fulfil his obligation to physically load the goods on the ship at the country of origin and his cost excludes the cost of freight and insurance. This means that the buyer would have to bear all costs and risk of loss of or damage to the goods from that point.
On the other hand, CIF price allows sellers (exporters) to take the entire burden and responsibility of the transported goods until the commodity is downloaded at the destination port.
The advice was a welcome move as Indian oilmeal exporters were facing stiff quarantine regulation in Vietnam, resulting in losses. There was no export to Vietnam during January and February. Although, exports have resumed, traders are cautious from both sides.
Authorities in Vietnam had quarantined two shiploads of oilmeal from India after very high levels of methyl bromide – a fumigant used for pest control – was found in the commodity about two months back. After keeping the shipment on hold for two months, Vietnam rejected it and Indian exporters were forced to sell the commodity at a discount to Vietnamese traders.
The current global industry norm allows upto 30 gram per square meter of methyl bromide for 72 hours which Indian oilmeal exporters are maintaining. “Including demurrages for over a month, Indian exporters lost nearly US $0.5 million in two shipments,” said Mehta.
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With an estimated annual export of nearly 850,000 tonnes, Vietnam accounts for 17 per cent of India’s total oilmeal exports worth Rs 8,200 crore (2010-11). SEA has sought the Commerce Ministry’s intervention to sort the matter out.
Traders want the matter to be sorted out amicably, fearing further loss. Although, alternate markets are available, Vietnam remains a big market for Indian exporters that can not be ignored, Mehta said.
The trade body has recommended a high power delegation to Vietnam comprising senior officials from the Ministry of Commerce and Food and experts from the industry to assess the situation in the neighbouring country. The apex trade body, however, is yet to receive any communication from the ministry.
“Although, we have not received any communication from the Commerce Ministry yet, I hope the ministry will understand the gravity of the issue,” said Sushil Goenka, president of SEA and director of Andra Pradesh-based agro processing company Foods Fats & Fertilisers Ltd.
According to industry insiders, Indian exporters are facing two problems while shipping oilmeals to Vietnam. First, Vietnam comes under the non-tariff barrier which makes trading difficult. Secondly, Bunge from the US has set up a 5,000 tonnes per day oilseed processing unit in Vietnam which assures local oilmeal consumption.
A Japanese company has also reportedly set up a mid-size oilseed processing plant. Since, the local companies are facing stiff competition from Indian imports, a quarantine issue was raised to restrict supply from India, a trader alleged.