PRT: CIF sales - third party / affiliate shipping
Third Party Shipping
The appropriate contract documentation and invoices in support of the calculation should be obtained, including, inter alia, freight, insurance and inspection costs.
Where equity and non-equity cargoes share transport, e.g. in a VLCC sailing in to the US, the costs should be apportioned between equity and non-equity volumes. Any costs associated with VLCC sailings to the LOOP terminal in the US Gulf should be reviewed in detail. Pipeline costs from the LOOP, it is understood, fall to the buyer and other LOOP fees should be reviewed to ensure that these are actually seller’s costs.
Affiliate shipping may be owned or time chartered. Where time chartered shipping is used the establishment of a market freight rate will be crucial and, in the first instance, will depend upon the terms of the time charter contract. Similar concerns will arise as for third party shipping.
For affiliate-owned shipping or ships on long-term charter LB Oil & Gas has said it will normally accept awards under the London Tanker Brokers Panel (LTBP) as providing an acceptable measure of freight costs. These awards are widely used in the industry to fix shipping rates and will allow for the costs of the particular ship involved to be fixed at an agreed time. The fixture time is to be agreed with the company and no examples of this have occurred to date.
For any case involving OTA75\S2(5A) all documentation regarding costs incurred for the first disposal should be obtained and reviewed in detail. If necessary, similar details should also be obtained for subsequent disposals, although as experience of the section grows it is hoped that the required documentation and, therefore, the compliance burden can be reduced.
For periods up to 31 December 1993 the Nomination Scheme also militated against CIF sales as the nominated price was the price received or receivable without deduction for the associated costs. FA94\S235(4) amended FA87\SCH10 such that for CIF crude sales the nominated price is the price assessed under OTA75\S2(5A). See OT05200.