Shipping contracts are the foundation when creating new partnerships. But as important as they are, just as frustrating can the paperwork be. At xChange we want to make it all a little easier. That’s why you on our platform only have to sign one contract – the BIMCO. You don’t have to negotiate individual contracts with every new partner.
Every time you make a deal, the paperwork starts from scratch. Shipping contracts in all shapes and forms need to be negotiated. However, for members at xChange, it’s different. We have a multiparty interchange agreement – in other words, a contract – that you only have to sign once. Instead of having to sign 300 different contracts with every new partner, you’ll have one that gets the job done. Something that’ll save you a lot of contract writing and negotiation.
Here, we’ll go in-depth with the BIMCO contract on xChange, and touch upon other contract types as well as smart contracts.
The Multiparty Interchange Agreement at xChange
On the xChange platform, we use a contract called Multiparty Interchange Agreement. Also known as the BIMCO. This is a contract that everyone has to fill out and sign when they become a member at xChange. This way you don’t have to sign individual contracts with every new partner you get.
The BIMCO is the legal framework that covers every legal aspect of trading, borrowing and using containers. E.g. Who is viable for what, who pays for what.
When you become a member at xChange the idea is: You sign once, provide the (monetary) terms for your own equipment and automatically have a contract with everybody else on xChange who has signed this shipping contract.
No more reviewing, negotiating and administering individual agreements.
Why the Multiparty Interchange Agreement is important
Being on top of all the shipping contracts is cumbersome and time-consuming. The Multiparty Interchange Agreement can save you time. Especially when you approach new partners and you are negotiating deals. This shipping contract reduces the manual workflow to smaller, deal-specific adjustments you want to negotiate. Here all you have to negotiate are Free-days, Pickup-Charge, or a Damage Protection Plan.
Negotiating has never been so easy! At xChange you can chat with your partner and specify the deal until you and your partner are happy with the result.
The BIMCO shipping contract and important definitions
The BIMCO is divided into two areas:
- Equipment-owner terms
- Standard conditions and notes
The terms for the equipment-owners are specific for each company. The terms that need to be filled out are such as per diems, DPP, and container replacement value. All these terms will be filled with default values when you send out a request on xChange. These can be negotiated with your partner until you agree on terms that you are all pleased with!
Standard conditions and notes regulate responsibilities. They’re issued in case of damage or loss. The conditions and notes cower a total of 15 terms. Some of the terms we will define below.
- Depreciated Value comes into effect when equipment is lost or damaged beyond repair. This is an amount both parties have agreed on, that the user will pay the supplier as a replacement. Depreciation shall commence from the date that the Equipment was manufactured as stated on the International Convention for Safe Containers (CSC) Safety Approval plate.
- Equipment means freight containers. As defined by the International Organization for Standardization (ISO). It can also mean related equipment, such as clip-ons.
- Replacement Value means the purchase value of new equipment of the same type on the date of replacement.
xChange request form
- It is the online form provided by xChange to negotiate and record each individual transaction on xChange.
- A redelivery Schedule is a list of permissible return locations for the supplier’s equipment as published on xChange.
The Multiparty Interchange Agreements cover every potential relationship aspect between supplier and user of containers and Container xChange.
This is only a quick overview of the structure. Don’t hesitate to contact us whenever you want more information on what the Multiparty Interchange Agreement covers – and how it can make your life easier!
What questions do we get asked before signing the contract?
Now and then we receive messages with concerns regarding the Multiparty Interchange Agreement although signing the agreement is mandatory and its benefits are obvious.
Therefore, we started this list and we will keep it up to date to help you eliminate concerns:
– We received some messages regarding the Damage Replacement Value (DRV) which is the current value of the container. The Depreciation Rate is usually 5% which means the container loses 5% of its value every year until it gets to a minimum of 50%, which is considered as the Residual Value. You do not have to pay the DRV before joining the platform – DRV is important for the insurance in case of loss
– Although you enter specific terms into your Multiparty Interchange Agreement you can change those numbers whenever you want. They serve as default values for requests you send using xChange. What you can not change is standard conditions and notes
Multiparty Interchange Agreements in other industries?
Airbnb makes it super easy to book accommodation. We at Container xChange work hard to use and supply SOC containers as easily as possible.
There are many other examples like Fiver, E-Bay etc. where Multiparty Interchange Agreements provide a contractual framework to support transactions. Multiparty Interchange Agreements increase trust among participants and reduce efforts and time per transaction.
Other shipping contracts
There is a lot of paperwork and contracts that you need to be on top of when working with container logistics. The many different bills of lading are important for transporting cargo. But so are export licenses and certificate of origin. However, the world of contracts is constantly evolving, just like the industry. We’ll, therefore, here briefly touch smart contracts as well.
Unilateral and Bilateral Agreement
As opposed to a multiparty agreement, in a unilateral agreement, only one party makes a promise. A unilateral agreement can e.g. be a reward agreement. If you, for instance, have lost your dog and you offer a reward to the person who finds your dog. In this case, you’re the only party promising something in the contract, that you’ll have to provide.
More common than multiparty agreements, you find the bilateral agreements. These agreements are the most common binding agreements. Bilateral agreements are between two parties, and the vast majority of contracts made between businesses are bilateral agreements. In a bilateral agreement, both parties in the contract have made a promise – a promise they have to keep, not to breach the contract. This can e.g. be a sales contract – you promise to pay a specific amount for a car and in return, the salesman gives you the title for the car. Here, you have both made promises, that you will need to uphold.
Smart contracts in shipping
The BIMCO multiparty agreement used at xChange is just one example of the use of contracts to improve the efficiency of global freight logistics. Seeing this is currently inefficient including many middlemen and manual paper workloads. The latest attempts in logistics technology involve the application of blockchain contracts to the industry through smart contracts.
Blockchain smart contracts are internet-based decentralized agreements between parties that can automatically trigger an action if required. These smart contracts are fast, safe, and accessible to all parties involved in the shipment. They can be as simple as “ship the cargo once you receive the payment”.
Currently, a joint venture between Maersk and IBM is working on this new blockchain smart contract technology that they seek to implement in the document flow of contracts in ocean freight. This is done with the ultimate goal of paperless trade, eliminating the time consuming and costly paperwork that often delays international ocean freight.
Multiparty Interchange Agreements in container shipping
The experience with contractual frameworks at xChange has been consistently positive. Imagine you would have to negotiate every single part of the contract prior to every single transaction on xChange – better sign the Multiparty Interchange Agreement (we call it BIMCO) and engage with new partners without friction.
We help you find containers for one-way or SOC use on xChange. It doesn’t matter whether you want to use or supply containers. Our smart search engine helps you get results in more than 2500 locations with more than 230 000 container units. The Multiparty Interchange Agreement serves as a contractual framework between Carriers, Leasing Companies, Traders, NVOCCs, and Freight Forwarders and is mandatory for every member joining xChange.