Contracts in container shipping: the BIMCO
What is the Multiparty Interchange Agreement?
The xChange Multiparty Interchange Agreement allows participants to easily and effortlessly enter into interchange agreements with new companies. 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 to contract. No more reviewing, negotiating and administering individual bilateral agreements.
Why is it important to sign the Multiparty Interchange Agreement?
The Multiparty Interchange Agreement saves you time approaching new partners and negotiating deals. It reduces the manual workflow to smaller, deal specific, adjustments you want to negotiate like Free-days, Pickup-Charge or Damage Protection Plan (to read more on deal specific terms click here). Negotiating has never been so easy – chat with your partner and specify the deal until you and your partner are happy with the result.
What does the Multiparty Interchange Agreement cover?
The Multiparty Interchange Agreement is divided into equipment-owner terms and standard conditions and notes. Equipment-owner terms are company specific and contain terms such as per diems, DPP and container replacement value which serve as default values when sending out a request. Standard conditions and notes regulate responsibilities and issues in case of damage or loss and cover the following topics:
Important container contract definitions
First of all, the Multiparty Interchange Agreement defines terms being used in the contract and determines the duration of the agreement. This section covers well-known definitions for “Depreciated Value”, “Equipment” or Replacement Value” as well as more xChange specific terms such as “xChange request form” and “Redelivery Schedule” amongst 15 terms defined in total.
“Depreciated Value” means the amount agreed to be paid by the User to the Supplier as replacement for Equipment lost or damaged beyond repair. 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) and/or 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“ means the online form provided by xChange to negotiate and record each individual transaction on xChange.
„Redelivery Schedule“ means a list of permissible return locations for the Supplier’s equipment as published on xChange.
Similar to every other contract you sign, the Multiparty Interchange Agreements covers every potential relationship aspect between supplier and user of containers and Container xChange.
I will give you only a quick overview on the structure, dont hesitate to contact us whenever you want to more information on what the Multiparty Interchange Agreement covers.
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/ supply SOC containers as easy as possible and 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.
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, as this is currently inefficient including many middlemen and manual paper workload. 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 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 a 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 does not 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.