Fur Broker Auction Service
The agreement is accomplished orally; meanwhile the majority of controversial points are not fixed. There is no any widely-accepted typical agreement in a written form. We suggest a common settled way of work based on the experience of the most prominent brokers working with Russian customers. Our advice is to discuss the parties' responsibilities and obligations beforehand in order to avoid any conflicts. (We also provide the Russian version.)
The beginning of the agreement is considered to be the customer's order for the goods and the end of the agreement is the sending off of all the goods to the customer by the broker. If one of the parties is violating the agreement or tries to change the agreement without the approval of the other party, the latter has the right to terminate the agreement.
A customer risks when he pays a deposit and makes other payments before he receives the goods. In that case he is obliged to buy all the ordered goods. The broker's risk lies in the necessity to clear from an auction all the goods in case of the customer's insolvency. The parties' responsibilities on every stage of the movement of goods are set out below and highlighted in a bold type.
The customer announces his intentions for the purchase and points out the amount of goods for each position. The broker forwards to the customer the hammer price breakdown of the previous auction and a prediction for the following one concerning the positions the client is interested in. Before the first day of the auction the customer shall transfer the prepayment (deposit) to the broker's account in the amount of 25% of the price at the auction in Copenhagen of the proposed purchase and 35% - at all the rest auctions. The customer announces the quantity and price limit on each position not later than one day before the auction. The broker sends, at the request of the customer, certain pages from the auction catalogue with his notes concerning the description of goods and proposed prices. While being present at the auction the broker supplies the customer with the copy of his own catalogue concerning the positions of interest to the client.
The broker buys the goods in accordance with the customer's order. In case of impossibility to make a purchase (low price limit) the broker shall inform the client as quickly as possible and adjust the order in the process of the auction. At the end of an auction day the broker sends the list of the bought goods. The client confirms the purchase and announces his instruction for the invoicing, pointing out the lots and the currency on each invoice. The client exercises the right to decline the purchase of any lot, which does not correspond to the order as regards the description or price limit.
The broker sends the invoices of the auction for the bought goods. Each invoice shall, in addition to the price of the goods bought at the auction, contain the auction fees: 6.75% in Copenhagen and 6.5% at all the rest auctions, as well as the broker's commissions - 3% of the auction price. Some auctions add the payment for the package to the invoice. The client sends to the broker the instructions for the further movement of goods: the lists of invoices for temporary storage in the auction warehouses and lists for sending off to certain dressing factories.
Auctions financing
The goods paid with a deposit are storaged free of charge for 21 days after the auction until the prompt day. After that the unpaid amount shall be charged with interest. The interest rate is different, depending on year and auction. For example, for the year 2003 in Copenhagen the interest rate for invoices in USD is 7.5% for the first 60 days after the prompt day and 10% for the period after that. In Helsinki the rates are accordingly - 8% and 11%. Auctions require all the goods bought during the season to be paid before the beginning of the next auction season, i.e. before the beginning of December of the current year.
During the period from releasing of the goods at the auction until sending them off to Russia, the broker provides the financing. He shall pay the unpaid portion on each invoice to the auction. The interest rate on the broker's credit is stated individually, however for the year 2003 the majority of broker firms have it as 15% per year. When the interest is charged extra, a credit period is considered to be from the day of the broker's payment for the goods until the day of his receiving the money onto his account. A year is considered to be 360 days. For example, a credit of 10,000$ for the period of 60 days is charged with an interest: 10,000$*60/360*15/100=250,00$. Taking into account that in this example the price level of the year 2003 allows to buy 380 mink males, having paid the prepayment 25% 3,300$, and that extra costs on the broker's credit will make up 0,66$ per item (20 rubles per skin), the broker's financing gives a possibility to increase beneficially the customer's amount of goods. The customer shall pay the broker's credit, including the interest amount on each lot, before sending the goods off to Russia.
If dressing factories outside Russia are used, the transportation from the auction to Russia has 3 stages: auction - factory, factory - foreign warehouse, foreign warehouse - customer's warehouse in Russia. The broker controls the first two stages of the movement of goods and informs the customer. The broker also provides cargo insurance which covers natural calamities and theft, gets and pays to the customer the insurance compensation. The broker exercises full material responsibility for the movement and safety of goods until the transport company representing the customer takes them over at a foreign warehouse. The customer pays all the transportation invoices before the due date indicated by the transport company in the invoice, usually 2 weeks. The customer informs the broker about the location of the foreign warehouse and gives the data of the transport firm for the transportation of the goods on the 3rd stage - from the foreign warehouse to Russia. Meanwhile the client shall pay to the broker for the unpaid part of the transported goods and the interest on the credit for these goods. At the moment when the transport company indicated by the client takes the goods over at the foreign warehouse, all the material responsibility for the safety of the goods shall transfer from the broker to the client. The first two stages of transport are usually provided by transport companies specialized in the transportation of furs. The broker tries to get wholesale discounts. On the 3rd stage the customers use the most reliable Russian transport companies specialized in the transportation of furs, which guarantee insurance and preferential terms for customs duties. The broker can suggest to the customer a number of transport companies for choice, but nevertheless all the responsibility on the 3rd stage lies on the client.
The client indicates to the broker the factory and sends instructions for dressing and dying of every part of the sent goods. The customer supplies a sample for dying. The broker informs the factory beforehand about the coming part, discusses the possibility and terms for carrying-out the order, and informs the customer. In case of impossibility to fulfill the order, the broker offers other factories or processes. The broker insures all the goods for the period of dressing, gets and pays the insurance compensation to the customer in case of loss or damage of the goods. The broker tries to obtain wholesale discounts for raw material manufacturing. The customer pays the invoices for the dressing and dying before the due date, which is indicated in the factory invoice for dressing, usually 4 weeks. When the dressing is terminated, the broker informs the customer and at the customer's request the goods may be taken for a temporary storage in a factory warehouse or in any warehouse pointed out by the client. The broker also insures the goods for the storage period after processing, gets and pays the insurance compensation to the customer in case of loss or damage of the goods.
Theoretically it is possible to apply to a court for the settlement of disputes. But the practice has shown that it is impossible to solve such problems in a legal way. In case one of the parties is violating the obligations under the agreement, the usual practice of the other party has been to terminate the agreement unilaterally.
|
