BREMEN COTTON EXCHANGE RULES

Transcription

1 BREMEN COTTON EXCHANGE RULES PHONE +49 (421)

2 Rules of the Bremer Baumwollbörse (Bremen Cotton Exchange) For the Trade in Raw Cotton, Cotton Waste, Linters and Waste from Man-Made Fibres or Fibre Blends June 30, 2016 Bremer Baumwollbörse

3 CONTENTS A. TRADE IN RAW COTTON I. General Rules Paragraph Contract Clause... 1 Periods and Dates... 2 General Obligation of Inspection... 3 Foreign Currency... 4 II. Rules Relating to Contracts 1. SHIPMENT AND DELIVERY Date of Shipment... 5 Documents... 6 Shut out Cotton... 7 Container Trade Rules INSURANCE Insurance... 9 Country Damage Seller s Obligations Buyer s Obligations Refunding SAMPLING (OTHER THAN FOR MOISTURE) Sampling Samples Seller s Permission Set of Samples TARE Tare Calculation of Tare WEIGHT Paragraph Gross Weight Weights % Rule Variation of Weight INVOICING AND PAYMENT Cash Payment Payment of Claims Claims for Clerical Errors Value Added Tax SALES ON CALL Sales on call Lot of the Futures Contract CLOSING CONTRACTS Closing Contracts Date and Price of Closure QUALITY OF THE COTTON DELIVERED Quality Characteristics CLAIMS FOR FALSE PACKED, MIXED BALES AND SO ON Periods Periods of Notice in Case of Country Damage INTERNAL MOISTURE Internal Moisture Samples for Moisture Testing Buyer s Obligations Costs... 39

4 III. Claims and Arbitrations for Quality Paragraph 1. GENERAL RULES Claims for Quality Deficiencies Additional Allowances QUALITY ARBITRATION PROCEDURE IN THE FIRST INSTANCE Application for Arbitration Suspension of Arbitration Arbitration Samples Arbitration Procedure: Market Value, Value Differences Arbitration Procedure: Purchases on Type and on Description Compensation Replacement Clause (if agreed) Classers, Anonymity, Certificate Supplementary Arbitration: Simultaneous Procedure PROCEDURE ON APPEAL Periods, Withdrawal Appeal Judges Appeal Certificate FEES Amount of Fees and Payment in Advance Distribution of Fees CLASSIFICATION Applicable Regulations IV. Instrumental Testing Procedures Testing Instruments Allowance by Deviation Application for Testing Testing Procedure Paragraph Request for a Second Test Fees for Testing V. Claims on Account of Other Deficiencies and the Procedure to be Followed VI deleted Procedure in the Court of Arbitration 1. JURISDICTION General Jurisdiction, Seat, Applicable Law Decision by the Ordinary Courts of Law THE ARBITRATORS Eligibility, Position Appointment, Notification GENERAL RULES OF PROCEDURE Principles of Procedure Default Third Party Notice Offsetting of Counterclaim Suspension in the Case of Default PROCEDURE IN THE FIRST INSTANCE OF THE COURT OF ARBITRATION Filing of Statement of Claim and Appointment of Arbitrators Amendment of Claim, Cross-Claim,Withdrawal of Claim PROCEDURE IN THE APPEAL INSTANCE OF THE COURT OF ARBITRATION Lodging of Appeal Statement of Ground for Appeal Cross-Appeal by Opposing Party Amendment of Claim, Withdrawal of Appeal Compliance with Formalities, Decision... 86

5 6. THE ARBITRATION AWARD Paragraph Voting, Legal Consultation Contents of Award Signatures, Formalities Legal Validity of Award and Enforcement FEES Fees and Distribution thereof Allocation of Fees Liability for Payment for Fees, Payment in Advance, Settlement of Fees B. TRADE IN COTTON WASTE AND LINTERS Paragraph Scope of Application... 1 Claims as to Quality Deficiencies... 2 Quality Arbitration... 3 Quality Arbitration Procedure... 4 Testing Procedure... 5 Appeal against the Laboratory Assessment... 6 Ascertainment of Fibre Composition... 7 Rights in Case of Deviation from Specifically Guaranteed Fibre Composition... 8 Foreign Matter... 9 Supplementary Provision for the Trade in Linters for Chemical Processing C. TRADE IN WASTE FROM MAN-MADE FIBRES AND FIBRE BLENDS Paragraph Scope of Application... 1 Claims for Quality Deficiencies... 2 Quality Arbitration... 3 Arbitrators, Umpire... 4 Quality, Arbitration Procedure... 5 Options... 6 Certificate... 7 Fees... 8 Foreign Matter... 9

6 Appendix I. General Trading Terms Appendix II. Scale of Charges of the Court of Arbitration According to 91 (1) of Part A. Appendix III. Container Trade Rules Appendix IV. Bremen Value Differences

7 A. TRADE IN RAW COTTON I. General Rules 1 Contract Clause (1) The Rules of the Bremer Baumwollbörse as in force at the time of the conclusion of the contract shall apply to all contracts between the parties concerned which have been concluded subject to these Rules or with the clause Bremen Arbitration or with any similar clause, unless otherwise specifically agreed. (2) In addition to the contracting parties themselves, other parties concerned are e.g. brokers, guarantors, agents, surety, etc. (3) Unless otherwise provided for in these Rules, the law in force in the Federal Republic of Germany shall be exclusively applicable to all contracts concluded subject to the Rules of the Bremer Baumwollbörse, to the exclusion of the provisions relating to the United Nations Convention on Contracts for the International Sale of Goods (BGBl. 1989, part II, page 588 f.) (4) The English wording shall be authoritative and final unless the Contract is concluded in German. (5) The Board of Directors of the Bremer Baumwollbörse shall be authorised to issue binding definitions of the terms of these Rules and fees, such definitions and fees being attached to these Rules as appendices I, II and IV. (6) The INCOTERMS apply in their latest edition. 2 Periods and Dates (1) If, on a given day or within a given period, a declaration of intention is required to be made or any act of performance to be done, and if the given day or the last day of the given period falls upon a Sunday, a day officially recognized in the place of declaration or performance as 06/26/2008 a public holiday, or a Saturday, then the next business day takes the place of such a day. (2) In calculating periods and dates, the date of the event as from which such period or date is calculated shall not be counted. (3) If a lot of cotton has been re-sold once or several times, and if one party has duly and within the specified time carried out the requirements (declarations, applications, communication, etc.) such performance shall also hold good for the other parties, provided that they for their part carry out the necessary requirements without delay after they learn of the preceding performance of requirements. 3 General Obligation of Inspection (1) After discharge in the port (in the case of contracts for shipment) or after tendering (in the case of contracts for delivery), the parties or their representatives shall jointly weigh and sample each bale (handling of cotton). Any identity marks showing the origin of the cotton must not be removed from the bales. (2) The buyer shall inspect each bale for deficiencies and, in order to protect his rights, he shall report such deficiencies without delay to the seller. For the establishment of quality claims and of deficiencies of the agreed instrumental values, the provisions of 40 ff. or 58 ff., and for the ascertainment of any other deficiencies, the provisions of 34 ff. shall apply. (3) If, in spite of proper examination, a deficiency was not detectable at the time of weighing and sampling, a claim must be filed immediately after detection of such deficiency, at the latest within 6 months from the last day of landing or from the day of tender. The bale in question shall otherwise be considered as approved in respect of such deficiencies. (4) No claim shall be considered for any deficiency in bales which have already been passed to a processing machine. 06/26/2008

8 Foreign Currency If a debt incurred in foreign currency cannot legally be paid in that currency within Germany, payment shall be effected in EURO at the rate at which the creditor can cover the foreign currency. II. Rules Relating to Contracts 1. SHIPMENT AND DELIVERY to extend the shipment period, then 30 and 31 applies. (5) Slight differences in marks will not be relevant. 7 Shut out Cotton The contract will not be closed if the cotton, or part of it, is shut out from the named ship, as long as the bill of lading is correct and fits the definition given in Appendix I. This only applies to contracts for shipment, not to contracts for sailing or clearance. 06/27/ Date of Shipment A signed on board bill of lading will be evidence of the date of shipment. 6 Documents (1) The seller must provide an invoice or full and correct details of marks, ships names and other facts contained in the bill of lading within the time set out in the contract. If the seller does not do so, the buyer can close all or part of the contract covered in the bill of lading and invoice it back to the seller as laid down in the Rules of the Bremer Baumwollbörse. The buyer must do this within 14 days (two weeks) of the deadline set out in the contract. If the seller provides the invoice or details after the deadline, and the buyer intends to close the contract or any part of it, he must let the seller know within three days. (2) If there is no time limit set in the contract and the seller does not provide the invoice or details within 21 days (three weeks) of the date of the bill of lading, the above will apply. (3) Shipping Instructions and Letters of Credit must be issued for the full value of the quantity of the shipment, notwithstanding the allowed variation in weight of the shipment. (4) In the event that Letters of Credit are opened late, or shipments have not been made as stipulated in the contract, then both parties may agree to extend the shipment period. If the parties cannot agree 06/30/ Container Trade Rules If there is a dispute over a contract for the shipment of American cotton in containers from US ports it will be settled under the Container Trade Rules set out in Appendix III of the Rules of the Bremer Baumwollbörse. 2. INSURANCE 9 Insurance When a buyer or seller takes out insurance on a shipment of cotton under a contract made under the Rules of the Bremer Baumwollbörse, the insurance must include: Marine cargo insurance and transit insurance in line with the Institute Cargo Clauses (A) or Institute Commodity Trades Clauses (A); War Risks Insurance (War risk or risk of contamination by weapons with public danger or by ionizing radiation shall not, however be covered) in line with the Institute War Clauses (Cargo) or the Institute War Clauses (Commodity Trades); strikes, riots and civil commotion s insurance in line with the Institute Strikes, Clauses (Cargo) or Institute Strikes Clauses (Commodity Trades) and Institute Radioactive Contamination, Chemical, Biological, Biochemical and Electromagnetic Weapons Exclusive Clause as per latest wording,

9 and cover the invoice value of the shipment plus 10%. 10 Country Damage Unless otherwise agreed between the parties, the seller shall be responsible for country damage, subject to the limitations detailed in 11 b and 12 b. 11 Seller s Obligations The following conditions apply to contracts where the seller is responsible for providing marine cargo insurance, transit insurance and country damage insurance: a) There must be a policy document or certificate of insurance. This document or certificate must be produced as one of the shipping documents. b) If the cotton is country-damaged when it arrives, the buyer must separate the damaged bales and must make a claim against the seller within 7 days (one week) of weighing or devanning, whichever is later, notwithstanding that the claim must be made within 42 days (six weeks) of arrival of the cotton. The parties must try to agree on an allowance. If they cannot do so, a qualified surveyor recognised by the insurance company shall be appointed to inspect the damaged cotton. The cost of the survey shall be for buyer s account in the first instance. If the survey confirms country damage, the seller s insurance shall be called upon to pay: the buyer for the market value of any country damaged cotton removed from the bales as set out in the surveyor s report, plus any reasonable charges incurred in the separation of the country damaged cotton, the cost of the survey. If the loss is not covered by seller s insurance the seller must pay. c) If a charge is made for collecting the insurance claim and the buyer 06/30/2016 pays it, the seller must refund the buyer. 12 Buyer s Obligations The following conditions apply to contracts where the buyer is responsible For providing marine cargo insurance or transit insurance, and the seller responsible for providing country damage insurance: a) So that the buyer can arrange insurance, the seller must give the buyer the necessary details of each shipment. b) If the cotton is country-damaged, the buyer must separate the damaged bales and must make a claim against the seller within 7 days (one week) of weighing or devanning, whichever is later notwithstanding that the claim must be made within 42 days (six weeks) of arrival of the cotton. The parties must try to agree on an allowance. If they cannot do so, a qualified surveyor recognised by the insurance company shall be appointed to inspect the damaged cotton. The cost of the survey shall be for buyer s account in the first instance. If the survey confirms country damage and that the damage is greater than 1.0% (one percent) of the total weight of the shipment, subject to a minimum claim of US-$ , the seller s insurance shall be called upon to pay: the buyer for the market value of any country damaged cotton removed from the bales as set out in the surveyor s report, plus any reasonable charges incurred in the separation of the country damaged cotton, the cost of the survey. If the loss is not covered by the seller s insurance the seller must pay. c) If a charge is made for collecting the insurance claim and the buyer pays it, the seller must refund the buyer. 13 Refunding (1) The seller must refund the buyer any extra charge or premium which the buyer has to pay if: 06/30/ /30/ /30/2016

10 the buyer is responsible for marine insurance; the seller is responsible for booking the freight; the seller books the freight on a different ship from the one the buyer has asked for; and the ship is subject to an additional premium under the terms of the Institute Classification clause of the Institute of London Underwriters or another similar clause in force when the buyer learns the name of the ship. (2) The buyer must pay the seller any extra charge or premium if: the seller is responsible for marine insurance; the buyer is responsible for booking the freight; the buyer books the freight on a different ship from the one the seller has asked for; and the ship is subject to an additional premium under the terms of the Institute Classification clause of the Institute of London Underwriters or another similar clause in force when the seller learns the name of the ship. 3. SAMPLING (OTHER THAN FOR MOISTURE) 14 Sampling (1) Sampling must take place at the point of delivery or other location as determined between buyer and seller. The buyer s and seller s representatives must supervise the sampling. The seller must give the name of his representative to the buyer: before sending the buyer an invoice; or with the invoice (2) Samples for arbitration must be drawn, sealed and marked in the presence of both, the buyer and seller and/or their respective representatives. 15 Samples (1) A sample from a bale of cotton should weigh about 150 grams. (2) For manual classification and/or arbitration American and Australian cotton must be sampled 100%. Unless otherwise agreed, other cottons need only be sampled on the basis of 10% representative samples from each lot or mark as defined on the seller s commercial invoice. (3) Samples may be drawn from part lots and/or shipments, however, a claim may only be made on the number of bales available at the time of sampling. (4) For instrument testing and/or arbitration a claim may only be made on individual bales specified by the party applying for instrument testing. For arbitration 100% of the bales claimed must be sampled. (5) If the buyer or seller believes that the cotton or cotton waste is false packed, mixed packed or in plated bales, every bale must be sampled, and samples must be drawn from each side of the bale. 16 Seller s Permission The buyer must not sample the bales before weighing without the seller s permission. 17 Set of Samples If the seller takes a set of samples after weighing, he must pay for them at the contract price of the cotton. 4. TARE 18 Tare (1) Unless the seller declares and guarantees otherwise, all cotton must be sold on actual tare. (2) The buyer can insist that the actual tare be established at the time of delivery. The actual tare must be measured within 28 days (four weeks) 06/25/ /30/ /27/2013

11 of the date of arrival of the cotton and must be carried out by the buyer under the supervision of the seller s representatives. This will then be the measurement of tare applied to the weight adjustment. (3) If the buyer insists that the tare be measured and it proves to be not more than the allowance given in the contract or invoice, the buyer will have to pay the costs of taring. Otherwise, the seller must pay these costs. 19 Calculation of Tare (1) To calculate actual tare, a minimum of 5% of the bales, subject to a minimum of 5 bales of each type of tare composed in any one lot or mark must be checked. (2) Actual tare is established by ascertaining the average weight of the wrapping, bands, ropes or wires from each type of the different tares comprising the lot or mark and multiplying the average weight of each type of tare by the total number of bales in the shipment. (3) Repaired bales must be tared separately. 5. WEIGHT 20 Gross Weight All cotton must be weighed gross weight on a bale by bale basis unless otherwise agreed. The tare is to be deducted from the gross weight. 21 Weights (1) Gross Shipping Weights must be established by an independent weighing organisation or other organisation as determined in writing between the buyer and seller within 28 days (four weeks), or any other time period as agreed between buyer and seller, before shipment. (2) Gross Landing Weights All cotton must be weighed by the buyer, for buyer s account, under the supervision of the seller s representa- 06/27/ /30/2011 tives (for seller s cost) at the agreed point of delivery or other location as determined by the buyer and seller, in any event within 28 days (four weeks) of the date of arrival of the cotton. If the cotton has already been sampled, a weight allowance must be made for the samples taken. (3) Both the buyer and the seller can appoint representatives at their own cost to supervise any weighing. The party arranging the weighing must advise the other party where and when it will take place, allowing a reasonable time to enable the representative to attend % Rule (1) The weight of bales which are condemned, short-landed, burst, wrongly marked or not marked will be calculated according to the average gross weight of the landed bales, as long as at least 25% of the lot has been landed in good condition. If less than 25% is in good condition, the weight of these bales will be calculated according to the average invoice weight. (2) If the buyer accepts bales which are wrongly marked or not marked, those bales will be weighed, and the weights shown separately. (3) If the buyer does not weigh the total shipment within 28 days (four weeks) of the date of the arrival of the cotton, the unweighed bales will be calculated according to the average gross weight of the weighed bales, as long as at least 90% of the lot has been weighed. If less than 90% of the lot has been weighed, the weight of the unweighed bales will be calculated according to the average invoice weight. (4) If the shipment is by container and all the containers are loaded onto one ship, the 25% referred to in part 1 of this paragraph will apply to the total number of bales delivered. (5) If the shipment is by container and the containers are loaded onto more than one ship, the 25% referred to in part 1 of this paragraph will apply to the number of bales delivered in each ship. 06/30/2011

12 Variation of Weight higher for delayed payments. (1) When contracts are made for shipments or deliveries of specified quantities during various shipment/delivery periods, each shipment or delivery should fall within the allowed variation. Each month s shipment or delivery shall form one weight settlement, even if shipped or arriving by more than one conveyance. 26 Claims for Clerical Errors Claims for clerical errors in invoices will be accepted if there is evidence to support. 27 Value Added Tax 06/27/2013 Proof of any variation in weight, must be sent to the other party within The price of cotton set out in the contract will not include any Value 49 days (seven weeks) of the date of arrival of the cotton. Compensa- Added Tax due, unless the contract says that it does. tion for variation in weight will normally be based on the invoice price. But, if the variation is more than the amount allowed for in the con- 7. SALES ON CALL tract, the buyer may then demand compensation for the market difference over that amount of variation, based on the market value of the cotton on the date of arrival of the cotton. If the contract does not specify an allowable variation, the variation allowed will be 3%. (2) Unless the buyer and seller agree otherwise, a kilogram will equal pound weight (lb). 6. INVOICING AND PAYMENT 06/27/ /30/ Sales on call (1) On buyer s call: 1. For sales on call Intercontinental Exchange (ICE) Cotton Contract No. 2 Futures: a) The final price of cotton sold on call will be fixed based on the ICE Cotton Contract No. 2 Futures contract month specified in the sales contract. : 06/27/ Cash Payment When the shipment arrives, the payment must be made on arrival or within 49 days (seven weeks) of the date on the bill of lading or shipping documents, whichever is earlier. Upon first presentation of the contracted shipping documents, the payment must be made within three working days unless otherwise agreed by the parties. b) The buyer should communicate to the seller an executable fixation instruction. The seller should communicate to the buyers in writing any filled fixation and the resultant fixed price. Unless agreed otherwise by the parties: c) Cotton must be fixed no later than the ICE Cotton Contract No. 2 Futures on the day prior to first notice day for the futures contract month specified in the sales contract. d) If cotton has not been fixed by this time, the final price shall 25 Payment of Claims be based on the ICE Cotton Contract No. 2 Futures closing price Claims that are made in accordance with the terms of the contract must be paid within 21 days (three weeks) of the claim date. Interest shall be payable as from the due date at a rate to be fixed by the Committee for Fixing the Value Differences. The rate of interest shall be 3% on the day prior to first notice day of the futures contract month specified in the sales contract. 2. For sales on call with reference to products other than the ICE Cotton Contract No. 2 Futures Market:

13 a) The final price of cotton sold on call will be fixed based on the quotation of the product specified in the sales contract. b) The buyer should communicate to the seller an executable fixation instruction. The seller should communicate to the buyers in writing any filled fixation and the resultant fixed price. Unless agreed otherwise by the parties: c) Cotton must be fixed prior to the expiration of the product. d) If cotton has not been fixed prior to the expiration of the product then the fixation shall be based on the last published quotation of the product, or if no expiration date then on the date of shipment/ delivery. (2) On seller s call, the roles of the buyer and seller are reversed. 29 Lot of the Futures Contract Cotton sold on call must be called in one lot or in lots of not less than the smallest lot of the future contracts on which the deal is based. 8. CLOSING CONTRACTS 30 Closing Contracts (1) If for any reason a contract or part of a contract has not been, or will not be, performed (whether due to a breach of the contract by either party or due to any other reason whatsoever) it will not be cancelled. (2) The contract shall in all instances be closed by being invoiced back to the seller in accordance with the rules of the Bremer Baumwollbörse in force at the date of the contract. (3) Claims for consequential damages will not be allowed. (4) The arbitrators will set the invoicing back weight if: 1. the seller has not provided an invoice; or 2. no actual weights are available; or 3. the parties cannot agree the weight. For the purpose of determining the invoicing back weight, when part of 06/26/ /27/2013 the contract has already been fulfilled, weight tolerances will not apply to the balance. 31 Date and Price of Closure (1) Where a contract or part of a contract is to be closed by being invoiced back to the seller, then the following provisions will apply: 1. If the parties cannot agree upon the price at which the contract is to be invoiced back to the seller, then that price will be determined by arbitration, and if necessary, appeal. 2. The date of closure is the date when both parties knew, or should have known, that the contract would not be performed. In determining that date the arbitrators will take into account: a) the terms of the contract; b) the conduct of the parties; c) any written notice of closure; and d) any other matter which the arbitrators or appeal committee consider to be relevant. 3. In determining the invoicing back price, the Arbitrators shall have regard to the following: a) the date of closure of the contract as determined in No. 2; b) the terms of the contract; c) the available market price of the cotton which is the subject of the contract or such like quality on the date of closure. 4. The settlement payable on an invoicing back will be limited to the difference (if any) between the contract price and the available market price at the date of closure. 5. Any settlement due and payable on an invoicing back of a contract closed in accordance with 30 and 31 will be calculated and shall be paid regardless of whether the party receiving or making the payment is considered to be responsible for non-performance 06/26/2008

14 and/or breach of the contract. right to do so. If the buyer has already paid for the cotton, the seller must buy it back at the market value of good cotton on the date the claim is proved and repay the buyer his expenses. (2) Any other losses or claims expressly agreed between the parties as recoverable will not be included in an invoicing back price. Such losses or claims should be settled by amicable settlement, or claimed (2) If the seller does not take back the cotton, the claim must be settled based on the market value of good cotton on the date the claim is proved to the seller. The seller must also repay the buyer his expenses. at arbitration. 9. QUALITY OF THE COTTON DELIVERED (3) The buyer must claim for unmerchantable cotton within 6 months (26 weeks) of the date of arrival of the cotton. The bales must be set aside for inspection for a further 28 days (four weeks) and the inspection must be done by an agreed expert. The buyer will be able to claim reasonable expenses from the seller for putting the bales into a merchantable condition. The buyer can also claim the value of any damaged cotton removed from the bales. The value must be based on the market value of the good cotton on the date the claim is proved to the seller. Any bales damaged as the result of fire can be invoiced back to the seller. This part does not apply to country damage or damage caused by salt water or any accident during shipping. 32 Quality Unless average has been stated in the contract, when cotton is sold on the description of grade, the cotton must be equal to or better than contracted quality. 06/27/ Characteristics (1) The buyer and seller can say in the contract what the grade, length, micronaire, strength and other fibre characteristics of the delivered cotton must be. The contract can also lay down what allowances, differences, limits and so on apply, and, where applicable, what type of instruments must be used to establish the characteristics in the event of a dispute (Please read Appendix IV). (2) If the buyer and seller disagree about a claim, the dispute will be settled by arbitration under the Rules of the Bremer Baumwollbörse. 06/30/2011 (4) The buyer must claim for foreign matter in the cotton within 6 months (26 weeks) of the date of arrival of the cotton. The bales must be set aside for inspection for 28 days (four weeks) after the claim is made and the inspection must be done by an agreed expert. The buyer will be able to claim reasonable expenses from the seller for removal of the foreign matter. 06/27/ CLAIMS FOR FALSE PACKED, MIXED BALES AND SO ON 34 Periods 35 Period of Notice in Case of Country Damage (1) The buyer must claim for false packed, mixed packed or plated bales within 6 months (26 weeks) of the date of arrival of the cotton. The bales must be set aside for insprction for 28 days (four weeks) after the claim is made and the inspection must be done by an agreed 06/27/2013 The buyer must give notice of any claim for country damage as detailed in 11 or 12 and the survey shall be completed within 14 days (two weeks) of the notice of claim, or within 56 days (eight weeks), of the date of arrival of the cotton, whichever is earlier. expert. If the seller tells the buyer within 14 days (two weeks) of the claim being proved that he intends to take back this cotton, he has the

15 INTERNAL MOISTURE 36 Internal Moisture If the buyer and seller disagree about a claim for internal moisture, the dispute will be settled by arbitration under the Rules of the Bremer Baumwollbörse. 37 Samples for Moisture Testing The following will apply when sampling bales to test for internal moisture: Samples of at least 250 grams must be taken from each bale to be sampled. These samples must be taken by the representative of the party who has asked for the test, and in the presence of a representative of the other party (if it appoints one). The samples must be taken at the time of weighing. Representative samples must be taken from 5% of the bales in each lot (at least 3 bales). These bales must be selected at random. Samples must be taken from at least two different parts of each bale from a depth of about 40 centimetres inside the bale. The samples must be placed at once in dry, hermetically-sealed containers and labelled to show the identity of the bale the samples have come from. The samples must be sent immediately to a testing laboratory mutually acceptable to both parties. 38 Buyer s Obligations (1) The buyer must: give notice of any claim for internal moisture within 42 days (six weeks); and produce a report from a mutually agreed laboratory and final claim within 63 days (nine weeks), of the date of arrival of the cotton. (2) The allowance given to the buyer will be based on the laboratory s report. The allowance will be the difference between: the weight of the absolutely dry fibre in the lot plus the percentage of moisture regain set out in the contract; and the total weight of the lot. This allowance will also be based on the invoice price. 39 Costs The party claiming and asking for the moisture test will have to pay the cost of sampling and all related charges. If the claim is proved, sampling, courier and laboratory charges will be reimbursed by the other party. III. Claims and Arbitrations for Quality 1. GENERAL RULES 40 Claims for Quality Deficiencies (1) If the cotton delivered differs from the contracted quality as to grade, colour, staple and character, only a claim for allowance at the market value shall be admissible, unless there is an option for closing the contract (see 30 ff.). (2) Allowances for differences in quality shall, upon application, be decided by the quality arbitration of the Bremer Baumwollbörse; such decision shall be final and binding upon the parties. 41 Additional Allowances Without prejudicing the buyer s right to close the contract in the case of contracts for delivery, the seller shall pay an additional allowance on the basis of the average invoice value for each deficient bale according to the following provisions

16 a) for each bale deficient in quality by more than 10% of the contract price... 3% b) in the case of sales on description - for cotton from USA, Mexico and Central America also in the case of sales on type for each bale deficient by one grade and a half or more... 3% c) in the case of cotton sold as middling or lower with the guarantee standard colour, for each bale falling off more than two steps in colour... 3% d) in the case of cotton sold higher than middling with the guarantee standard colour, for each bale falling off more than half a step in colour... 3% e) in the case of sales of coloured cotton up to and including spotted, for each bale falling off to tinged, stained or more colour... 3% f) for each bale falling off in staple length by 1/ % g) for each bale falling off in staple length by more than 1/16...3% 2. QUALITY ARBITRATION PROCEDURE IN THE FIRST INSTANCE 42 Application for Arbitration (1) The application for quality arbitration shall be submitted to the Bremer Baumwollbörse within a period of 28 days (four weeks) after either the last day of landing or after the day of tender. The application shall be effective only if a copy thereof is dispatched simultaneously to the opposing party. (2) The application for arbitration shall cover the entire lot. (3) In his application for arbitration and in his notice to the opposing 06/27/2013 party, the application shall state: 1. the name of the applicant; 2. the exact quality guarantee and the date of the contract; 3. the number of bales, their marks, the bale numbers and the name of the ship, if any; 4. either the last day of landing or the day of tender; 5. the name of the opposing party to whom the duplicate of the certificate is to be sent; 6. the name of the firm furnishing the samples; 7. the name of the firm to whom the samples shall be sent after expiry of the time for appeal; 8. the type of arbitration applied for (ordinary arbitration, arbitration stating the numbers of the bales found deficient with or without mentioning the value of the allowances, urgent arbitration, classification according to 57). 43 Suspension of Application (1) An application for arbitration may, with the consent of the opposing party, be suspended only once for a period of up to 21 days (3 weeks) from the date of the application. (2) The suspension of the application shall be void if one of the parties objects. (3) Such suspension shall not prejudice the period prescribed for the submission of the arbitration samples to the sample room of the Bremer Baumwollbörse. 44 Arbitration Samples (1) The arbitration shall be carried out on the basis of the arbitration samples drawn in accordance with 14 (2). (2) If only a percentage sampling has taken place, the arbitration award

17 shall be effective proportionately for the entire lot. (3) The arbitration samples, properly sealed, shall be sent to the Bremer Baumwollbörse within the period fixed for the application for arbitration (see 42). The Bremer Baumwollbörse may, if practicable, order fresh arbitration samples to be drawn. Each party shall bear one half of the fees arising therefrom. In so far as unsealed arbitration samples and/or types are submitted to the Bremer Baumwollbörse, this fact shall be mentioned in the certificate. 45 Arbitration Procedure: Market Value, Value Differences (1) The cotton delivered shall be arbitrated against the contracted quality on the basis of the market value. (2) In the case of cotton from USA, Mexico and Central America, the arbitration shall be made in half grades. (3) The arbitration on staple length shall be decided on the basis of the type, unless a specific staple length has been guaranteed. (4) Differences in market value shall be fixed by the Committees for Fixing the Value Differences of the various growths and published in the Weekly Report of the Bremer Baumwollbörse. (5) In the case of contracts for delivery, the value difference shall be that of the day of tender; in the case of contracts for shipment, the value difference shall be that of the last day of landing. 46 Arbitration Procedure: Purchases on Type and on Description (1) The arbitration shall be carried through by comparing the arbitration samples with the purchase type, unless the purchase has been made on description and corresponding standards adopted by the Bremer Baumwollbörse are available. The parties may agree that standards not being adopted, in so far as such standards are deposited with the Bremer Baumwollbörse, be used as a basis for the arbitration; in such case, the standards shall serve as types. (2) In so far as official Bremen standards or internationally adopted standards are available for the various growths of cotton, such standards shall be used as a basis for determining the value differences in arbitrations, both in the case of purchases on description as well as in the case of purchases on type. (3) In the case of purchases on description, the average quality of the standard, and in the case of purchases on type, the average quality of the type shall be the basis for the arbitration. 47 deleted 48 Compensation (1) Compensation shall not be allowed between within grade, colour, staple and character. (2) Only bales inferior in grade by up to half a grade may be compensated, within a limit of up to 25% of the lot, by bales which are correspondingly better in grade. This shall not apply to contracts with a rejection/replacement clause. 49 Replacement Clause (if agreed) (1) If the contract stipulates that the cotton must not be inferior to the quality agreed upon or must not deviate in character, the seller shall, at the buyer s demand replace any inferior or deviating bales with bales corresponding to the quality agreed upon (replacement clause). (2) Such replacement is to be made within a period of 42 days (6 weeks). Where replacement is not effected within these 42 days (6 weeks), the buyer shall have the right to close the contract as per 30 ff. in respect of the undelivered bales or those not delivered in accordance with the terms of the contract. 06/26/2008

18 (3) If the parties cannot agree upon the bales to be replaced, either the entire lot or, at the seller s option, only the bales objected to shall be arbitrated in accordance with 42 ff. (4) Where the amount of the award on the bales falling off is also to be determined, this shall be specifically applied for. (5) Each party shall bear its own expenses arising in connection with the selection and handling of the cotton. (6) The fees of the first arbitration instance shall be borne by the seller of the bales found deficient and, where the whole lot has been arbitrated, he shall also bear the costs for the bales which the buyer has already accepted. All other costs shall be borne by the buyer. The terms of 56 (2) shall apply as regards fees for the appeal. (7) The value date for the bales accepted by the buyer and for the bales deemed acceptable in the arbitration shall be the day of tender. The value date shall, however, always apply to a truck load of 10,000 kg. Where, with the consent of both parties, more or less than 10,000 kg is to be loaded, the value date shall apply to the loaded portion. Where replacement of bales has taken place, the value date shall be the first day of tender for those truck loads for which the replacement procedure has been carried through within 14 days (2 weeks) after the first day of tender; if the replacement procedure ends only after such period of 14 days (2 weeks), the value date shall be the fourteenth day preceding the end of the procedure. 50 Classers, Anonymity, Certificate (1) In the first instance of the Arbitration Board, quality arbitration shall be carried out by the sworn classers of the Bremer Baumwollbörse. (2) The names of the parties and the marks of the lots shall not be disclosed to the classers. (3) For each quality arbitration, the Bremer Baumwollbörse shall issue each party with a copy of the certificate bearing the award. (4) In the case of cotton from USA, Mexico and Central America, the deviation in grade, colour, staple, and character must be stated separately in the certificate. 51 Supplementary Arbitration: Simultaneous Procedure (1) The opposing party may apply to the Bremer Baumwollbörse for a supplementary arbitration to be held against its supplier if it has bought the cotton with the same quality terms and if the same day is applicable for the determination of the value differences. (2) The application for supplementary arbitration shall be made immediately after the application for the first arbitration has become known. The supplier of the cotton must be notified simultaneously. (3) The supplementary arbitration and the first arbitration shall be carried through simultaneously. (4) The Bremer Baumwollbörse shall issue a certificate for each arbitration showing the same award and the same distribution of the fees. (5) The Bremer Baumwollbörse shall consider both arbitrations as one arbitration in relation to the fees. (6) Where the application for supplementary arbitration is made only after the first arbitration has been carried out, such supplementary arbitration shall be considered as a separate arbitration in respect of the fees. 3. PROCEDURE ON APPEAL 52 Periods, Withdrawal (1) Both parties may lodge an appeal with the Bremer Baumwollbörse against the award of the Arbitration Board within 14 days (2 weeks) after the date of the certificate. The opposing party shall be notified simultaneously. (2) The application for appeal shall include the names of the buyer and

19 the seller as well as all other parties concerned. (3) The application for appeal may be withdrawn by giving written notice of withdrawal to the Bremer Baumwollbörse and to the opposing party, provided that the latter agrees to the withdrawal. Consent to withdrawal shall be deemed given unless the opposing party lodges written protest with the Bremer Baumwollbörse within 14 days (2 weeks) after the receipt of such notice of withdrawal. 53 Appeal, Judges (1) The Managing Director of the Bremer Baumwollbörse shall immediately inform the Committee for the Nomination of Appeal Judges and Arbitrators of the application for appeal. The Committee shall appoint three appeal judges out of the list compiled by the Board of Directors in accordance with 23 (2) of the By-Laws of the Bremer Baumwollbörse. (2) The appeal judges shall decide by majority vote. The appeal judges shall be joined by one of the classers of the Arbitration Board as advisory member upon order of the Bremer Baumwollbörse. (3) If one or more appeal judges are of the opinion that the first decision of the Arbitration Board should be considerably amended, then the Bremer Baumwollbörse, upon application, shall enlarge the Appeal Board by two additional appeal judges. (4) The award of the classers and the samples shall be submitted to the appeal judges, without, however, disclosing the names of the parties or the marks of the lots. Furthermore, the appeal judges shall not be informed whether the seller or the buyer has lodged the appeal. 54 Appeal Certificate (1) The Bremer Baumwollbörse shall forward to each party a copy of the appeal certificate. (2) The decision of the Appeal Board shall be incontestable. 4. FEES 55 Amount of Fees and Payment in Advance (1) The amount of fees shall be fixed according to the Scale of Charges of the Bremer Baumwollbörse. (2) The fees and other charges shall appear on the certificate. (3) The fees and charges shall be collected from the applicant by the Bremer Baumwollbörse. (4) The Bremer Baumwollbörse shall be entitled to demand from the applicant a payment in advance of fees and charges likely to accrue within a fixed time. Should the applicant fail to comply with the demand for such payment in advance within the time-limit stipulated, the applications for arbitration (see 42) or for appeal (see 52) shall be considered as withdrawn, the Bremer Baumwollbörse shall notify the opposing party accordingly. In this case, the opposing party shall have the right to lodge the appeal within 14 days (2 weeks) after receipt of such notification. 56 Distribution of Fees (1) The fees and charges of the Arbitration Board shall be borne by the applicant for the entire lot if the award does not exceed double the amount of the fees for the arbitrated lot. In all other cases, the opposing party shall bear all fees and charges for the arbitration. (2) The fees and charges of the Appeal Board shall be borne by the party who lodged the appeal if the award of the Arbitration Board is confirmed. If the decision of the Arbitration Board is amended by the Appeal Board, each party shall pay one half of the appeal fees and charges; the distribution of fees and charges of the Arbitration Board shall, however, be governed by the result of the appeal award.

20 (3) Where, as a result of incorrect details in the application, a re-classification or a new arbitration should become necessary, the fees and charges for the invalid classification or arbitration shall be borne by the party at fault. 5. CLASSIFICATION 57 Applicable Regulations (1) Where classification alone (determination of the quality of the cotton) is to be made, this must be specifically noted in the application. (2) The application may be rejected by the Bremer Baumwollbörse if the classification should prove impracticable. (3) The provisions relating to quality arbitrations shall apply accordingly. IV. Instrumental Testing Procedures 58 Testing Instruments The criterias for certification of acceptable testing instruments be in compliance with the Universal Calibration Standards (e. g. HVI-CCS and USDA Color Calibration Tiles) and appropriate parameteres (e. g. UHML und UI). 59 Allowance by Deviation (1) Where, due consideration being given to the control limits, the cotton delivered deviates from the instrumental values agreed upon, an allowance may only be claimed for the difference in market value of the deviation. (2) The differences in market value of the various growths shall be fixed by the Committee for Fixing the Value Differences and together with the control limits attached to these Rules as appendix IV and published in the Bremen Cotton Report of the Bremer Baumwollbörse. 06/26/ /26/2008 (3) In so far as no differences in market values have been fixed by the Committee for Fixing the Value Differences, the competent Committee shall fix such differences in market values in each individual case. (4) So far and so long as official value differences have not yet been fixed, the parties shall come to an agreement between themselves as to an allowance. 60 Application for Testing (1) The application shall be submitted to a laboratory within a period of 21 days (3 weeks) either after the last day of landing or after the day of tender. Such application shall only be valid if a copy of it is submitted simultaneously to the opposing party. (2) In the application and in the notification to the opposing party, the applicant shall state: 1. the name of the applicant; 2. the exact quality guarantee including the date of the contract; 3. the number of bales, their marks, the bale numbers, and the name of the ship, if any; 4. the last day of landing or the day of tender; 5. the opposing party to whom the duplicate of the certificate is to be sent; 6. the name of the firm furnishing the samples; 7. the name of the firm to whom the samples shall be delivered after expiry of the time-limit for a second test. 61 Testing Procedure (1) High Volume Instrument testing or classification shall be carried out in accordance with the approved practices and procedures listed in the latest version of the Universal Cotton Standards Agreement between the United States Department of Agriculture and the international signatories. 06/25/ /30/2011

21 (2) If sealed samples have already been taken for manual arbitration in (4) The second test report will be issued and signed and/or stamped by the laboratory s authorised personnel. The test report will show the results of the test. accordance with 14 (2) and 15, the same samples can be used for the tests, provided they have been resealed. (3) At least two tests shall be made on each sample. The average result (5) The provisions of 61 shall apply to the second test procedure. of the tests shall be decisive. (4) A first set of tests will be done in a laboratory agreed between the buyer and seller. If there is no agreement, the tests will be undertaken in a certified laboratory selected by the party applying for the test. (5) The laboratory which does the first test will issue a test report signed and/or stamped by its authorised personnel. The test report will show the results of the test. The samples will be resealed by the laboratory and retained by the laboratory for up to 35 days (five weeks) in case a second test is called for. (6) In the event the first test was undertaken in a certified laboratory it 63 Fees for Testing (1) The amount of fees shall be fixed according to the Scale of Charges of the Bremer Baumwollbörse. (2) Whichever party asks for the tests must pay the laboratory the whole cost. But, if the buyer pays, the seller must repay the cost of testing every bale which does not come within the control limit set out in the contract or, where the control limit is not stated in the contract, within the usual control limit specified in Appendix IV attached to these Rules. 06/30/2011 will be final, and no request for a second test will be allowed. (7) The terms of 51 shall apply to a supplementary test. V. Claims on Account of Other Deficiencies and the Procedure to be Followed 62 Request for a Second Test 06/30/ deleted 06/26/2008 (1) Subject to 61 (6), either firm can request a second test within 21 days (three weeks) of the first results being dispatched. If no request is VI. Procedure in the Court of Arbitration lodged, the information on the test report will be final. (2) The result of the first test shall not be disclosed to the laboratory which does the second test. 1. JURISDICTION 71 General Jurisdiction, Seat, Applicable Law (3) Any request for a second test must apply to the total number of bales in the first test. A second test may only be undertaken in a certified laboratory agreed between the parties. In the event of no agreement, the claimant will indicate the certified laboratory to be used. (1) All legal disputes over technical matters shall be decided by the Court of Arbitration of the Bremer Baumwollbörse to the exclusion of the ordinary courts of law, save where both parties agree in writing to a decision by the ordinary courts of law. The tests will be made on samples of cotton drawn from the original (2) The same shall apply to disputes arising as to the validity of the main contract and the arbitration agreement, as well as to the jurisdiction of the Court of Arbitration. Actions arising out of cheques or bills of exchange may be raised before the ordinary courts of law in sum- resealed samples. The party applying for the second test shall pay for the resealed samples to be dispatched to the certified laboratory designated for the second test.