Marine Annex to the LEAP Master Agreement

The Marine Annex to the LEAP Master Agreement for Purchasing and Selling Refined Products and Crude Oil Version 1.0190, “The Marine Annex”, was released in May, 2010 for voluntary use in physically-settled transactions in which oil marine delivery or receipt occurs in U.S. or Canadian ports or territorial waters.

The Marine Annex references and is effective with deliveries under the following Incoterms:  FCA, FAS, FOB, DES, DEQ, DDU, DDP, CIF, CPT, CIP, and CFR.  The release was the culmination of over 5 months of document drafting and negotiation among committee members including representatives from Barclays, BP, Camin Cargo, Chevron, Glencore, Koch, Nexen, and Shell.  It is intended to be executed between two counterparties in conjunction with the execution of Master Agreement for Purchasing and Selling Refined Products and Crude Oil Version 2.1.

In general, master agreements simplify individual transaction documentation and facilitate the electronic matching of contractual economic terms.  To the extent that a company has executed master agreements across a large portion of their business, they also reduce the legal basis risk inherent in having purchase and sale trade activity on ‘mismatching’ terms.  In certain cases, master agreements also allow for the netting of default risk across transactions between two counterparties.

The signing of master agreements or joint general terms and conditions for marine deliveries in particular simplifies and clarifies processes for Operations and Settlements personnel. For example, the terms of the settlement of demurrage between the parties of the agreement can be established up front, eliminating the need to check individual trade documents for laytime definitions and demurrage rate calculation parameters.  To facilitate adoption, The Marine Annex provides for several ‘checkbox’ options in the areas of product measurements, blending and dyeing, nomination procedures, laytime, and demurrage, among others noted in Exhibit A (located on the last two pages of the Marine Annex).

LEAP has also developed a User Guide to assist contract administration professionals in implementing the Marine Annex to The LEAP Master Agreement, including descriptions of the various elections available to the drafting parties.

If you have any questions about its use or have suggestions related to expanding its scope or increasing its adoption, please contact   312-.594-7803