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Japan changes U.S. wheat import rules

03/19/2012 @ 10:28am

Japan has changed the delivery rules for U.S. wheat in tenders this month due to delays in receiving cargoes but suppliers say the new structure is difficult to implement, can result in penalties, cause cost overheads and push up prices.

Japan is one of the world's largest wheat importer, buying all its milling grade requirements from the U.S., Canada and Australia.

At a time when Russia has eaten into U.S. share in wheat trade elsewhere, Japan continues to be a captive customer, and its import rules are among the world's most stringent.

Japanese government officials told Dow Jones Newswires that they are now seeking few of the U.S. cargoes of wheat with contractual fixed dates of arrival because of earlier instances of delays in delivery.

"If cargo arrivals are delayed, we can press for whatever penalties are stipulated in the contract," one of the food ministry officials said without elaborating.

The more common norm in global milling wheat trade is to buy the cargo with dates finalized only for shipment from the port of origin.

Once the ship sails on the time stipulated in the contract, the onus of delayed arrival isn't on the exporter.

Instead, in one of the recent tenders, Japan's Ministry of Agriculture, Forestry and Fisheries sought U.S. wheat for arrival within specific dates in June.

However, the matter came to a head with only one of the exporters offering the popular, high protein, U.S. Dark Northern Spring, or DNS grade wheat, government officials and traders said. Japan didn't buy the grade in the tender due the lack of a price comparison, a government official said.

In the next tender, Japan sought most U.S. wheat on stipulated shipment date basis but again insisted on two cargoes of DNS grade on arrival date basis.

It managed to get the cargoes this time around.

Japan doesn't divulge the prices and sellers in its tenders but traders said the two cargoes with the mandatory date of arrival were sold by Sojitz Corp. and three others on shipment-basis by Itochu.

Executives of Sojitz declined to comment and that of Itochu couldn't be immediately reached for comment.

Exporters are wary of accepting arrival dates because the duration of a voyage can vary widely due to logistical hassles and unforeseen circumstances, said a Tokyo-based trading executive.

Exporters also combine few orders into a single panamax vessel of 55,000 tons-65,000 tons to reduce costs and achieve economies of scale, he said.

Earlier, Japan used to import wheat in small vessels at frequent intervals but with global prices rising over the years, government permitted shipments in panamax vessels around late-2010.

However, this has led to logistical problems and delay in larger vessels arriving and getting berths at ports, prompting millers to complain and press the government to insist on mandatory arrival dates.

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