Renegotiation of rice import contract unsettling

There is this report, from VietNamNet Bridge, that Vietnam wants to renegotiate with the Philippines its rice contract for the importation of 800,000 metric tons of 15-percent rice brokens it won in the mid-April auction. Coming as it is more than a month after its state trading firms won the bid, this is unsettling news amid the escalating domestic retail prices and a looming El Niño.

What went wrong? The same news agency reported on April 19, 2014, that Nguyen Hung Linh, chair of the Vietnam Food Association (VFA) of which victorious Vinafood 1 and 2 are members, “declined to provide information about the winning bid but said the winning bid was a reasonable market price” (“Exporters bargain rice away, farmers suffer”).

To our recollection, this is an unprecedented development. The directive to “renegotiate” the contract with the National Food Authority (NFA), which was issued by the VFA and the Vietnam industry and trade ministry, appears to be anchored on “the overly low bid that Vinafood 1 and 2 made to the Philippines to win the contract, and the strict requirements in the contract.” In our view, the pricing parameters on the auction could be a problem and were not a settled matter. A source of VietNamNet Bridge was quoted as saying: “Vietnam obtained the right to sell to the Philippines for $439 per ton CIF (cost, insurance, freight).”

The NFA has accepted and announced the price to be CIF/DDU (cost, insurance, freight/door-to-door, including port cargo-handling and delivery to designated warehouses). It may be noted that the 2013 rice contract of $461.77/MT with Vinafood 1 for 705,700 MT (25-percent brokens) was on a CIF/DDU basis as reported in Manila.

How will the issue be resolved speedily? Will a cheaper rice grade and/or an assumption by the NFA of port cargo and delivery expenses be acceptable?

—MANUEL Q. BONDAD,

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