Wool Auctions - Sale Basis – is still relevant?
This is a preliminary paper to open the discussion on reviewing the EDI standards for wool Sale Basis.
The Post Sale Charge (PSC) and the wool Sale Basis (WSB) are data elements required by the buyer to calculate cost of the wool, ex the broker’s store.
The PSC often incorporates a delivery component, or other cost components, that may include pre-paid services, enable a rebate to be claimed etc. Hence the WSB is a specification of those conditions.
The Table A below defines current industry standards/terms for WSB via the Wool Industry EDP User Group Standards (WIEDPUG). Other relevant associated terms as also defined in this table.
Background
In days long gone the PSC was called a Delivery Fee. It was simply a prepayment the broker would require for delivery a local destination – primarily the dump. As most deliveries went to that predetermined destination it was a simple/efficient methods of payment.
If the buyer did not want the wool to be delivered to that destination then the buyer would claim a refund and organise their own transport. This claim was predominately a generous proportion of the PSC.
What Has Changed?
- When the PSC was primarily a delivery fee it was a small charge – say $2-4/bale. Now the delivery component is often less than 15% of the PSC. It is more relevantly termed a Buyers Fee, although many buyers still refer to it as a delivery charge.
- There are many more variations in the storage location and ‘sale by separation’ circumstances in today’s wool sale environments, requiring more complex determination of the PSC and incorporated delivery fee components, all conceivably ‘on the same page’ of a wools ale catalogue.
- Brokers are now specifying conditions on the ‘free’ delivery. For example, this may they are willing to delivery to ‘these stores’ in Melbourne, but not these stores in Melbourne. This may be influenced by the efficiencies of each of the stores.
- Most wool is now purchased based on the electronic data transmitted by the broker conforming to WIEDPUG rules.
- Software within the wool industry has often been ‘left behind’ with respect to these changes.
Issues
So to start the conversation we will follow an example of a lot being sold at auction to assist in identifying the issues. Whilst not typical, this scenario comes up in most sales.
- A buyer buys a lot at auction and decides to re-offer that lot via a different broker, or their ‘own’ catalogue.
- This lot may be stored at a location not previously recorded by the new selling broker. The common industry practice is to offer this lot with the same PSC as that of the original selling broker. In this case the lot is being offered for sale without a prior written/published PSC charge. Not really a concern as the buyers will have available the PSC charge via the electronic data. Those not receiving the electronic catalogue will be at a disadvantage.
- Even if the lot is being offered at a location that the broker traditional sells from, it may not have the published PSC applied. Using the scenario above the PSC will often be the original selling brokers PSC not the current selling brokers PSC. Again the only problem is that of above.
- Now the new broker prepares the catalogue and sends the lot electronically to buyers. Recording this ‘unique’ PSC and defining the WSB as D (Delivery to a Nominated Destination). However traditionally this broker would normally provide a WSB as N (No conditions/services in the PSC).
- This new broker sells the lot to a buyer who requires to the wool to be delivered to a Melbourne location. The electronic catalogue specifies that the PSC includes ‘free’ delivery to M(elbourne). However in this case the buyers required destination in Melbourne is not one of the predefined locations that the broker is willing to deliver for free. These locations are only declared on the brokers Terms and Conditions of sale, not in the electronic catalogue, and as explained above, this location may not even be recorded in the brokers T&C. The buyer will then be required to organise pick up, and/or be additionally charged, affecting the profitability of the lot.
As an additional note at this stage it should be recorded that whilst the above information is mandatory nearly 60% of the N15 catalogue had this information missing!
Table A
Extracts from the EDI standards
Sale Basis
This may have one of several values:
D (Delivered Nominated Destination). The post sale charge includes delivery to a nominated destination, usually the main shipping centre, and this will be invoice at the time of sale. A freight rebate will be applicable at the time of shipping if the buyer elects to take delivery a the brokers store door, this rate must be indicated in the Freight Rebate field.
L (Loaded on Transport). The post sale charge does not include delivery. If the buyer requests that the broker arrange transport, the broker will apply a freight charge at the time of shipping.
F (Free on Transport), No post sale charge is applicable.
N (None of the above). None of the methods specified above apply.
Centre - Delivery
This field is mandatory if a freight charge is nominated. It is the nominated delivery centre that the freight charge applies to.
Freight Rebate
If a freight charge is included in the Post Sale Charge, then the freight rebate is the amount repaid by the broker to the buyer should the buyer not require the broker to transport the wool to the nearest designated area (usually a shipping port).