New BMW Purchasing Conditions (IPC) as of 1 December 2022
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Associate
Germany
As a senior associate in our Commercial Team in Düsseldorf and a member of the German and International Automotive Group, I advise domestic and international clients on contract law focusing on liability questions in particular. In this respect, I advise both in out-of-court negotiations and settlements as well as in complex disputes and court proceedings.
Partner, Co-Head of the Automotive & Mobility Group
Germany
I am focusing on international commercial disputes (both litigation and arbitration) and complex commercial contracts. I offer specialist advice to our clients in the Automotive & Mobility as well as Energy sectors, and I am an expert for supply chain disputes. I am co-head of Bird & Bird's international Automotive & Mobility Group, and I am a partner both in our Dispute Resolution Group and Commercial Group. Furthermore, I am co-head of the German ESG Group.
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A new version of the BMW International Purchasing Conditions for the Purchase of Production Materials and Automotive Components (IPC, BMW's central purchasing document) came into force on 1 December 2022. This update includes numerous changes which have a direct impact on the supply relationship of suppliers with BMW and can entail significant (legal) disadvantages for suppliers. Immediate action by the affected suppliers is required. A short summary of the main changes and risks can be found in our article.
The BMW Group has published a new version of its International Terms and Conditions of Purchase for Production Materials and Automotive Components ("IPC"). The IPC regulate the essential principles of the contractual cooperation between BMW and its suppliers.
The update replaces the previous version of the IPC published on 31 March 2018 and applies as of 1 December 2022. In this respect, it is expected that BMW will reference the new version of the IPC in all series orders and other contractual documents from 1 December 2022 on. The new IPC 2022 are therefore expected to become the central basis of thousands of contracts between suppliers and BMW for the supply of production materials and automotive components in the years to come.
It is obvious that the changes to the IPC 2022 are largely influenced by the crises of the past years and the resulting legal issues. With the following brief summary, we would like to draw your attention to the most important innovations. This affects especially and amongst others the following topics:
- Changes to the nomenclature and individual regulations regarding long-term supply contracts, supply contracts, and purchase orders, which should create more transparency and clarity for legal assessments but may also entail legal disadvantages for suppliers.
- Extension of the possibility to terminate supply contracts extraordinarily, especially in the event of a significant deterioration of the economic situation of the other contracting party. BMW is adapting to the corresponding regulations of other OEMs.
- For the first time, the IPC entail a limitation of the exercise of rights to refuse performance and rights of retention in the IPC, which is intended to strengthen security of supply, but bears considerable legal disadvantages for suppliers.
- Explicit regulations on the procurement risk within the supply chain at the expense of the supplier: This aggravates the already difficult legal situation of the supplier in the event of delivery disruptions.
- New regulations on the liability of the supplier, in particular on the supplier's responsibility, which are disadvantageous for the supplier.
- Modification of the previous force majeure provision: The enumerative list of relevant force majeure events is set aside.
- New obligations of the supplier to pass on certain obligations from the IPC along the supply chain, which may make it necessary to adapt contracts with the supplier's own suppliers.
- Further information obligations of the supplier towards BMW regarding the supply chain (in particular subcontractors).
- Outsourcing of a large part of the previous regulations for the ordering of production resources to the "Terms of Transfer of Title of Production Means" of the BMW Group.
- Further regulations on information security.
- Extension of confidentiality regulations.
- Reference to the "BMW Group Supplier Code of Conduct" as part of the compliance regulations. These regulations, like all references to ESG, are likely to become increasingly relevant in the coming years. It is to be expected that BMW will increasingly enforce corresponding obligations of suppliers.
The new version of the IPC requires immediate action on the part of suppliers, both in existing and planned business relationships with BMW. In addition to a careful review and risk analysis of the IPC 2022, it is likely to become necessary to regularly adapt one's own purchasing conditions with tier-n suppliers. Furthermore, it will often be advisable to initially object to the far-reaching changes of IPC 2022 and to modify them as good as possible in negotiations according to the supplier's interests. The following procedure is particularly recommended:
- Check new serial orders and other documents from BMW for reference to the updated version of the IPC.
- Carry out a risk analysis with regard to the specific effect of the changes/addition of specific regulations on the supplier's own business with BMW.
- Declare an objection to new regulations, insofar as individual provisions of the new version are not acceptable for suppliers.
- If necessary, prepare corresponding discussions and negotiations with the respective contact persons at BMW.
