By buying grains, sugar and edible oils on a free on board (FOB) basis, Iraq will cut out the additional cost, insurance and freight (CIF) charges but take on the task of arranging transporting the goods to Iraqi ports.
International suppliers have expressed concern that Iraq might not be able to handle the shipping and they could lose money if cargo bound for Iraq ends up sitting on docks with no ships to pick them up.
"We are expecting our first FOB shipment on December. It is going to be a real test if it is going to work or not. We are waiting and we will see," Abdul Karim Noury, a general manager at the Trade Ministry, told Reuters on Monday.
"But this is a road we have started down. We can't stop now."
Iraq, which imports around 3 million tonnes of wheat a year and 1 million tonnes of rice, has announced that tenders for goods such as sugar, wheat, oil and tomato paste will all be on FOB terms, which the ministry says will give it a clearer idea of the prices of both the goods and the transport.
"From now on all contracts are going to be on FOB terms. We are not going to deal according to CIF. It is better for Iraq - we can save money on it and be more in control," Trade Minister Abd al-Basset Mawloud told Reuters earlier.
Iraqi officials argue that moving to FOB is going to save Iraq around $150 million a year, which will flow into the general national budget.
"Companies take commission to ship the products under CIF; but now when the Transport Ministry is in charge the commission will simply produce a profit for the state budget," Noury said.
AN independent trading source said: "Under CIF, companies would include the price of the shipment in the deal and of course this is not done for free. They would take commission for this.
"What the ministry has done by moving to FOB is to cancel this commission and save the money."
Iraq's Trade Ministry is fighting rampant corruption which has shaken international traders' confidence and made them hesitant to enter tenders.
But the ministry says it has already started a campaign against corruption and taken procedures to limit it. They have stopped dealing with middlemen and directly approached production companies.
The Grains Board's role is now limited to sending invitations to potential suppliers and it can no longer choose the winning bidders.
A High Committee for Contracts now makes those choices.
It is made up of the finance minister, trade minister, central bank governor, the legal and economic advisers to the prime minister and other officials, including at the moment Deputy Prime Minister Ahmad Chalabi.
But moving to FOB is going to be challenging to Iraq, especially to both the ministries, trade and transport.
"I think we will have lots of problems from moving to FOB, mainly because it is something new for us so some complications might occur," Noury at the Trade Minister said.
"Besides, now, because of moving to FOB we will not be able to have our own checks that the product meets specifications - it gets checked at the outbound port and after that you either take it or leave it. Those are the rules."
"We are worried about cheating."
Iraq has insisted that it is going to turn down any deal if it is not offered under FOB.
The ministry has shown its determination to hold to the new terms when it awarded a buying tender for one million tonnes of wheat to two US firms, the first in many years, after Australians refused to make an FOB offer.