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Investor Relations
With our strategic alliances, joint ventures and partnerships with individuals,
and corporate in oil, gas, petroleum related and energy businesses in
Marketing and Representation, we have placed ourselves in a position of growth.
The aim is to introduce our investors/clients to the workings of
our Company.
Here, we will introduce some of the proceedures expected to be followed
by our
investors in their transactions with us In our help page, we have also
listed
some terms and definitions that would be encountered in any contract
entered into
with us.
We have rules of the trade that we practice called the
Uniform Rules and Practice for Intermediaries. These were developed by
Davide Papa over the course of 25 years of international commodities trading.
© URPIB Rules of Trade Full Revision 1988-2011.
Last Revision:1st March 2012
English spelling and corrections. 10th March 2012
Copyright: FTN Exporting Australia 1988-2012
New Addition: Article 23: FOA
10th March 2012
URPIB Article 1:
Definitions and Overall Premise:
1. An International Trade intermediary shall be defined as a sourcing
Intermediary, and/ or Intermediate seller, intermediate agent, intermediate
broker or intermediate buyer. An entity working as a independent ‘middle person’
individually or grouped between two other principal entities shall also be
known as the ‘Buyer/Seller’. The other principal entities who are not acting
in the position of the intermediary are; the actual owner in possession of
goods being offered, also referred to as the ‘Supplier’ and the person paying
for the goods who is also the person taking possession of the goods being
purchased, also referred to as the ‘End Buyer.’
2. A Procurement intermediary is one who is specifically trading under the name
of either the principal supplier or principal end buyer. (Mandate holder of such)
One who is- “Acting on behalf of a disclosed principal.” It is said that these
type of traders are in the minority and not a preferred position for a
independent intermediary to hold nor trade in.
3. The private intermediary is one who prefers to hold a position and trade
“On behalf of an undisclosed principal.” In where ultimately the said
intermediary holding such a position does so as “Seller and Buyer.”
4. Any intermediary acting in the position of an undisclosed principal is not
required to disclose the principal End Buyer or Supplier at anytime throughout
the course of any transaction.
5. An Intermediary claiming to be acting on behalf of a disclosed principal must
disclose such principal upfront at the start of the transaction. Such an
intermediary is defined as a Procurement or Sourcing Intermediary or Agent of
said disclose principal once such disclosure is made.
6. A URPIB intermediary may consider acting as a procurement agent of any
principal, but ostensibly its said that all URPIB intermediaries do not procure
nor act as agent for anyone and are defined to trade holding position as
intermediate buyer and or seller at any given time;as being the best , safest
position to hold when dealing in the export and import of commodities and the
sales of such for commission.
7. In a scenario where no other ‘sourcing intermediaries’ are involved within a
transaction, the parties are as follows:
8. (a)Supplier (b)Buyer/Seller (c)End Buyer
9. Where sourcing intermediaries are involved, the group to the transaction to
be implied in similar mode:
10. (a)Supplier
11. (b)Sourcing intermediaries (one or many)
12. (c)Seller/ Buyer (middle person in control of the whole deal)
13. (d)Sourcing Intermediaries (one or many)
14. (e)End buyers
15. If a ‘Mandate holder’ has disclosed his principal or produced a written
mandate ship issued by his claimed principal, and if such a mandate ship has
been authenticated as being genuine, the following group will eventuate. Mandate
ship of a disclosed principal paying for and accepting goods purchased or;
Mandate ship of a supplier in possession of goods and not another intermediary.
16. (a)Supplier
17. (b)Suppliers Mandate holder (or Procurement agent of disclosed Principal )
18. (c)Sourcing intermediaries (one or many)
19. (d)Seller/ Buyer(Middle Person in control or the whole deal)
20. (e)Sourcing Intermediaries (one or many)
21. (f)End Buyer’s mandate holder (or Procurement agent of disclosed Principal )
22. (g)End buyers
23. The ‘middle person’ who leads a trading group of ‘sourcing intermediaries’
and or mandate holders is also referred to as a primary principal.
24. A ‘seller’ is not the same thing as a ‘supplier’ and an ‘end buyer’ is not
the same as a ‘Buyer’.
25. For the purpose of these rules a primary principal is different from the
other principal entities, in that the primary principal shall only be able to
proceed in a transaction as a person holding and transferring title or leading
delivery documents of the goods without ever taking actual or physical
‘possession’ of the goods.
26. A ‘sourcing intermediary’ is not a primary principal or a
‘primary intermediary’. Sourcing intermediaries answer directly to the primary
intermediary (PI). The primary intermediary in turn answers to his primary
principal, the leading ‘middle person’ in a trading group, commonly referred to
in international trade as the ‘Buyer/Seller’. A person acting for the head of a
group is a “Principal of Agency.”
27. A Seller/Buyer shall also define a single person acting as a
‘Seller and Buyer’ at the same time in the position between a Supplier and
end Buyer and as per URPIB, shall also mean to define the activities as they
pertain to a ‘Primary Principal of Agency’.
28. Where the Seller/Buyer is advising his immediate primary intermediary, the
primary intermediary is responsible for advising all other intermediaries on
that side of transaction, in particular where language and cultural barriers may
need to be addressed in an effort to appease the end Buyer of the primary
principal’s contracting requirements.
29. There will only ever be a maximum of three primary principals involved in
any one deal. (1) The supplier. (2) The Buyer/Seller. (3) The end Buyer or
End User. All others involved in the same deal are defined as
‘Sourcing intermediaries’ in the collective form even where genuine mandate-ship
is held of a principal.
30. A ‘String contract’ is where many ‘Sourcing intermediaries’ are acting as a
collective ‘middle group’ or with a middle entity located between the principals
to the particular side of a transaction.
31. A Buyer/Seller is a single entity in a trade, in that both entities are
selling and buying is activated and conducted by the same entity within a
transaction. There cannot be an intermediate ‘Buyer’ and another intermediate
‘Seller’ acting as the single controlling entity in a string contract. A single
Buyer or Seller is trading on the premise that they are able to buy goods for
reselling and vice versa, which means that when entities claim to be able to do
this it infers that they are also a ‘Buyer/Seller’. A middle controlling
Buyer/Seller cannot transact on any deal where another Buyer/Seller is involved
but may occasionally use the option of an
IPG
( Intermediary Payment Guarantee )
in an attempt to cause the other Buyer/Seller or indeed any other intermediaries
to ‘Step back’.
32. The middle controlling Buyer/Seller must be in a position of strength as to
knowledge of international trade procedures.
33. A middle Buyer/Seller will never step back to another Buyer/Seller who makes
reference to LOI ,
RWA,
ICPO,
NCND ,
BCL,
POP,
PB,
MPA,
ASWP and other variants
no matter how infrequently they are referred to nor in which combination.
(Please see
Help page for these terms.)
34. An intermediary shall not entertain another intermediary who is using the
above flawed procedures.
35. A sourcing intermediary not prepared to take up the mantle of a controlling
middle Seller/Buyer without the protection and guidance of a middle controlling
trusted Seller/Buyer should not be trading.
36. A sourcing intermediary is treated with respect by the middle Buyer/Seller
who in turn guides the sourcing intermediary as to the way in which a deal
should be closed. This is done so that eventually the sourcing intermediary may
also learn the correct procedures to further enhance the whole trading group to
which they will eventually attach themselves.
37. Any middle controlling Buyer/Seller who is trading but not using his own
trusted intermediaries should not be considered a Buyer/Seller holding a
position built upon honorable intent. The exception to this is if a specific
reason is given as to why this trader does not allow intermediaries in a
transaction.
38. In the formation of a string contract there is a principal supplier, one or
more intermediaries leading to the Buyer/Seller and a principal end buyer with
one or more intermediaries leading to the controlling Buyer/Seller. In this
formation the Buyer/Seller, holds the ultimate position of strength and is the
controlling principal. The Buyer/Seller is well versed in procedures and has
chosen intermediaries who are similarly well informed and able to verify the
proficiency and good intent of the Buyer/Seller.
39. All informed URPIB Intermediaries shall trade using trademark rules of
delivery as defined by the owners International Chamber of Commerce,
(ICC) Paris, France as currently applicable under latest ‘Incoterms’ at any
given time in where any new incoming delivery rules becoming apparent, outgoing
incoterms
delivery rules may still be used as the intermediary slowly dissolves
the use of one application to favour the new incoming application.
40. Any person heading a deal amongst all intermediaries involved in such a deal
is specifically defined to hold the position of ‘Seller and Buyer’, within such
a group and hold position as a (Prima) Principal within the group.
41. Such trade procedures as per the Intermediary doctrine of trade created by
FTN exporting
42. Whether such a doctrine has been studied and applied fully or in part as
such with allowable or acceptable variations enacted.
43. Middle Buyer and Seller applying URPIB Rules of reference and who has
studied fully FTN exporting Doctrine shall not step back to anyone.
44. A Buyer/Seller is not entitled to or have obligation to guide or assist
anyone unless such is reasonably informed of basic procedures as per said
doctrine.
45. A Buyer / Seller shall attempt to trade on his own or where appropriate with
other trusted associated intermediaries who trust the Buyer/Seller implicitly
and who are able to endorse the buyer/seller accordingly.
46. All informed URPIB Intermediaries shall trade using trademark rules of
delivery as defined by the owners , International Chamber of Commerce ,
(ICC) Paris, France as currently applicable under latest
“UCP” banking
rules at any given time in where any new incoming Banking rules becoming
apparent, outgoing banking rules may still be used as the intermediary slowly
dissolves the use of one application to favour the new incoming application.
Banking rules as it applies to financial instrument issuance and collection
under current collection rules at any given time.
47. Financial instrument specific to at sight collection of documentary letters
of credit to exclude of all other forms of payment
Below we have listed two processes we hope would be of use to you, our
clients.
a. Commodity Transaction Process
b. Sample LOI on Buyer's Company Letterhead
COMMODITY TRANSACTION PROCESS
Warning:
We subscribe the following ICC measures with respect to Buyers and Sellers
conducting oil transactions:If an ICPO, LOI, RWA, or BCL is issued and the
document is not real,the Seller will be able to inform the FBI, ICC, and
INTERPOL. In addition, after an FCO is sent to the Buyer, there should be a
formal answer to the Seller from the Buyer. If there's no response from the Buyer
in a timely manner,
the is repeated by Sellers, they too will also be reported for
abuse of the NCNDA, LOI, ICPO, and RWA OR BCL: such action is a criminal
offence.
The international codes will be strictly enforced to exclude all
intruders that
send out false information. Those who submit a false NCNDA/IMFPA, LOI,
ICPO,
RWA or BCL, or FCO, as well as FALSE PROOF OF PRODUCT (POP), WILL
BE CHARGED
WITH A CRIME. This went into effect on November 15, 2008 after a
meeting was
held between the US Federal Reserve, European Central Bank, Interpol,
US Federal Bureau of Investigation and The US Central Intelligence
Agency.
Our business process for securing contractual transactions is as
follows.
Although secure in our procedures, mandate and the Sellers realise that some
slight variations need to be introduced by legitimate buyers to
accommodate
their needs and processes.
Step 1: Buyer sends a Letter of Intent (LOI) to the Seller's Mandate
address
Step 2: Seller produces a corporate offer to the Buyer with details for
the
commodity transaction.
Step 3: Buyer issues an Irrevocable Corporate Purchase Order (ICPO) or
other
proof of funds for amount specified in LOI.
Step 4: Upon receipt of the POF, the Seller will issue a draft contract
/ Full
Corporate Offer (FCO) to Buyer. The FCO will constitute the
authorization
documents to the Buyer as prescribed by the Buyer Mandate.
Step 5: Buyer and Seller exchange the signed contract (FCO) via
electronic mail,
which shall be deemed legally binding and enforceable. The contracts
are
registered in the Seller's and Buyer's banks within two (2) banking
days after their signing.
Step 6: The Buyer's bank issues as Bank Guarantee (BG) by Swift MT799
to
Seller's bank within two (2) days after both parties have signed the
contract.
Step 7: Seller / Seller's Bank issues Buyer / Buyer's Bank a partial
proof-of-product (POP) / Delivery Allocation, within two (2) banking
days upon
receipt of the Bank Guarantee and informs that the full POP is ready.
Step 8: Seller/Seller's Bank posts Non-Operative Performance Bond equal
to 2%
of the value of one (1) month of shipments or of the spot allocation,
totaling
of the Product at the contract price.
Step 9: The Buyer's Bank re-issues the BG by Swift MT760 to Seller's
Bank and
activates the Seller's Performance Bond. Seller's bank provides the
official
proof-of-product documents on a bank-to-bank basis to confirm
activation of POF.
Step 10: Buyer's Bank issues a Conditional MT103/23 (TT after SGS or
CIQ a
inspection at Buyer discharge port within 5 days).
Step 11: Repeat process for each subsequent lift in Purchase Order or
as
specified in successive LOI's / continue as per contracts.
Timing: Upon receipt of an LOI, we take the following steps,
unless this is a repeat customer and/or we know the Buyer:
- The LOI is first logged in and sent to our
research lead for review.
This review consists of running the key names (company, LOI signatory,
banking)
through our database to ensure that there are no issues with the LOI
itself.
We allow 24 hours for this review (if there are any issues, we double
check to
ensure we are correct in our assessment).
- If there are no issues, the LOI is then sent
electronically to the
Seller's Team for processing. If there are issues, we contact the
buyer's
representative/source and discuss our concerns with the goal of
resolving any
issues prior to proceeding to this step.
- The Seller's Team then must match the request
as stated in the LOI
with sourcing, product availability and pricing. We allow one week or
less
to process.
- Upon completion of the negotiations with the
chosen product source,
We receive the content for the SCO/FCO which is prepared under mandate
letterhead and sent to the appropriate buyer's representative/source.
We allow 24 hours (one business day) for preparation of the SCO/FCO.
We are a Consortium comprised of both a Seller's Team and a buyer's
Team together with the appropriate transaction intermediaries.
We look forward to working with you to successfully complete this
transaction.
Sincerely,
Seller's Principal Intermediary
Buyer's Principal Intermediary
BUYER'S COMPANY LETTERHEAD
SAMPLE
LOI
February 24, 2012
PI address
RE: Letter of Intent
Dear Mr.
We at _______________________________, with full legal corporate authority
and responsibility, are ready, willing, and able to enter into contract with
the seller, to buy a quantity of _________________________ Metric Tons/BBLs
with a monthly amount of ______________________ Metric Tons/BBLs for ________
months under the following terms and conditions, pending mutual agreement of a
final contract:
1. Product: (Name product specifically in technical business terms)
2. Specifications for Product: (Any particular specifications or content)
3. Quantity: (In terms of Metric Tons or BBLs monthly and whether spot or
contract to include time period of contract - number of months for delivery)
4. Origin: (Defined by Seller in contract, however if there is a special
request for origin, name it here)
5. Terms of Payment: (Specify Buyer Terms of Payment - i.e.,
NT-DLC; and/or Soft Probe)
6. Banking Information: (State bank of origin for payment and bank officer
representing this transaction)
7. Special Terms and Conditions as requested by the Buyer:
(These will be negotiated with the Seller)
We agree to the terms and conditions of the procedures for
securing contractual transactions as prescribed by the Seller
YOUR Business Analysis.
Executed this __________________________________.
Date
By: _____________________________
Printed Name and Title: Company Seal (optional)
Contact Phone:
Address:
____________________________________________________
1. Are there certain laws you have to follow in
International Global Trading?
The laws are UCP600, Incoterms delivery rules 2010 and the ICC Paris.
You want to make sure whatever you write and whatever documents you sign these
laws are mentioned.These laws are applicable to all trading countries in the
world including the US. Hence, If your payment instrument is a DLC then you
would want to state in your document that your financial instrument is a
Documentary Letter of Credit defined under UCP600 procedures. This prevents any
misunderstanding of the type of payment being offered. Also, this removes any
grief that could prevail without the UCP600 procedures.
2. What is a soft offer?
There is no such thing as a "SOFT OFFER". A "Quote/Offer" is a soft offer. A
quote need only to be confirmed. Once confirmed, a full offer is advised. Once
accepted the contract is advised.
3. Isn't the buyer with the money the most important thing
in securing an oil deal?
Not understanding why the supplier needs to be secured first can get an
intermediary in a lot of trouble.
If an end buyer issues a
DLC (Documentary Letter of Credit) to your account (the controlling
intermediary) under the impression that you have a supplier (because of quotes
you received from another intermediary seller) and the intermediary seller
really did not have a supplier then you can and will be charged on "fraud". The
end buyer went through an expense setting up the DLC and in return was defrauded
by you. It is without say, you are in a serious situation. So secure the
supplier first, find the buyer second. Once you get a quote from the person who
is in actual possession of the product (supplier) then seek the buyer.
4. Is there a difference in a "RFQ" (Request for Quote) from
an End Buyer to a Buyer/Seller as opposed to a "RFQ" from
the Buyer/Seller to the Supplier?
Yes, there is a difference between the End Buyers RFQ and the Buyer/Sellers RFQ.
The RFQ from the End Buyer to the Buyer/Seller is a request for a quote to buy
the product. The RFQ from the Buyer/Seller to the Supplier is a request for a
quote to sell the Supplier's product. This is why an intermediary cannot give
an "ICPO" to a supplier. The intermediary is not purchasing the product.
Only the person who is taking possession of the goods is purchasing the product.
The intermediary only takes possession of the Title not the product.
The intermediary deals in documents only not the product itself.
The "Quote from the Supplier is the first most important document.
Without a quote from a real supplier you have nothing to start a deal.
Supplier first, buyer 2nd. Here is a small example of a RFQ transaction:...
Your neighbor Joe has a sports car in his driveway for sale and you say to him
("Hey Joe how much do you want for your sports car; I think I know
someone who might want it.) You have just requested for quote from Joe to sell
the car, not to buy. Now you advertise that sports car and a potential buyer
asks, how much for the car?. The buyer is requesting in here for a quote to buy.
5. If I have secured a supplier should I ask for a mandateship?
No. A mandate to a supplier is an "agent" who acts on behalf of a disclosed
principal. A mandate is not just given to a person; (as implied so often).
It has to be earned, after a strong relationship has been built from many years
of dealing with a "principle supplier". The mandate agent can only act under
the instructions of their principle (supplier) who must disclose to end buyer
immediately when the offer is made to an end buyer; and in closing the deal,
the "mandate agent" would be paid a by the supplier is often the end result.
The mandate agent gets no commission from the buyer's side of the deal. A
mandate agent has to close many deals in order to get any reasonable
commission amount from the supplier. Many intermediaries claim mandateship
because they think being next to the supplier as a mandate agent is putting
them in a great position. This is incorrect. An intermediary in a chain deal
will make a great deal more money than a mandate agent. The best position in a
deal is the "controlling buyer/seller intermediary". The buyer/sell must know
procedures really well and act in the best interest of all parities on both
sides of the deal. Forget about becoming a mandate holder of a principal as
it is not a feasible position to hold if you are looking to make the big money.
Learn the proper procedures, rules and policies and become the legally defined
Buyer/seller.
6. What is really POP?
P.O.P as often seen on the Internet is basically Proof of Product.
Intermediaries cannot give POP if they have never even seen the goods; and even
if one goes to the supplier's country and looks at the goods he is going to
purchase, there is no guarantee that the goods he has seen, will not be sold to
someone else tomorrow. A Proof of Product ('POP') is often requested by buyers
or intermediaries who believe it will give them some guarantee of the existence
of the product and ability of the supplier to deliver. Many POPs produced are
fake. The POP offers no proof at all, because once a POP has been drafted, it
is automatically out of date. The product could have been sold to another buyer
and no longer exists. If an end Buyer were dealing with a supplier, anything can
be suggested especially in matters of POP. But no matter what the End buyer
demands, he will still need to produce the financial instrument to pay for the
goods before a supplier will even consider making any effort in getting goods
ready for delivery. When an end buyer asks a buyer/seller he needs a POP before
financial instrument is in place, he is really saying : Please tell me who your
disclosed principal is so I can circumvent you. POP really does not really give
any proof, but it will give the opportunity for circumvention.
7. What does NCND or NCNDA mean?
NCNDA stands for (Non Circumvention, Non Disclosure Agreement.) This document
is not worth the paper it is written on. If you have your name on this document
and get circumvented, do you have hundreds of thousands of dollars to pay to
take this through the international courts? This is a document that is very hard
to enforce. Only a misinformed or unskilled intermediary/broker would send you a
NCNDA.
8. Is the NCNDA any protection for an intermediary?
Not even close to protection. The NCND is totally useless piece of paper unless
the product is in your own country. Internationally, this documents floating
around the Internet is impossible to enforce in a court of law.
9. What does FPA, IFPA or IMFPA mean?
IMFPA stands for (Irrevocable Master Fee Protection Agreement.) The FPA
(Fee Protection Agreement) and NCND are usually attached to each other. FPA/NCND
is not the proper way to protect intermediary/broker's interests.
Beware if someone claims to be the Mandate, Supplier, End Buyer while at the same time
requesting FPA and NCND. A real mandate never fears circumvention as he is
protected by the one who extended the mandate to him. A real supplier and a real
End Buyer don't get commissions.
10. Does the MFPA (Masters Fee Protection Agreement) enforce
payment of commission?
The flawed document MFPA does not protect a commission payment. There are
documents under International Law that can protect your commission but the MFPA
is not one of them.
11. Please help me understand the real meaning of LOI and ICPO
LOI: This term is used out on the Internet by inexperienced traders as a
"Letter of Intent" which is incorrect. LOI mean "Letter of Indemnity."
Inexperience "intermediary seller" who is claiming to be the supplier will ask
for a "Letter of Intent" to purchase goods. You as an intermediary cannot give
a letter of intent to buy goods as your intentions are not to buy goods but to
sell the "Title" of the goods. So your letter of intent to buy goods would be a
lie. Giving a Letter of Intent only means "Yes I intend to buy the goods but I
can change my mind anytime. A letter of Intent is not a binding contract. The
Letter of Intent is a total waste of time on a worthless piece of paper. An
intermediary can only give to the supplier an "Offer" which is to SELL the Title
of the suppliers goods.
ICPO: This term means Irrevocable Corporate Purchase Offer. This term will not
work for the intermediary.
Only sometimes these flawed terms and documents will work between an end buyer
and a real supplier, but not work for the intermediary. An ICPO may work for
the end buyer and the supplier dealing with each other but not for an
intermediary.
An intermediary works with different applications.
Once again, intermediaries
cannot "irrevocably offer to purchase" the goods when not purchasing. They are
offering to sell the "Title" to the said goods, not purchase and take possession
of goods. If any intermediary offers you an ICPO you know they are
inexperienced or trying to scam you. Only the end buyer can offer
such a document.
The intermediary should first ask the supplier for a "RFQ" (Request for Quote)
not issue a (LOI). The next document is an "Offer" for you as a "buyer/seller
intermediary" to consider from the supplier ("Offer to Sell") Not (ICPO). This
is all that is needed (Quote, Offer). Not understanding the proper procedures
and documents for an intermediary one of two things will happen.
i. The deal will collapse, and/or
ii. You as an intermediary will be circumvented.
LEARN, STUDY and UNDERSTAND supplier. Not very often but sometimes, as anything
can be implied between end buyer and supplier. For the intermediary, these
terms and documents will NEVER work. In the International Trading business, the
only thing needed is a "Quote" "Offer" "Contract" "Payments" and "Delivery of
goods".
12. What does BCL mean?
This stands for Bank Comfort Letter. It is a letter provided by the buyer's bank
to confirm that the buyer has sufficient funds to carry out the transaction. The
intermediary can't give a BCL because intermediaries does not have the money in
their bank account. If you get a BLC from your end buyer and hand it over to the
supplier you have just lost the deal. They will deal directly with each other and
you are out. An intermediary cannot deal with a BCL. However it may apply to a
direct buyer doing business with an end Supplier on some occasion - but cannot
simply be applied when intermediaries such as Buyer/Seller are involved.
13. What does RWA mean?
RWA means (Ready Willing and Financially Able.) Like the BCL the same applies to
RWA. ("Look I have the money to buy"- IT DOES NOT MEAN I WILL BUY) If an
intermediary asks for a RWA or BCL from a Buyer and the Buyer gives a Genuine
RWA/BCL, then the intermediary has to continue with the deal which usually means
disclosing the supplier to the buyers side - and here is your problem -The
supplier is disclosed and the buyer changes his mind, then returns to the supplier
at a later time and circumvents everyone in the group. The buyer just saved himself
millions of dollars.
14. What does EXW stand for and mean?
EXW stands for "Ex-Work's and means The buyer pays for all costs of transport
from pickup at the suppliers premises. "e.g. EXW Clearwater Florida." This means
the supplier has sold off the warehouse floor and at warehouse prices.
The buyer makes the arrangements to have it picked up from the warehouse or
another place. (Wherever the supplier says the product will be. The Supplier or
Buyer/seller only have to provide the goods as per contract at a designated
place and nothing more. The contracted driver gives a pickup receipt to
supplier and it is this receipt that allows the supplier to collect on the DLC.
If the buyer/seller or supplier is going to deliver the goods to the dock, then
that's not ex works but FAS (free alongside ship) The price would now be higher.
15. What does FAS mean?
FAS means (Free Alongside Ship)) (The supplier pays costs only to the port of
loading). Loading and shipment are then the responsibility of the buyer. Also
means that once you have the goods on the docks on a designated date , then you
can collect on your DLC the moment the goods are placed ready near shore Crane
tackle for lifting on board ship- If the ship as ordered by the buyer is late-
That's the buyers problem-You get paid once delivery "FAS" has applied as per
Incoterms2010 delivery rules- However the supplier must clear the goods for
export. e.g. "FAS Port Canavera, Florida". Your custom receipt is presented to
your bank to apply collection on the DLC.
16. What does a DLC mean in the international trading business?
A Documentary Letter of Credit (DLC) is a type of financial instrument
used to pay for goods being ordered. The DLC has terms and conditions applied.
The end buyer issues a DLC to supplier and if all conditions are met the
supplier can obtain collection of funds. By default a DLC becomes an
irrevocable Letter of Credit.
17. What is the best form of DLC?
The best form of DLC issuance are confirmed and irrevocable. The CIDLC is
guaranteed by the issuing bank and not the buyer. In other words the bank is
saying to the supplier "we don't care what the end buyer says, you the seller
have met the condition of the CIDLC, we the bank will guarantee payment for the
goods ordered".
18. Should I as intermediary accept a revocable
letter of credit from the buyer for payment of goods?
The intermediary should not accept a Revocable Letter of Credit as it can be
modified or even canceled by the buyer without notice to the intermediary. The
payment instrument should be A Pre Advised "IRREVOCABLE" DLC. The operative
word here is "IRREVOCABLE". Once the conditions of the Pre Advise has been met
the DLC becomes active and the buyer cannot change his mind and cancel the DLC.
With a revocable DLC he can.
19. You have said in the past that a TDLC
(Transferable Documentary Letter of Credit)
can only be transferred once. If that is the case,
then if it is transferred to me from the end buyer.
How do I get to transfer it to the supplier?
Please explain the mechanics of this TDLC.
The end buyer applies for a "TDLC" to pay for purchased goods to you the
"controlling buyer/seller intermediary" as the beneficiary. The Transferable
Letter of Credit is not transferred to your account, it is issued as a
Transferable DLC by the end buyer's bank to your bank account. You being the
beneficiary of the TDLC can transfer the said amount of suppliers invoice to the
suppliers bank. This is one transfer. The balance of the TDLC is left in your
account as commission for you and the other intermediary who assisted you on
BOTH SIDES. Once it is transferred to the suppliers bank it cannot be
transferred again. One transfer only.
Note: The transferable DLC may be transferred to more than one supplier but can
only be transferred once. Hence, one supplier gets xx% of the TDLC and another
supplier gets yy% of the same TDLC but once transferred to the suppliers it
cannot be transferred again.
20. What does Swift MT 760 mean?
SWIFT (Society for Worldwide Interbank Financial Telecommunication) MT
(Message Type) and the numbers indicates one of the many standardized message
formats which comprise the SWIFT messaging system. These types of payment are
internal bank applications for transferring money- Intermediaries cannot use such
applications. When a bank issues an MT 760 it practically issues a payment
guarantee, on behalf of a customer, typically having first blocked the same amount
of funds in the customer's account. Impossible incorrect flawed applications.
Intermediaries can only use Non cumulative revolving UCP600 Bank issued Irrevocable
Documentary Letter of Credits (PA IDLC) when attempting to close a deal.
21. What does this mean? Branches of a bank in different
countries are considered to be separate banks.
Am I to understand that branches of a bank in the same country
are considered to be the same bank?
Branches of particular banks are able to perform different functions as perceived
by the UCP600 provided they are based in different countries. If a bank in
London England issues a Letter of Credit, its branch in Manchester England cannot
confirm it as they are both in the same county and therefore are considered to be
the same bank. If the same bank in London England issues a letter of credit and
its office in Dubai were requested to add its confirmation then this is acceptable
under UCP600 Article 3 (but not necessarily acceptable to the beneficiary) as the
branches are in different countries.
22. My buyer wants a sample first before he enters into
agreement with me. Should I send it to him?.
This could be very expensive and then he might change his mind.
The buyer is being very inventive. (suppliers hate this). The buyer may be
looking to reject the goods even if they perfectly match the shipped goods.
This can easily happen. Any sample given overrides any specs in the contracts.
In other words, if the goods arrive different even just a little from the
sample, the goods can be rejected at port. A buyer could create this problem to
get the goods at a lower price. Buyers know what they want. SGS does the
analytical inspection of the goods and advises exactly what is being shipped.
The safest way to go is No Samples.
23. I have been sent an out dated SGS certificate from
a company to prove to me that they have done business
in the oil industry before. Is there a way I can
check to see if this certificate is real?
To authenticate a SGS certificate you may contact SGS by
telephone (+41 22 739 91 11) or fax them the certificate to authenticate at
(+41 22 729 98 86). They also will offer to validate a certificate online .
It is impossible to forge a SGS certificate as the certificate number can be
checked with just a phone call. You can also email them through their
Information Request Page at
http://www.sgs.com/solution_finder/information_request.htm
24. I was told that the "Bank Performance Guarantee"
from the supplier was what activated the Letter of
Credit from the buyer. Is this correct?
Also when the Letter of Credit is activated does this
mean it has turned into actual money?
NO, a Performance Guarantee does not activate the L/C and NO, activation of
the L/C does not mean money.
A Bank Performance Guarantee is issued in the form of a Stand by
Letter of Credit defined by and subject to the rules of ISP98
(International Standby Practice) by the suppliers bank as a guarantee of
delivery to the buyers bank. This is a complete separate entity to the
Pre Advised Documentary Letter of Credit.
The Pre Advised Transferable Documentary Letter of Credit is issued by a
prime Top World Bank Per UCP600 banking laws by the buyer for purchase of goods
and is activated only when the Pre Advise conditions are met. The conditions in
the Pre Advise L/C is not the Performance Guarantee.
Activation of a letter of credit is not money in the suppliers bank account.
Activation of the L/C means the buyer who issued the L/C cannot change his mind
and void the Letter of Credit unless fraud is proven. The active Letter of
Credit turns into money only when the delivery documents are presented to the
bank and the end buyer.
The L/C is always issued first by the buyer and the Bank Performance Guarantee
is issued by the supplier second.
Note: Sometimes instead of a Bank Guarantee the supplier offers a
"LDD" (Late Delivery Discount) applied as a credit of XX% to favor of the end
buyer on the Sellers invoice if delivery fails to be made on time. The buyer
sometimes sees the "LDD" as the favorable choice of delivery guarantee as the
% value offered on the LDD is higher than the % value of the SLC.
25. The supplier offered us a 2% Performance Bond for the guarantee of the
delivery of the good. My question is: What is the difference between
a Performance Bond and a Performance Guarantee?
The Performance Bond (PB) is a guarantee that follows the goods to the
destination port in where if the goods can be rejected for good reason, then
applying on the collection of P.B supported by a B.G. Both the Performance
Guarantee and the Performance bond are "based" on performance yet both are
different types of performance assurance. A Performance Bond is for a deal that
works for the supplier in possession of goods and an end buyer taking possession
of goods. The delivery of title documents cannot be secured so an intermediary is
not to enter in such deals. A Performance Guarantee is a guarantee given by the
seller's bank to the buyers bank in the form of an unconditional Stand-By letter
of Credit. If the delivery fails and the delivery documents are not presented to
the bank on the date specified in the contract, the bank just automatically pays
buyer bank the Performance Guarantee unconditionally, No questions asked.
So the Intermediary must ask the seller to issue a Performance Guarantee (PG)
of 2% (Not a Performance Bond) of the total cost as defined in contract, issued
as unconditional as per Stand-by Letter of Credit procedures defined under UCP600
banking rules, issued within 3 days of buyers L/C being transferred.
26. If the end buyer collects on the "2% PG" (Performance Guaran
tee) for non-delivery of goods, how does the intermediary who is
controlling the deal gets compensated for his time and effort?
You as the buyer/seller (controlling intermediary) offer to the end buyer a
lesser value to what you obtained from the supplier or you offer no "P.G." to
the end buyer even though you still get the "P.G." from the supplier.
27. Does the supplier or the end buyer order the vessel to
deliver the purchased goods?
In a FOB deal the End Buyer order/charters the vessel. In a CIF or CFR deal the
Supplier secures the vessel. Even though the vessel is ordered by the supplier,
the buyer is still responsible for the cost of vessel which is on the supplier's
invoice.
28. If one sees the "CIF ASWP" why would you
suspect it to be a scam?
CIF ASWP stands for Cost Insurance and Freight to Any Safe World Port.
This is a flawed term which does NOT exist in the real market. The CIF part of
the term is correct, the ASWP is wrong. There is a simple logic behind this.
The shipment cost cannot be the same to ANY World's Port! For example the
CIF (Cost Insurance and Freight) price to ship sugar from Brazil to China would
be double compared to if it was shipped to South Africa. This could make it
over half a million dollars price difference. No buyer would be willing to pay
extra just to get an "easily" quoted CIF ASWP price.
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