BAD AND GOOD TERMS OF TRADE 

SUPPLIER AND END BUYERS ADVICE WORLD WIDE

FTNX INTERNATIONAL TRADE EDUCATION

Last Updated:Sept 20, 2019


ICPO

IRREVOCABLE CORPORATE PURCHASE ORDER: This is not an international trade term and should not be used. Often  seen used by ill informed Traders.  Appropriately used often in USA as a localised or interstate business  practice. A Professional Commodity Trader (PCT) signing an ICPO  in the same USA State as a  USA supplier who fails to perform  locally or interstate go could find  them selves in serious legal hot waste due to the terms ’irrevocable.’ ICPO is used to describe business  of Interpol  ( International Criminal Police Organisation)


BROKER

Person acting on behalf a disclosed principal is a broker. I.e: working for an insurance company,  Brokerage firm..etc..etc.


INTERMEDIARY

An (ill informed) intermediary in general  is neither an Agent, Broker or Principal. Such is a person  undisciplined  in commercial practices who acts as a third party in a three  party deal in where a reward or commission is offered to person who surrenders vital information to a principal or others in return for a payment. An opportunistic person, attempting  to secure a commission  in an ‘ad hoc’  manner. An ‘informed’ Intermediary who later turns ’professional’ after time spent in study and practices is define as am independent  ‘Buyer’ or ‘Seller.’ In International trade business there is no scope for ill informed intermediaries to exist let alone trade effectively. 


MT799

A  device generated ‘Message Text’ (MT)  were the open aspect of such, allows one bank using Internal secure means; to send a message to the another participating bank world wide.  MT 799 Is not a  text related to the issuance of a DLC, ( and yet we see this mistake the most often)   but  merely an ‘advice’  being served from one bank to another. I.e:  a ‘Bank Comfort Letter’ is  being electronically   advised stating that the Buyer is RWA to the bank of the Supplier. It does not mean that the Buyer will ‘buy’ anything, nor does it binds the buyer to perform. BCL cannot be used or issued  by the PCT as we are traders not end users of the products we buy and later sell. 


LOI

In international trade business ‘LOI’ stands for ‘Letter of Indemnity’ and   not ‘letter of intent.’ The LOI serves  no value in this business.


ASWP

ANY SAFE WORLD PORT: Incoterms  requires  that the name port  of destination must be indicated so that an accurate assessment of carriage rate can be served. Offers carrying ASWP  may also indicate that the goods have been ‘marked up’ dramatically as well. What is indicated when such a term is applied  is that the trader is ill informed. Import Customs will not tolerate such aspect either. World scale rates are use when assessing freight values.


PROOF OF PRODUCT (POP)

When a document  is produced purporting to indicate  a previous  sale, it’s usually served to  try and convince a buyer that the ‘goods are real.’ The the  only  indication that must be drawn from such a presentation is that an ill formed trader is making the approach and offering such ‘proof’,  when in fact, no proof is apparent, may be immediately  assumed. This kind  ‘proof’ is treated as rubbish  and must never be accepted as evidence in any form. Product  is proven once loaded- to its quality.Evidence of the ‘supplier able to verify the sellers goods’  is served accordingly if such is offered on contract only.


THIRTY (30%) DEPOSIT

No funds must ever be presented up front in any form whatsoever under any circumstances of a legitimate first run deal being sealed. If anyone asks for any money upfront, being it a deposit, fees,  charges or the likes; RF the deal immediately. Having said  that Chinese ‘Traders’ will often ask for a deposit up front; but after a first challenge after serving the trader a quick lesson on acceptable safe procedures,  they soon come to understand that their requests is one that a scam artist would make. Legal  Frustration whee a buyer has shifted the deal so far on each demand made, in where a third offer has been produced, the offer may accompany a demand  for a  performance deposit, is the time such a deposit may be sought.  The type of deposit that will stop another offer being issued  in where  if the buyer fails to enact on the deals the deposit is forfeited.

 

BANKS  AND THE CONTRACT

‘Please advise contract to our bank’ means’ a Rubbish fodder (RF) deal in apparent. Banks have no part is matter of the contract. Banks deal in finance not products. This is a  major rule under universally applied UCP 600 Banking rules. Suppliers must always beware of such a request from a  person calling themselves ’ buyer’


SLC 

Buyer beware! A SLC is never used to pay for goods and a deal is dropped is this payment instrument is sought. An SLC can be transferred  many times or not  transferable  at all, depending on the rules supporting its issuance. An SLC is ideal for using in support of a P.G or when paying rebates, fees and commissions. A DLC is a conditional instrument meaning that certain conditions must be met before collection can apply. This make the DLC  a deferred payment application. An SLC however bears an unconditional aspect where the production of a drivers license proving I.D may be all that is required to initiate collection– instantly. 


PERFORMANCE GUARANTEE (PG)

The buyer must alway must  issue the financial instrument  to pay for goods first. The supplier counters this act with  the issuance  of a SLC in support of a performance guarantee–when such a P.G is offered. This aspect  MUST never be applied the other way, useless  one is keen to lose their money  and the deal. We won’t elaborate more on this part  in case scam artist are reading this site. A supplier must  never offer a P.G first on the lure of a lucrative deal, is our clear advice. The P.G is only forfeited  if the supplier through his fault failed to have goods at port to enact delivery on time. The term ‘BOND’ is an ugly  term and should not be used. .


OFFER (LETTER OF OFFER)

The main stay of any international trade transaction is the well defined offer.Unless stated differently on the offer itself , in International trade  the offer once signed  is accepted as legally binding. From the supplier its called an offer, from the  end buyer or PCT it’s an  ‘Offer to Procure.’  The offer is the bedrock as such supports the whole deals’ and  destroys deal if presented ambiguously. An offer is presented in an expressed formatted pointed letter style using Georgia, Times or Arial fonts.The is legal contract without an offer  first being signed as accepted.


QUOTATION 

A quote is ‘confirmed’ rather than accepted and has no legally binding spect like that of the offer.A quote is a good document to service as the deal can be tested with a supplier or end buyer long before a deal moves into ‘deeper waters.’ 


R.W.A

‘Ready Willing and Financially Able’ is a Bona fide trading aspect .The buyer must have funds secured prior to placing an order rather  than before considering to place  order. The supplier must have finances  in place to export goods being sold. Just like a PCT the buyer must open a bank account to handle the DLC aspect of business ; but if a buyer is looking to  finance an export deal, then the loan application  has nothing to do with the underlying import contract itself. When the end buyer has  become RWA it means that the PCT has received the required DLC to pay for goods; until, this happens no RWA is apparent as per the perspective of the PCT.


SUPPLIER 

FTN EXPORTING definition for  purpose of clarity and study. Entity who has  ‘as owner possession of export ready goods and the property in them ‘ who makes the offer.


END BUYER 

FTN EXPORTING definition for  purpose of clarity and study. Entity who   ‘a buyer paying for and taking possession of imported  goods and the property in them.’


PCT

FTN EXPORTING definition for  purpose of clarity and study as it applies to the emerging industry it  has created. Professional  Commodity Trader (PCT) is neither intermediary , broker agent  supplier or end buyer, but a highly informed , experienced,  disciplined, and educated  professional ‘Buyer  or Seller’ of commodities  at any given time  who are also specialised at what they do ; who has developed a skill set  to flip over a contract from once side to another using a legal and lawful application to do so  under a set of  standards, rules and laws. A person undertaking the principles of leverage and arbitrage. A PCT instigates the deal thus cannot be deemed to be an  ‘Ad Hoc’ intermediary nor an ISS member.A PCT is therefore ta ‘first party trader ‘ and principal in their own right.


LIEN (Caveat)

A right to keep possession of property belonging to another person until a debt owed by that person is discharged. Usually an unseen aspect found in ‘many places’ when applied in International trade matters, in particular to  (carrier)  rights to sell goods for unpaid freight. In 2018 a new aspect has become apparent in that a lien should not be  relied upon the applied against goods which at  one moment are apparent  in where  when such  goods  once  used, destroys the lien attached. A  lien thus should not be deemed to  stand on the same platform  like other  types of  offered security or collateral. 

 

AT SIGHT

Terms used by the issuing  bank of the end buyer to ‘visually  sight’  delivery document before payment is released to the seller or supplier  in where any anomalies can stop payment until the issue(s)  is resolved  or;  a waiver from the end buyer is provided to the bank  as indemnity against legal action. Only matters applied  on the terms and conditions on the DLC  and not contract  are checked ‘at sight ‘ and affirmed based on a  set of protocols and rules that must apply before collection process may proceed.  i.e: A  Charter Party BOL is presented where under UCP rules the bank of the buyer can only accept the more secure and costly  Shipowners BOL etc..etc..In where the credit terms require a PSI certificate to be issued by SGS in where a BOV Certificate is provided instead will require a waiver from the buyer before payment can be made.Many such aspects  must be apparent;  is the added security feature  using UCP IDLC. When  a document does not  comply or has been altered  it is said not to be presented in an ‘unclean’  state. Waiver as best avoided at all times as waiver ‘opens the door’  for the buyer to make added demands in contrary to the contract basis.   


DELIVERY 

The delivery of original  documents and not the physical goods   when presented cleanly activates collection process. Even at DAP Incoterms; and  even though delivery of goods must apply to an  agreed place, often at buyers factory in another country, the documents  supporting such are still required to be presented in a ‘Clean’ stated before collection process  may  apply. In FOB, CFR or CIF, once the goods clear the ships rails  in good condition port of loading the risk passes to the end buyer who now owns the goods.  Again we have seen many stupidly inspired  interpretations of the delivery aspect. The  supplier  wants to be paid before  the goods being sold  no longer belong to him. How clear is that? No supplier in their right mind will allow  a DLC or payment  to be lodged  after the goods have arrived at destination port. It’s just commonsense., regardless of the  payment method used. To do so means the end buyer can obtain the goods and the supplier never paid. There is not even a claim for payment, if the end buyer takes the goods and coverts it to another product, before payment is collected.    


CIP AND FCA

‘Carriage and Insurance Paid’ (CIP) and ‘Free Carrier’ (FCA) are used for FCL (Full Container Loads) sales  and not FOB, CFR or CIF. Light product needing volume to initiate good weight  often use 40 FT FCL.Dense material often use a 20FT FCL .Both containers have weight limits imposed on them in where all because one can sell  20 MT of I.e: Copper Cathodes via a 20FT FCL . The will not be able to fill a 40FT FCL with 40 MT of Copper. All Containers have their TARE weight  and the maximum net weight printed  on the door.This does not infer that ALL Port will however accept such weight. The supplier and end buyer need to be informed about such matters before contract  are sealed  


FCL

Full Container Loads; come it all kind of sizes to include cradles and freezers (Reefers) and in where bladders are used for  bulk liquids, and ‘Hot Tainers’ with heaters for bitumen. 20 foot and 40 foot lengths  are more common lengths. 40 Ft  Containers are often  used when product carry volume but are light i.e: bales  of wool, novelty items , mixed products.


CFS

CONTAINER FREIGHT STATION :Area near or along side Port of loading or unloading  inside customs  control.  One set of charges apply from factory to CFS, and a charge for  lifting and un-lifting  to and from ship, and another charge for storing, moving around, at CFS via place of loading and unloading, deceptively  makes up the full freight and delivery  cost  component, even though most charge only refer to the ocean going component. Added costs pertaining to  matters of Quarantine, Currency fluctuations, and late returns of empty container to CFS  storage depot may also apply to produce a vey large  total cost of final delivery. 


CIF  DRAW BACK

Lots of  confusion applies to such matters often seen on speculative trading boards or industry advice  in where if such boards or advice explained their processes they use   better more investors  would be secured.   CIF Rotterdam, CIF EU,  CIF  Laverna.. etc. means to  to define that the goods ordered are delivered to named destination ports., where the end buyer arranges freight to destination.The Buyer is not receiving a CIF quote to final destination, but is being advised that the  freight component  in getting  the goods to the named pickup port, will still need to be paid , when the buyer picks up such good from such named  ports/places. i.e: Freight component from Russian Port to Laverna, Italy. The freight component from Russian port to Laverna is still payable , even though  the goods are offered at FOB Laverna. 

 

LAY CAN

All major ports have berthing schedules  where booked  vessels are expected to arrive at a designated berthing time, where the ship can either  unload or take on loads.  If the buyer fails to   have goods ready to load when Lay can is taken, the supplier loses its P.G . 


NBC 

NON BREAK CARGO: The rule here is one whole bulk carrier shipment , one BOL applies, as delivered to one port to one buyer, whereas 50 FCL , 50  different buyers and 50 sets of BOL’s are served to many buyers at the same POD (Port of Destination) 

 

DEMURRAGE 

A charge payable to the owner of a chartered ship on failure to load or discharge the ship within the time agreed. Thus the ship has missed lay can  and needs to ‘park offshore’ until next berthing the is secured will also need to pay cost of such delays accordingly. 


BANK GUARANTEE 

Another misunderstood concept:  A buyer states that they want to buy a product using a ‘Bank Guarantee’ in where  no payment can be collected  until  the goods arrive at destination as per CIF. The buyer is not understanding  that  if a seller is unable to obtain his money owning when goods are loaded on board a ship port of loading, then it’s not longer (a) a CIF transaction but a ICC  DAP Incoterms  delivery mode and not CIF and that (b) Interest is also applied on to the agreed payment value  as a premium and (c)  a Guarantee in the form of a SLC should not be used for  such a transaction.  A Bank guarantee as advised by  a bank in another country  is a risky proposition  and should never be considered  as payment because laws and rules retaining to this kind of Guarantee apply localised banking rules and laws.  The correct credit is a  DLC  for delivery as DAP Incoterms. This one aspect   assures that once the required delivery documents   are presented, the supplier is guaranteed payment under the DLC once 30 days after delivery has completed.We have seen entities who should have known better seek such B.G. A Bank guarantee must not be used for payment of of goods. 


DEFERRED PAYMENTS D/P  

As for deferred payment,  a Negotiating and Confirmed DLC must be secured and interest  be calculated in the offer price. Here the supplier bank if accepted, will discount the value of the DLC and pay the supplier accordingly then collect on the  whole DLC value later when  bank seeks reimbursement.  But the end buyer has to pay a higher rate if the seller is not going to collect on documents at a later date (D/A)  or collects on such but defers collection. The Buyer is using the sellers ‘money’ to do business– hence such deals attract higher sell prices. 


TRANSHIPMENTS 

A barge or an other  vessel  loading a mother ship offshore  will produce a trans-shipped BOL , which is not allowed to be used under ta UCP DLC application is another security feature of using a DLC.


POOP: PERPETUAL OFFER ORBITING THE PLANET 

This issue remains in place. In 2019 we are still  receiving inquiries for goods offered 12 months earlier as submitted by ill informed others.  So a genuine  offer once released even though long expired or sold  can  and will often travel around the world many times due to  ill informed  intermediaries trading in such documents. This matter makes the work of legitimate PCT traders even  more difficult.


VALIDITY  DATE 

This is an important date. If an offer is not returned on time, the basis of the original  offer may change is a second offer is sought.   


SCAM ARTISTS 

While national news stories sensationalise such matters, In fact ‘scam artists’ have been around long before  FTNX started in this business in 1988  when using a facsimile. Most scam artist use a non ISP services email address is a common feature.The other is the use of in particular platforms such as ‘Facebook’ in where scam artists conduct business openly to prey upon gullible victims. Scams involving romance, SLC financial instruments, drug trafficking, money laundering, compassionate requests for money, fake product..etc..etc..are common. In the commodity trading  business as advised  in the FTNX  Doctrine of Trade, such matters are not an issue and easily discovered, if one follows its advice.  An internet  study offered in primary schools  would reduce  the ability of scam artist greatly. The Internet is a dangerous place, more so if one is naive. It’s not so dangerous when  natters of due diligence are always apparent.  


ORTHODOX TRADING ROUTINE 

Quote, Offer, Contract, DLC, P.G, Delivery , Collection, Next Delivery. Any strange requests of improper aspect  or variants offered are dismissed. This is the basic formal and formidable safe trading aspect applying to any  straight forward  commodity  transaction. Any demand for upfront payments, or mention of  incorrect  terms of reference seen herein, the nature of business is dismissed. 


P.O.P

The term ‘Proof of Product’  when asked for is a another  improper term. If an  end buyer does not  go, under an invitation, to meet the supplier and discuss business and sight goods in suppliers country, no such POP is possible until goods arrive at destination port.  But even if an end buyer went to such a meeting it  could lose the right to reject  goods when they arrive at destination port, because end buyer   has already seen and accepted the goods,’ when visiting the supplier. (Legal maxim: Caveat Emptor: Buyer Beware) This is why third party independent inspector are important. An End buyer sighting such  goods, cannot possibly know what the inherited properties are ‘just by looking.’ Independent inspector however can, by conducting tests only ON THE GOODS  being sold, and not as per goods sold to someone else previously as specified on some other buyers  report.  How it applies to the end buyer so does it apply when a  PCT is offering goods. There is not valid issue  nor  valid evidence  that the goods sighted at port of loading will be the same quality of goods that will arrive. Independent experts must attest to goods at port of loading. The PCT still has discretion to service evidence of  his ‘supplier’ , even  after the DLC has been accepted, because the PCT is the ‘Seller’ under the law and is not required to provide such evidence; evidence for goods that the end buyer could not secure  ( otherwise why use the services of the PCT) nor secure at the price offered by a PCT.  


 DLC

The use of  a DOCUMENTARY LETTER OF CREDIT (DLC) as endorsed under UCP rules as administered by the ICC Paris, France, is the safest payment advice one can use, because it comes with a whole lot of  conditions. that must be satisfied first. This is a why a SLC MUST never be used to pay for such goods as a SLC has no or very little conditions  to apply collection on such payment instruments. An end buyer  who cannot open a DLC, is deemed as not being an end buyer at all. A DLC is opened as ‘irrevocable’  meaning  that the issuing bank will honour payments on behalf of it’s customer, the end buyer, even if the end buyer protests. Because there is a long period of time between issuance and collection, if the required  transport documents are not produced, or  do not comply, no payment can be collected. Furthermore if it is found that fraudulent dealing are apparent , this is the one act that can cause the irrevocable status of a credit  to become revocable  instantly. When a contracting period is 60 days, any fraudulent dealing would be soon discovered in the course of the transactional basis.    We have seen may stupidly ill informed payment methods and excuses therein. As far as the PCT is concerned it cannot accept any other payment instrument  but an IDLC carrying an ‘at sight’ collection process. 


FAKE DEALS

If you have studied the FTNX doctrine, you are an informed PCT and a private commodity trader. One who is trading on documents and is not in possession of goods being sold is a Informed PCT. A PCT must not  deal with anyone applying as a routine in part or combined - improper trading terms such a ‘POP, ICPO, LOI, ASWP, SLC, BCL, RWA. To do as much may mean you are dealing with ill informed entities and fake deals. A company may deal in any way they like, we cannot stop people acting foolishly,  but an informed specialist private trader such as a PCT may not entertain or trade in such a manner.

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