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From: 1 August 2022



Acronyms are not defined as the advice offered is only  suitable for use  by informed USCT members / ITSI practitioners who have studied our doctrine 

The PCT can only act on two fronts. To act in the position of an  intermediary or broker  when it comes to international trade and related industry of agency is not a viable option for the novice inexperienced PCT, as confronting scammers in the market place and circumvention is an assured aspect of acting in such a position, should the intermediary actually initiate a live deal between two principals. The trade intermediary must revert to the position of  either ‘acting for an undisclosed principal’  or ‘acting on behalf of a disclosed principal.’ The latter is a viable option only for very experienced PCT’s which could be taken up  anytime while trading in the former said undisclosed position. The former position also serves the PCT intently as legal matters of trade  are often heard in a federal court, whereas  in the latter  position  the country where the principal is located, often serves jurisdiction on legal matters to do with commission payments or lack thereof–as it applies to an agent or broker acting for a disclosed principal. 

e.g: FTNX offers the following goods on behalf of a disclosed principal  CEO John Smith C/o “Exxon Corporation” Nigeria.

e.g: FTNX offers the following goods  as seller.

One position is disclosing the principal, meaning that the intermediary is looking to earn commission on information held, rather than when the deal is closed. The principal cannot be another string trader, but the actual supplier and owner of the goods ( which most often they are not). The Intermediary is wasting its time trading as a sourcing intermediary.This is the easiest aspect to try by those who are ill informed, as no serious deals will even becomes apparent, the SI has no responsibilities and as such, neither will any commission payment be secured, because not deal will closes under such a premise-even though actors trading in such a position  believe otherwise.

In the undisclosed position. The seller ( the PCT) has to be a highly informed trader to orchestrate such a deal and cannot reply on its principal to oversee the deal. The PCT cannot be circumvented  and commissions/profits are assured once the deal is closed. If a PCT is not educated and has not gained any trading experience; this position cannot be effectively tried. The PCT acts as a SI, then once goods are sourced  it acts as the buyer to the supplier .The PCT then sells such goods to its sourced client , the end buyer. In this light, the SI acting as an ill informed intermediary has very little protection for the law. This aspect changes dramatically once a PCT is trading as a Seller/Buyer, as do criminal and legal consequences attached to such a position.This now adds further to the premise that the Intermediary must becomes a informed Buyer/Seller who clearly understands how to trade in safe waters. 

When a PCT acts for a disclosed principal as their appointed or authorised  agent or broker ( whether local or internationally)  customary standing rules and understandings as developed over a very long time exist as a matter of routine–worldwide. The  PCT must be  academically  informed ( which our doctrine serves intently) and have good experience in the international arena before a principal exporter or supplier will allow such a person to seek orders on its behalf.The agent acting for the named principal receives a commission on every new customer serviced by the principal. The principal  being the supplier, pays for all expenses associated  with the deal even the DLC transfer fee, if the agreement between the supplier and his agent stipulate as much. This single attribute  serves confidence to the PCT in as much that it has to disclose who his supplier to potential end buyers; but in where the PCT is allowed to secure payment and transfer  the sell price to the his principals leaving behind a disclosed  payment of commission  for the benefit of the PCT as rightfully earned. If the financial instrument is to go directly to the disclosed supplier, then the PCT has to rely on the integrity and honourable intent of the supplier, that  the agreed upon commission payment will be paid  for each new client secured by the agent. But this aspect of acting as an agent for a disclosed principal leaves open the idea that the PCT  may work very hard,  for years,  disclosing who his supplier is resulting in many such  buyers  going  directly  to the disclosed supplier, without mentioning the involvement of the tenured agent. This act is common and cannot be effectively applied where the PCT  is in one country and the supplier is in another–may be assumed. However when the supplier is in the same country or even better, in the same state as the PCT, the viability of acting for such a principal increases proportionally, more so if the PCT is allowed to secure a transferable financial instrument, or is allow to advise on the deal  after contract is  signed  by the principals. To take legal action locally for matters to do with circumvention is a simpler affair if evidence held in the hand of the jilted PCT can readily prove that circumvention or failure  to pay rightfully earned commission has taken place. In the position of agent or broker acting for a disclosed principal, in house policies usually also apply,as such denying the agent the use of standing international rules.

When a PCT acts on behalf  of an undisclosed principal, the PCT is claiming to end buyers it is testing, that is has secured a contract or an offer, and is able to buy export ready goods and that the PCT does not wish to disclose who his supplier is at this stage of the deal – or not at all. In this aspect the PCT must now ‘sell’ the secured goods to the potential end buyer as a  legally defined seller. This is the best legal aspect for the informed PCT to trade in commodities  safely without the fear of being circumvented. Being that the PCT come seller, has now become a principal,  it also has to bear all liabilities and consequences of the deal and pay all  fees as prescribed under certain rules pertaining to delivery (Current  ICC incoterms) and  fees to do with issuance of a financial instrument (As per current  ICC UCP/URC banking rules ). A PCT claiming on documents their seller or buyer status  will be subject to the same laws and rules as it applies to a supplier or end buyer.  

This means the seller can now apply the same rules of trade as other principals the PCT is dealing with–ought to be also using ( which is not always the case). The PCT acting in this position must also personally pay commission to those who assist him with the closing of a deal. The PCT is the seller to the end buyer  on one side and the buyer to the supplier on then other side. The seller issues the offer and contract to the end buyer and secures the financial instrument and all association fees of issuance,  as the PCT must in the first instance seek the safety of securing a transferable type of financial  instrument. An assignment of the instrument is not allowed nor are any other forms of payment  other than an  ICC endorsed DLC, may be considered. This aspect alone ensures the strictest safest transaction becomes apparent not only for the PCT but  the end buyer ( and supplier) it is dealing with. Lastly, the PCT must always secure supply from a supplier in possession of export ready goods first, then approach potential end buyers. To seek a buyer first offering such products not secured prior in writing is a fraudulent act. A PCT seeking finds for the end buyer for goods not secured prior, is a criminal offence, once ‘funds’ change hands. This aspect is a proven aspect; experienced PCT’s understand how difficult it has become securing a supplier prior, even in the best of times; having funds secured first does not make this aspect  easier. 

In  Summary

  • A PCT  must learn to act as a Buyer/Seller by learning all matters of the FTNX  doctrine intently.
  • This aspect allows the PCT to become academically informed about the nature of business it is applying and practising.The PCT becomes an ITS.
  • All documents must issued by the PCT to an end buyer or supplier  indicating what rules are applied to the trade being conducted. Even while a pandemic and war rages, strict safe procedures more than ever before must be applied.
  • All fees and charges being paid by the end buyer to the seller, must not be sought from the supply side when the PCT is acting as the buyer; to do so could serve to indicate a dishonourable act which could jeopardise a legitimate deal.Fees either are sought from the supply side our end buyer side; the latter being the more practical  aspect.
  • In the first instance as agreed upon on the offer the seller seeks all fees and charges to do with the issuance of the financial instrument from the end buyer side.
  • The PCT must state on its offer to the end buyer side that the seller (PCT)  is acting on behalf of an undisclosed principal ( the un-named  supplier) 
  • The supplier  may be named at the discretion for the seller as a matter of contract if this option is served in where such disclosure can only be released after payment for goods has been secured first.
  • If the PCT decides to also seek agency ( to act of a disclosed principal); an agency agreement must be signed stating in house policies, processes and procedure as well as commission rates
  • To secure agency  does not allow  the PCT to  act in an adverse manner in  contrary to the doctrine .The PCT must inform its principal when unsafe or undesirable  practices are apparent.The principal make the final decision on such matters.  
  • The  end buyer is advising the financial instrument  to the seller  who is ‘not the beneficiary’ of such funds. The beneficiary of the ultimate financial instrument is the supplier in possession of goods offered to the PCT.
  • Where  a certain rule used  needs to be set aside, where no unsafe practices are apparent, then such aspects is allowed on the condition that the parties to the contract has agreed upon a different situation.
  • There is no other safe method for an intermediary come informed commodity  trader to trade in the market place. If the PCT does not act as a buyer /seller the matter of circumvention shall always remain apparent
  • There is a lot to know about this business.The FTNX doctrine  must be understood  to a reasonable level before the PCT enters the market place.