Supplier/Title Holder expects full transparency from potential End Buyers.
Transparency and credibility can be proved by documents provided for the End Buyer at the very beginning.
These documents can be easily verified and can prove that our Supplier holds the title to all offered products, export licenses and other necessary documents.
This means that throughout the process both End Buyer and Supplier are obtaining more credible information about each other.
1.SUPPLIER’S/TITLE HOLDER’S DOCUMENTS
1.1. Quote (Q)/Offer(O)/Offer To Supply (OTS).
This document is issued by the Supplier as an acknowledgement of the End Buyer’s Request For Quotation (RFQ) and confirmation and acceptance of the specifics in the procedure.
After receipt of the Offer To Supply (OTS), the End Buyer issues an Offer To Purchase (OTP) as binding document between the Supplier and End Buyer.
Some Suppliers, directly uses the SPA/Contract after the order is RFQ.
1.2. Proof Of Product (POP), set of documents that serve as a Supplier’s proof that the product is real.
The Proof Of Product is a document issued by the Supplier to the End Buyer to prove that he /she has the product being sold.
The Proof Of Product is subject to verification by the Facilitator/Primary Agent and/or End Buyer.
The End Buyer may not continue with the transaction if he /she is unable to establish that the seller has a tangible product to sell.
This may be done either by a physical inspection of the product in a vessel by accredited inspection firms or through a verification authority
Proof Of Product (POP) sent by secured mail to the End Buyers Bank/Buyer and typically consist of:
Copy of License / permit to export, issued by the department of the ministry of energy (If applicable),
Copy of approval to export issued by the ministry of industry and trade (If applicable),
Copy of statement of availability of the product,
Copy of the refinery commitment to produce the product,
Copy of the pipeline corporation contract (TRANSNEFT) to transport the product to the loading port
Refinery certificate of product,
Copy of the port storage agreement (TSR – If applicable),
Copy of the charter party agreement(s) to transport the product to the discharge port,
Dip Test Authorization letter (DTA)/ Assignment of ownership document.
Copy of SGS or equivalent report (SGS)
1.3. Sales Purchase Agreement (SPA)/CONTRACT(C): SPA stands for Sale Purchase Agreement and it is the same document we refer to as CONTRACT.
The End Buyer and the Supplier or their Mandates must sign and seal the contract and becomes binding document. If contract is not signed and sealed by both parties, (End Buyer and Supplier), such CONTRACT is not effective.
2.END BUYER’S DOCUMENTS
2.1. Request For Quote (RFQ): A letter of request sent by the End Buyer (either directly or through his/her, Facilitator/Primary Agent and/or Mandate) to the Supplier, expressing their intention to purchase a product from the Supplier.
The RFQ usually will describe the product, the quantity, method of payment, method of shipping and their banking details.
The RFQ must be in the End Buyer’s letterhead and must be signed and sealed.
In some instance the End Buyer’s Mandate can sign and seal an RFQ on behalf of the End Buyer.
A trusted Mandate can do so, only if, an approval has been given by the End Buyer.
2.2. Offer To Purchase (OTP): After the End Buyer has received an Offer from the Supplier, called Offer To Supply the End Buyer issue Offer To Purchase to confirm that the End Buyer has accepted his initial Offer.
The End buyer sends a signed and sealed (ICPO) to the seller.
This exchange of documents is usually done through and between the buyer and seller’s
facilitators or agents/mandates.
The End Buyer must usually sign and seal the OTS
2.3. Proof Of Fund (POF): Proof Of Fund is a document that is issued by a bank, confirming the financial capability of their (customer) client to complete the transaction.
It could be a letter written, signed and sealed by bank officials in the bank’s official stationary (letter head). It can also be in the form of a quarterly bank statement signed and sealed by authorized bank officials, with his phone, fax numbers and e-mail addresses for verification of the
authenticity of the document.
Proof Of Fund documents are usually subject to verification for authenticity from the issuing bank. Proof Of Fund is not a financial instrument and cannot borrowed against.
It is not cashable.
At the very beginning of the cooperation we require following documents from the End Buyer, who should be able to present them:
# Company profile of the End Buyer
# The name of Signatory entitled to act in the name of the company (with number and copy of his passport)
# Company name, residential address, registered office, web, e-mail, phone, mobile
# The name of the bank intended to be used for the transaction
# Required types/quality of the petroleum products, quantity/volumes, port of discharge
# Written statement that End Buyer accepts and agrees with Supplier’s Procedures.
The entire process from exchange of necessary document up to the signature of the SPA/CONTRACT is being realized by Facilitator/Primary Agent.
Order bill of lading – A negotiable bill of lading made out to the order of the shipper.
Order bill of lading – A negotiable bill of lading made out to the order of the shipper.
3.DOCUMENTATION TRANSPORT, SHIPPING AND LOGISTICS
When preparing to ship a product overseas, the exporter needs to be aware of packing, labelling, documentation, and insurance requirements. Because the goods are being shipped by unknown carriers to distant customers, the new exporter must be sure to follow all shipping requirements to help ensure that the merchandise is
– packed correctly so that it arrives in good condition;
– labelled correctly to ensure that the goods are handled properly and arrive on time and at the right place;
– documented correctly to meet local and foreign government requirements as well as proper collection standards; and
– insured against damage, loss, and pilferage and, in some cases, delay.
Because of the variety of considerations involved in the physical export process, most exporters, both new and experienced, rely on an international freight forwarder to perform these services.
3.1.Freight Forwarders
The international freight forwarder acts as an agent for the exporter in moving cargo to the overseas destination. These agents are familiar with the import rules and regulations of foreign countries, methods of shipping, government export regulations, and the documents connected with foreign trade.
Freight forwarders can assist with an order from the start by advising the exporter of the freight costs, port charges, consular fees, cost of special documentation, and insurance costs as well as their handling fees – all of which help in preparing price quotations. Freight forwarders may also recommend the type of packing for best protecting the merchandise in transit; they can arrange to have the merchandise packed at the port or containerized. The cost for their services is a legitimate export cost that should be figured into the price charged to the customer.
When the order is ready to ship, freight forwarders should be able to review the letter of credit, commercial invoices, packing list, and so on to ensure that everything is in order. They can also reserve the necessary space on board an ocean vessel, if the exporter desires.
If the cargo arrives at the port of export and the exporter has not already done so, freight forwarders may make the necessary arrangements with customs brokers to ensure that the goods comply with customs export documentation regulations. In addition, they may have the goods delivered to the carrier in time for loading. They may also prepare the bill of lading and any special required documentation. After shipment, they forward all documents directly to the customer or to the paying bank if desired.
3.2. Export Documents
Exporters should seriously consider having the freight forwarder handle the formidable amount of documentation that exporting requires; freight forwarders are specialists in this process. The following documents are commonly used in exporting; which of them are actually used in each case depends on the requirements of both our government and the government of the importing country.
# Commercial invoice
As in a domestic transaction, the commercial invoice is a bill for the goods from the buyer to the seller. A commercial invoice should include basic information about the transaction, including a description of the goods, the address of the shipper and seller, and the delivery and payment terms. The buyer needs the invoice to prove ownership and to arrange payment. Some governments use the commercial invoice to assess customs duties.
# Bill of lading
Bills of lading are contracts between the owner of the goods and the carrier (as with domestic shipments). There are two types: a straight bill of lading is non-negotiable while a negotiable or shipper’s order bill of lading can be bought, sold, or traded while goods are in transit and is used for letter-of-credit transactions. The customer usually needs the original or a copy as proof of ownership to take possession of the goods.
# Consular invoice
Certain nations require a consular invoice, which is used to control and identify goods. The invoice must be purchased from the consulate of the country to which the goods are being shipped and usually must be prepared in the language of that country.
# Certificate of origin
Certain nations require a signed statement as to the origin of the export item. Such certificates are usually obtained through a semi-official organization such as a local chamber of commerce. A certificate may be required even though the commercial invoice contains the information.
# Inspection certification
Some purchasers and countries may require a certificate of inspection attesting to the specifications of the goods shipped, usually performed by a third party. Inspection certificates are often obtained from independent testing organizations.
# Dock receipt and warehouse receipt
These receipts are used to transfer accountability when the export item is moved by the domestic carrier to the port of embarkation and left with the international carrier for export.
# Destination control statement
This statement appears on the commercial invoice, ocean or air waybill of lading, and SED to notify the carrier and all foreign parties that the item may be exported only to certain destinations.
# Insurance certificate
If the seller provides insurance, the insurance certificate states the type and amount of coverage. This instrument is negotiable.
# Export license (when needed)
# Export packing list
Considerably more detailed and informative than a standard domestic packing list, an export packing list itemizes the material in each individual package and indicates the type of package: box, crate, drum, carton, and so on. It shows the individual net, legal, tare, and gross weights and measurements for each package . Package markings should be shown along with the shipper’s and buyer’s references. The packing list should be attached to the outside of a package in a waterproof envelope marked “packing list enclosed.” The list is used by the shipper or forwarding agent to determine:
(1) the total shipment weight and volume and
(2) whether the correct cargo is being shipped. In addition, customs officials (both local and foreign) may use the list to check the cargo.
Documentation must be precise. Slight discrepancies or omissions may prevent merchandise from being exported, result in exporting firms not getting paid, or even result in the seizure of the exporter’s goods by local or foreign government customs.
Collection documents are subject to precise time limits and may not be honored by a bank if out of date. Much of the documentation is routine for freight forwarders or customs brokers acting on the firm’s behalf, but the exporter is ultimately responsible for the accuracy of the documentation.
The number of documents the exporter must deal with varies depending on the destination of the shipment. Because each country has different import regulations, the exporter must be careful to provide proper documentation. If the exporter does not rely on the services of a freight forwarder, there are several methods of obtaining information on foreign import restrictions:
– Foreign government embassies and consulates can often provide information on import regulations.
– The Air Cargo Tariff Guidebook lists country-by-country regulations affecting air shipments. Other information includes tariff rules and rates, transportation charges, air waybill information, and special carrier regulations. Contact the Air Cargo Tariff, P.O.Box 7627, 1117 ZJ Schiphol Airport, Netherlands.
– The National Council on International Trade Documentation (NCITD) provides several low-cost publications that contain information on specific documentation commonly used in international trade. NCITD provides a free listing of its publications. Contact National Council on International Trade Documentation, 350 Broadway, Suite 1200, New York, NY 10013; telephone 212-925-1400.
3.3. Shipping
The handling of transportation is similar for domestic orders and export orders. The export marks should be added to the standard information shown on a domestic bill of lading and should show the name of the exporting carrier and the latest allowed arrival date at the port of export. The exporter should also include instructions for the inland carrier to notify the international freight forwarder by telephone on arrival.
International shipments are increasingly being made on a through bill of lading under a multimodal contract. The multimodal transport operator (frequently one of the modal carriers) takes charge of and responsibility for the entire movement from factory to the final destination.
When determining the method of international shipping, the exporter may find it useful to consult with a freight forwarder. Since carriers are often used for large and bulky shipments, the exporter should reserve space on the carrier well before actual shipment date (this reservation is called the booking contract).
The exporter should consider the cost of shipment, delivery schedule, and accessibility to the shipped product by the foreign buyer when determining the method of international shipping. Although air carriers are more expensive, their cost may be offset by lower domestic shipping costs (because they may use a local airport instead of a coastal seaport) and quicker delivery times. These factors may give the exporter an edge over other competitors, whose service to their accounts may be less timely.
Before shipping, the firm should be sure to check with the foreign buyer about the destination of the goods. Buyers often wish the goods to be shipped to a free-trade zone or a free port where goods are exempt from import duties.
4.INSURANCE DOCUMENTS:
Export shipments are usually insured against loss, damage, and delay in transit by cargo insurance. For international shipments, the carrier’s liability is frequently limited by international agreements and the coverage is substantially different from domestic coverage. Arrangements for cargo insurance may be made by either the buyer or the seller, depending on the terms of sale. Exporters are advised to consult with international insurance carriers or freight forwarders for more information.
Damaging weather conditions, rough handling by carriers, and other common hazards to cargo make marine insurance important protection for exporters. If the terms of sale make the firm responsible for insurance, it should either obtain its own policy or insure cargo under a freight forwarder’s policy for a fee. If the terms of sale make the foreign buyer responsible, the exporter should not assume (or even take the buyer’s word) that adequate insurance has been obtained. If the buyer neglects to obtain coverage or obtains too little, damage to the cargo may cause a major financial loss to the exporter.
4.1. Performance Bond (PB), operative and nonoperative: A Performance bond is an insurance document guaranteeing that the issuer will pay a stipulated amount of money (%) to the other party if he/she failed to perform the contract.
This amount will compensate for the losses suffered by the other party.
The defaulting party’s bond cover all the losses incurred by the beneficiary. It is usually 2% of the total value of the purchase in the SPA.
A bond will become operative if the conditions to activate it are met.
Conclusively, a PB is not operative until it has been activated by a similar document or a clause that will make it operative.
5.MARINE TERM & DOCUMENTS :
5.1. Authority To Board (ATB): stands for Authority To Board a vessel. This is a marine document issued by the captain of the mother vessel.
The mother vessel is the seller’s vessel carrying the cargo to be delivered.
The captain issues this document to the buyer, advising him to bring his inspector on board his vessel to conduct a Q&Q inspection.
I hope you know what Q & Q means at this point. The captain will give details of his location by exact latitude and longitude. You know that the ocean is very vast.
He will also include his e-mail address, phone and Fax numbers for painless contacts.
This marine document must originate from the captain of the vessel.
If it does not originate from the captain, it might be fake.
Please make sure that the ATB is verified by confirmation from the captain of the mother vessel by the captain of the receiving vessel.
5.2. Alongside: The side of a ship.
Goods to be delivered “alongside” are to be placed on the dock or barge within reach of the transport
Ship’s tackle so that they can be loaded aboard the ship.
5.3. Along Siding: Two vessels are said to be along side (Side by side) before they engage in the process of trans-shipment.
When they get side by side, they connect all trans-shipment hoses and pumps before they commence
trans-shipment (pumping the crude oil) from the feeder to the receiving vessel.
5.4. Charter Party Agreement (CPA): A charter Party Agreement is the copy of a contract signed between the Chatterer and the commercial operators of a vessel.
The agreement specifies the total cost for the charter, method of payment and all relevant information about the vessel.
Most TTT sellers require that the buyer should provide them with a copy of his charter party
agreement.
It is risky to provide Nigerian sellers with such documents hence they can easily alter it for fraud related activities. Please be careful
while dealing with Nigerian sellers and suppliers.
5.5. Destination Point: Destination point is the point of discharge, e.g., the location where the cargo will be discharged from the vessel. It could either be, a CIF, TTT or FOB cargo. This term is very often synonymous with a CIF transactions.
5.6. Lightening: Lightening is the process of transferring crude oil from a large oil tanker by a smaller oil tanker into a storage refining facility.
This may occur where it will be very unsafe for the larger tanker to come close to a storage facility.
5.7. Mother or Feeder Vessel: A Feeder or Mother vessel is a vessel with a loaded car go to be discharged into another vessel waiting to receive the cargo.
This is always associated with TTT transactions. It is called the feeder or mother vessel because it feeds another vessel with her onboard cargo.
5.8. Notice Of Readiness (NOR): A NOR is a marine document sent from one vessel captain to the other. During a TTT Transaction, the captain of a mother (Supply) vessel sends a notice of readiness (NOR) to the buyer’s vessel to inform him about his readiness to meet him at a point for TTT transaction.
He requests for the receiving vessel’s location and the expected time of arrival (ETA) at the agreed location. The receiving (buyer’s) vessel responds with his marine document, called ETA.
This document outlines his expected time of arrival (ETA) at the location they have mutually agreed upon for a TTT transaction.
5.9. Expected Time of Arrival (ETA): ETA (Expected Time of Arrival) is a marine document issued by a vessel captain in response to an NOR he received from a fellow captain.
The captain informs the originator of the document the time he is expected to arrive at the mutually agreed location in the ocean for a TTT transaction. See NOR above.
5.10. Marine insurance- Insurance that compensates the owners of goods transported overseas in the event of loss that cannot be legally recovered from the carrier. Also covers air shipments. Compare Credit risk insurance.
5.11. Ocean bill of lading- A bill of lading (B/L) indicating that the exporter consigns a shipment to an international carrier for transportation to a specified foreign market. Unlike an inland B/L, the ocean B/L also serves as a collection document. If it is a “straight” B/L, the foreign buyer can obtain the shipment from the carrier by simply showing proof of identity. If a “negotiable” B/L is used, the buyer must first pay for the goods, post a bond, or meet other conditions agreeable to the seller. Compare Air waybill, Inland bill of lading, and Through bill of lading.
5.12. On board bill of lading- A bill of lading in which a carrier certifies that goods have been placed on board a certain vessel.
5.13. Order bill of lading – A negotiable bill of lading made out to the order of the shipper.
5.14. Receiving Vessel: A receiving vessel takes cargo from the feeder or mother vessel.
As the name implies, the receiving vessel is usually fed by a mother or feeder vessel.
This is very common with TTT transactions.
5.15. Ship’s manifest- An instrument in writing, signed by the captain of a ship, that lists the individual shipments constituting the ship’s cargo.
5.16. Tank farm: A tank farm is a storage facility where crude oil is stored and finally
pumped into awaiting vessels.
6. DOCUMENTS PRESENTED FOR PAYMENT
6.1. A full Set Clean shipped on board, ocean Bill of Lading, blank endorsed, blank Order, marked “Freight Prepaid” including DLC SWIFT MT760 No. in three originals and three copies, including,
A full set of clean POP.
6.1.1. Vessel details, IMO Q88
6.1.2. CPA- Charter Party agreement CPA
6.1.3. Fresh SGS from vessel at Loading port
6.1.4. DTAOB- Dip test authorization on Board vessel for loading port waters consist from:
ATB- Authority to Board ATB
B/L cargo manifest
Certificate of authenticity
Certificate of quality
Certificate of quantity
Certificate of origin
Tanker Ullage receipt
Master’s receipt for sample
Master receipt for documents
7. FACILITATOR’S/PRIMARY AGENT’S, SUPPLIER’S & END BUYER’S DOCUMENT:
7.1.International Payment Guarantee (IPG): IPG it stands is a document which protects all parties’ financial interest. (which is the commission fee).
IPG is usually signed by all involved parties, in the same time with OTS and OTP, before the SPA/CONTRACT is signed and embedded in the SPA/CONTRACT.
This protects all parties from being circumvented by any greedy participant in any given deal.
It is always advisable to have this document signed by all the players in any particular deal.
It is very important to have this document embedded in a contract as an integral part rather than as an addendum to a contract.
8. INCOTERMS DOCUMENTATION
8.1. What are INCOTERMS?
Incoterms are a set of rules for the interpretation of the most commonly used trade terms in international trade – International Commercial Terms.
They were first published by the International Chamber of Commerce (ICC) in 1936 and since then have been updated in 1953, 1967, 1976, 1980, 1990 and the current revision 2000.
Parties to a contract are often unaware that there are different trading practices in their respective countries, for example FOB for an American company may have a different meaning to FOB for a UK trader. This can lead to misunderstanding and, in the worst scenario, costly litigation. Incoterms set out to avoid this problem by giving a set of standard rules that are recognised throughout the world.
The basic purpose of each Incoterm is to clarify how functions, costs and risks are split between the buyer and seller in connection with the delivery of the goods as required by the sales contract. Delivery, risks and costs are known as the critical points. Each term clearly specifies the responsibilities of the seller and the buyer. The terms range from a situation in which everything is fundamentally the responsibility of the buyer to the other extreme where everything is fundamentally the responsibility of the seller.
8.2. The Obligations of the Seller and Buyer
The main purpose of Incoterms is to clearly set out the obligations of the seller and the buyer in relation to the delivery of the goods and the division of functions, costs and risks related to the delivery. The way this is presented in each Incoterm is under ten clauses each for the seller and the buyer, where each clause on the seller’s side “mirrors” the position of the buyer with respect to the same subject matter. For example, clause A3 deals with the seller’s obligations to contract for carriage and insurance and clause B3 deals with the buyer’s obligations to contract for carriage and insurance.
8.3. Incorporating Incoterms
It is important to ensure that where the protection of Incoterms is intended to be incorporated into a contract of sale that an express reference to the current edition of Incoterms is always made. For example it is not enough to quote just “FOB Southampton” but instead “FOB Southampton Incoterms 2000” should be used.
Alternatively, suitable wording can be included in the contract stating that the contract is subject to Incoterms 2000. However, if this is the case, you should be careful to ensure that standard contracts, and any other standard paperwork mentioning Incoterms, are updated to quote “Incoterms 2000” rather than Incoterms 1990.
Failure to incorporate the correct version of Incoterms could result in dispute as to which version is intended or indeed if Incoterms were intended to be incorporated at all.
8.4. The Incoterms 2010
The thirteen Incoterms are split into four distinct groups:
Group E – where the goods are made available to the buyer at the seller’s premises;
Group F – where the seller must deliver the goods to a carrier appointed by the buyer;
Group C – where the seller must contract for the carriage of the goods without assuming risk of loss of, or damage to the goods or additional costs due to events occurring after shipment;
Group D – where the seller has to bear all costs and risks required to bring the goods to the place of destination.
The following is a list of all of the Incoterms, the group to which they belong and a brief outline of responsibilities under that Incoterm. However, it should be remembered that this is just a brief outline and is not a substitute for reading and understanding Incoterms 2000 itself. Additionally it has been noted whether the term is suitable for any mode of transport or just conventional maritime and inland waterway transport.
Group E Departure
EXW – Ex Works
Named place – Any mode of transport.
The seller must place the goods at the disposal of the buyer at the seller’s premises or another named place not cleared for export and not loaded on any collecting vehicle.
Group F Main Carriage Unpaid
FCA – Free Carrier
Named place – Any mode of transport.
The seller must deliver the goods, cleared for export, to the carrier nominated by the buyer at the named place.
FAS – Free Alongside Ship
Named port of shipment – Maritime and inland waterway transport only.
The seller must place the goods, cleared for export, alongside the vessel at the named port of shipment.
FOB – Free on Board
Named port of shipment – Maritime and inland waterway transport only.
The seller delivers the goods, cleared for export, when they pass the ship’s rail at the named port of shipment.
Group C Main Carriage Paid
CFR – Cost and Freight
Named port of destination – Maritime and inland waterway transport only.
The seller delivers the goods when they pass the ship’s rail in the port of shipment and must pay the costs and freight necessary to bring the goods to the named port of destination. The buyer bears all additional costs and risks after the goods have been delivered (over the ship’s rail at the port of shipment).
CIF – Cost Insurance and Freight
Named port of destination – Maritime and inland waterway transport only.
The obligations are the same as under CFR with the addition that the seller must procure insurance against the buyer’s risk of loss of, or damage to the goods during carriage.
CPT – Carriage Paid To
Named place of destination – Any mode of transport.
The seller delivers the goods to the nominated carrier and must also pay the cost of carriage necessary to bring the goods to the named destination. The buyer bears all additional costs and risks after the goods have been delivered to the nominated carrier.
CIP – Carriage and Insurance Paid To
Named place of destination – Any mode of transport.
The obligations are the same as under CPT with the addition that the seller must procure insurance against the buyer’s risk of loss of, or damage to the goods during carriage.
Group D Arrival
DAF – Delivered at Frontier
Named place – Any mode of transport.
The seller must place the goods at the disposal of the buyer on the arriving means of transport not unloaded, cleared for export but not cleared for import, at the named point and place at the frontier.
DES – Delivered Ex Ship
Named port of destination – Maritime and inland waterway transport only.
The seller delivers when the goods are placed at the disposal of the buyer on board the ship, not cleared for import, at the named port of destination.
DEQ – Delivered Ex Quay
Named port of destination – Maritime and inland waterway transport only.
The seller delivers when the goods are placed at the disposal of the buyer, not cleared for import, on the quay at the named port of destination.
DDU – Delivered Duty Unpaid
Named place of destination – Any mode of transport.
The seller must deliver the goods to the buyer, not cleared for import, and not unloaded at the named place of destination.
DDP – Delivered Duty Paid
Named place of destination – Any mode of transport.
The seller must deliver the goods to the buyer, cleared for import, and not unloaded at the named place of destination.
As can be seen this list runs from the term where the buyer has most of the responsibility (EXW) through to that where the seller has the majority of the responsibility (DDP).
It is worth noting that in Incoterms 2000 the only term that requires the buyer to clear the goods for export (including obtaining any export licence necessary) is EXW and the only term that requires the seller to clear the goods for import (including obtaining any import licence necessary) is DDP.
Most important for Petroleum Products Transactions:
Cost Insurance and Freight (CIF): Cost Insurance and Freight method is the safest shipping method
for the End Buyer.
The Supplier covers the shipping, the insurance and cost of the product.
The Supplier will be paid by the End Buyer, upon the safe delivery and inspection of the product, plus production of all required documents as specified in the body of the DLC.
The discount for this kind of delivery is smaller than to FOB, TTO and TTT transactions.
The Supplier loads the vessel, inspects the product on board the vessel and deliver the product at a mutually agreed safe port.
At the delivery port, the buyer will conduct his own inspection to ascertain the quantity and quality of the product and pay the supplier based on the result of the inspection after the supplier has submitted all relevant documentations as specified in the SPA/CONTRACT Procedure.
This is the best and safe way to buy crude oil.
Freight On Board (FOB): In FOB transactions, the End Buyer provides his vessel and a copy of his Charter Party Agreement (CPA) to the Supplier. His vessel sails to the loading port and his vessel load the cargo.
End Buyer pays for his vessel charter and all insurance.
This method is also good because the End Buyer pays after his vessel is loaded and inspected to ascertain Quality and Quantity (Q&Q).
Tanker Takes Over (TTO)
In TTO transaction after the partners sign the SPA/CONTRACT, the End Buyer’s inspectors go on board vessel within 72 hours after the confirmation of the IDLC, to conduct Q & Q, inspection report made available to End Buyer.
Re-assignment of cargo is done in End Buyer’s name and Charter Party Agreement (CPA) issued, signed by End Buyer and returned to the Supplier within 4 working days of receiving a positive Q & Q report. All Original documents handed over to the End Buyer’s bank.
End Buyer’s Super cargo goes on board within 3 days after the re-assignment and CPA signed.
Payment made to the accounts in the Supplier according to SPA/CONTRACT within 72 hours of Super cargo going on board and Vessel sails afterwards.
Tanker To Tanker (TTT): Tanker-to-Tanker (TTT) transshipment transaction is usually conducted in the International waters. The End Buyers and Suppliers’ vessels exchange communication document and commence communication.
The Supplier’s vessel would send a marine document Notice Of Readiness (NOR) to the buyer’s vessel.
This means that the Supplier’s vessel contacts the buyer’s vessel as a confirmation that he is ready to sail and meet him at an agreed discharge point.
The End Buyer’s vessel will respond with Expected Time of Arrival (ETA). This is the time he expects to arrive at the agreed meeting point for a TTT transaction.
TTT is a very risky type of transaction.
Among the three forms of crude oil delivery to the End buyer, CIF is the most recommended.
The seller gets paid after the product is trans-shipped into the buyer’s vessel, Q & Q
Conducted, and all relevant documents are presented to the buyer’s bank as specified in the contract.
However, most sellers will require the buyer to open an irrevocable letter of credit in favor of the seller before trans- shipment takes place.
This assures the supplier that the End buyer will not steal the product and run away.
CI, Dip & Pay, is the fastest procedure specially for just spot delivery.
After the partners sign the SPA/CONTRACT,
End Buyer’s bank issue via SWIFT PRE-ADVICE LETTER OF CREDIT, MT 799 to Supplier’s bank.
Supplier’s Bank issues via SWIFT 2% ACTIVE PERFORMANCE BOND, (as previously agreed on), MT 760 to End Bayer’s Bank, upon receipt and confirmation of End Buyers PRE-ADVICED LETTER OF CREDIT.
Supplier issues POP documents to :
* Commitment to supply
* Certificate of Origin
* Q&Q done by indigenous lab at port of Origin
* Authorization To Supply (ATS), License certificate
* Statement of availability of product,
* Notice of Readiness (NOR)
In order to commence injection of the petroleum product.
End Buyer provide to Supplier
* Tank Storage Receipt (TSR),
* Authorization to Verify (ATV),
*Readiness to Receive Fuel (RTR) .
Supplier issues to End Buyer, Dip Test Authorization (DTA),
End Buyer engages SGS to conduct Q&Q dip Test Inspection on the Product on Supplier tank to check the Quality and Quantity of the fuel before injection can to take place to be sure the product is according to the Specification/International Standard product.
