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| Home Trader Q&A Procedures Circumvention Articles Buyers Sellers Companies Contact Us Disclaimer |
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| Questions and Answers |
Question: What is the condition In the Pre Advise DLC that activated the DLC in the intermediaries
account.
Answer: The Intermediary provides to act upon a single condition of the credit. Evidence of goods
certificate as defined on contract. "PPI." Providing all the detail of the supplier.
Question:
Once I meet the conditions of the DLC and present my PPI certificate to the bank, will the end buyer
circumvent me on future deals with my supplier. Is this one of the reason you do not want to deal in spot
deals.
Answer:
Yes any future deals he will go around you. He is not circumventing you as you are not apart of the next
deal.
Question:
What is a soft offer?
Answer: 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. Once
signed the "Buyer goes first and issues the DLC financial instrument.
Question:
Should I as a intermediary accept a revocable letter of credit from the buyer for payment of goods?
Answer:
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
Advised has been met the DLC becomes active and the buyer cannot change his mind and cancel the
DLC. With a revocable DLC he can.
Question:
Does the supplier or the end buyer order the vessel to deliver the purchased goods?
Answer: In a FOB deal the End Buyer order/charters the vessel. In a CIF or CFR deal the Supplier
secures the vessel.
Question:
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.
Answer:
NO, a Performance Guarantee does not activate the L/C and NO, activation of the L/C does not mean
money. I will explain.
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 are 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 can not 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 then the % value of the SLC.
Question:
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.
Answer:
The end buyer applies for a "DTLC" 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. 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 then one supplier but can only be transferred
once. Eg. One supplier get 25% of the TDLC and another supplier gets 50% of the same TDLC but
once transferred to the suppliers it cannot be transferred again.
Question:
What does NNPC/JVC stand for and mean .
Answer:
NNPC/JVC stands for- Nigeria National Petroleum Company / Joint Venture Company. NNPC/JVC is
often seen on a fraudulent Sales and Purchase Agreement asking for banking information. The NNPC
is in joint venture with many companies like Shell, Mobil, Elf, Chevron, Texaco, Agrif which means they
are doing business with these companies. The NNPC are not in partnership with these companies. The
NNPC cannot offer a sales and purchase agreement to any intermediary, company or anyone implying
that the companies they are doing business with is part of a sales and purchase agreement. Anyone
offering such a sales and purchase agreement does not have oil or even access to it.
If the NNPC and Shell or Mobel or any other company are involved in any sales and purchase
agreement with a principal buyer (which is very doubtful) it has to be specifically stated on the sales and
purchase agreement. No Sales and Purchase Agreement can be generic as being offered on the
Internet.
Question:
Are there certain laws you have to follow in International Global Trading?
Answer:
The laws are UCP600, Incoterms 2000 and the ICC Paris. You want to make sure what ever you write
and what ever documents you sign these laws are mentioned. These laws are applicable to all trading
countries in the world including USA. Eg. 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. This
removes any grief that could prevail without the UCP600 procedures.
Question:
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.
Answer:
PB:
This stand for Performance Bond. The PB is a guarantee that follows the goods to the destination port
in where if the goods are rejected for good reason, remedy is sought by 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 type of performance assurance. A Performance Bond is for a DES
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 with in 3 days of buyers L/C
being transferred.
Question:
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?
Answer:
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.
Question:
Is there a difference in a "RFQ" (Request for Quote) from an End Buyer to a Buyer/Seller as apposed to
a "RFQ" from the Buyer/Seller to the Supplier?
Answer:
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 Suppliers product. This is why a
intermediary can not give a "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, the 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 ask, how much for the car. The buyer request for
quote to buy. See more on ICPO and RFQ below
Question:
If the end buyer collects on the "2% PG" (Performance Guarantee) for non-delivery of goods, how does
the intermediary who is controlling the deal get compensated for their time and effort.
Answer:
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.
account.
Answer: The Intermediary provides to act upon a single condition of the credit. Evidence of goods
certificate as defined on contract. "PPI." Providing all the detail of the supplier.
Question:
Once I meet the conditions of the DLC and present my PPI certificate to the bank, will the end buyer
circumvent me on future deals with my supplier. Is this one of the reason you do not want to deal in spot
deals.
Answer:
Yes any future deals he will go around you. He is not circumventing you as you are not apart of the next
deal.
Question:
What is a soft offer?
Answer: 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. Once
signed the "Buyer goes first and issues the DLC financial instrument.
Question:
Should I as a intermediary accept a revocable letter of credit from the buyer for payment of goods?
Answer:
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
Advised has been met the DLC becomes active and the buyer cannot change his mind and cancel the
DLC. With a revocable DLC he can.
Question:
Does the supplier or the end buyer order the vessel to deliver the purchased goods?
Answer: In a FOB deal the End Buyer order/charters the vessel. In a CIF or CFR deal the Supplier
secures the vessel.
Question:
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.
Answer:
NO, a Performance Guarantee does not activate the L/C and NO, activation of the L/C does not mean
money. I will explain.
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 are 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 can not 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 then the % value of the SLC.
Question:
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.
Answer:
The end buyer applies for a "DTLC" 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. 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 then one supplier but can only be transferred
once. Eg. One supplier get 25% of the TDLC and another supplier gets 50% of the same TDLC but
once transferred to the suppliers it cannot be transferred again.
Question:
What does NNPC/JVC stand for and mean .
Answer:
NNPC/JVC stands for- Nigeria National Petroleum Company / Joint Venture Company. NNPC/JVC is
often seen on a fraudulent Sales and Purchase Agreement asking for banking information. The NNPC
is in joint venture with many companies like Shell, Mobil, Elf, Chevron, Texaco, Agrif which means they
are doing business with these companies. The NNPC are not in partnership with these companies. The
NNPC cannot offer a sales and purchase agreement to any intermediary, company or anyone implying
that the companies they are doing business with is part of a sales and purchase agreement. Anyone
offering such a sales and purchase agreement does not have oil or even access to it.
If the NNPC and Shell or Mobel or any other company are involved in any sales and purchase
agreement with a principal buyer (which is very doubtful) it has to be specifically stated on the sales and
purchase agreement. No Sales and Purchase Agreement can be generic as being offered on the
Internet.
Question:
Are there certain laws you have to follow in International Global Trading?
Answer:
The laws are UCP600, Incoterms 2000 and the ICC Paris. You want to make sure what ever you write
and what ever documents you sign these laws are mentioned. These laws are applicable to all trading
countries in the world including USA. Eg. 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. This
removes any grief that could prevail without the UCP600 procedures.
Question:
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.
Answer:
PB:
This stand for Performance Bond. The PB is a guarantee that follows the goods to the destination port
in where if the goods are rejected for good reason, remedy is sought by 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 type of performance assurance. A Performance Bond is for a DES
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 with in 3 days of buyers L/C
being transferred.
Question:
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?
Answer:
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.
Question:
Is there a difference in a "RFQ" (Request for Quote) from an End Buyer to a Buyer/Seller as apposed to
a "RFQ" from the Buyer/Seller to the Supplier?
Answer:
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 Suppliers product. This is why a
intermediary can not give a "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, the 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 ask, how much for the car. The buyer request for
quote to buy. See more on ICPO and RFQ below
Question:
If the end buyer collects on the "2% PG" (Performance Guarantee) for non-delivery of goods, how does
the intermediary who is controlling the deal get compensated for their time and effort.
Answer:
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.
This site was created by an intermediary for intermediaries on the advise of a world know global trader
and an International Trading Lawyer.
All questions answered here in matters of International Trading procedures is the personal opinion of
the author j. hollister based on her experience, training and education in the International Trading
Market. No liability will be directed for the opinion.
Every industry and every country has their own standards and different rules and regulation that
govern trading in their jurisdiction. Buyers, Sellers, Brokers, Intermediaries all need to educate
themselves in the proper legal procedures for their industry and location.
In any business, knowledge is power. In the international trading business, knowledge is survival. Not
knowing the proper procedures, you will not survive and you will never close a deal.
You may use our Contact Us page for question or comment..... Your education starts here.
The Q&A is a free service and will remain free until further notice.
and an International Trading Lawyer.
All questions answered here in matters of International Trading procedures is the personal opinion of
the author j. hollister based on her experience, training and education in the International Trading
Market. No liability will be directed for the opinion.
Every industry and every country has their own standards and different rules and regulation that
govern trading in their jurisdiction. Buyers, Sellers, Brokers, Intermediaries all need to educate
themselves in the proper legal procedures for their industry and location.
In any business, knowledge is power. In the international trading business, knowledge is survival. Not
knowing the proper procedures, you will not survive and you will never close a deal.
You may use our Contact Us page for question or comment..... Your education starts here.
The Q&A is a free service and will remain free until further notice.
Please use our contact page for any question regarding International Trading.
Questions will be answered within 2 business days.
(All questions of importance and value will be added to our Question & Answer page.)
Questions will be answered within 2 business days.
(All questions of importance and value will be added to our Question & Answer page.)