Locating Business Partners Worldwide
Where Global Trading Begins
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©2008 Trader Commodity B2B
Questions and Answers
How do I know a SGS certificate is authentic?
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What is the difference between a BG (bank Guarantee) and a SBLC (Stand By Letter Of Credit)
The word Stand By means the same as contingent--available when called upon.. The SBLC is a BG
(bank guarantee) that will pay for a non-performance. No question asked.  The BG (Bank Guarantee)
by its self is an obligation subject to civil law.  The SBLC is issued subject to  UCP600 and ISP 98
rules.   A "BG" in the form of a SBLC is issued for the purpose of an obligation. (eg. delivery failure).   
Not for payment of goods.

Who bears the cost of the SGS Certificate, the buyer or the seller.
If the supplier has offered or issued a PSI (Pre-Shipment Inspection) quantity and quality, the supplier
bears that cost.  If the buyer wants his own inspection agency to do the inspection, then the buyer will
bear the cost as per agreement contract.

Note: A SGS certificate cannot be forged.  The SGS will authentic the certificate from their eDocument
authentication page.   

What is the most important document needed for presentation in relationship to the financial instrument?
The leading or primary document required for presentation for collection on the DLC is a clean on
board ship mate's receipt, signed by the ship's master or ship's owner. This shows the goods are on
board the buyer's vessel.  However you cannot be sure which document will be available first, therefore
it is advised to add a condition in the agreement contract to allow a different document to be used as a
primary evidence that the goods are on board the named vessel. An acceptable presentation document
that can be used as a primary document is a non-negotiable waybill that is produced by a  forwarder's
agent of the shipowner or master. A forwarder's receipt can also be a leading delivery document for
presentation. These documents prove the product is on board the buyers vessel.  The PSI is first class
evidence that the product exist.

Note: In an FOB contract.
The Marine BOL (Bill of Laden) is not required to be secured by the intermediary unless the buyer
specifically asks the intermediary to do so. In such an event the leading delivery document on an FOB
deal is the FCR, (forwarders certificate of receipt)  Ship's mate's receipts or sellers invoice. Not
necessarily in that order.

Note: Intermediaries MUST learn trade for years on FOB deals until they get experience to trade on the
more complicated CIF/CIP deal.

Who secures the Certificate of Origin, the buyer or the seller?
The COO (Certificate of Origin) is secured by the supplier if it is asked for by the buyer and the cost
remains with the buyer.
The Certificate of Origin is an import document not an export document.

I am a intermediary trying to control the deal, how do I use the Intermediary Payment Guarantee (IPG) to
protect the other intermediaries commission?
To answer this question please click here Understanding the (IPG)

Being the controlling intermediary when do I sign and send back the contract from the supplier?
The controlling intermediary signs and sends back the contract to the supplier after the DLC of Credit is
issued to the intermediary account and before the controlling intermediary meets the conditions of the
Pre Advise to active the DLC.

#35-Question: by
What is the difference between a Waybill and a BOL?
A Waybill is a receipt of the goods that is on board the carrier. A Bill of Lading is in all its legal sense is
a document of "Title"

How many intermediaries can be included in a commission agreement contract?
Only one intermediary per contract agreement with the controlling intermediary. (the
one who is going to pay you your commission for assistance with the deal)

If we have more than one intermediary in the deal, how do we manage the commission agreement

Each intermediary has their own commission agreement contract with the controlling intermediary. If
there are 10 intermediaries in the chain then there are 10 individual commission agreement contracts
with the controlling intermediary. If there are too many intermediaries in the deal, the situation is handle
like this.

Lets say there are 20 intermediaries on the buyers side and 10 intermediaries on the sellers side and
each side will be paid 10 cents a barrel of 4 million barrels.  That would be $400,000 for each side. The
controlling intermediary will appoint one intermediary on each side to disburse the commission for their
side.  This leaves the controlling intermediary with only having to pay commission to one person on
each side. Which would be $400.000 for each side. It would be the duty of the appointed intermediaries
to have a written agreement with all the other intermediaries for their commission.

This system stops an intermediary in a chain from claiming his brother,  sister and uncle are entitled to a
claim of the commission as it would be voted out by the group of intermediaries on that side.  The
controlling intermediary will keep the 2 appointed intermediaries transparent and in the loop of the deal
and it is the duty of the appointed intermediaries to keep the other intermediaries informed.

The reason for individual agreement, is for the protection of the individual intermediary in a chain deal.
If all 20 people are listed in one commission agreement and one of the listed people are not entitled to
the commission and removed from that agreement for what ever reason that commission agreement
contract become invalid which leaves everyone else on that agreement without a legal claim for their
commission. This is why the NCND/IMFPA flawed documents are of no protection what so ever.  There
are legal documents that will protect the intermediaries and his commission but the NCND/IMFPA is not
one of them.

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 the SGS and they will authentic the certificate from
their eDocument authentication page.

#31-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.  Providing all the detail of the supplier.

Once I meet the conditions of the DLC and present my documents 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
Yes any future deals he will go around you. He is not circumventing you as you are not apart of the next
deal unless stated in the contract.

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.

Should I as a 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
Advised has been met the DLC becomes active, the buyer cannot change his mind and cancel the
DLC.  With a revocable DLC he can.

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. Even though the vessel is ordered by the supplier the buyer is still response for the
cost of vessel which is on the suppliers invoice.

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.  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 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 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.  

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 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.

What does NNPC/JVC stand for and mean?
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

Are there certain laws you have to follow in International Global Trading?
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.

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?

This stand for Performance Bond. The 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 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

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 XX% (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. This guarantee ends when delivery documents is presented to bank.

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.

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?
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...  Question #1
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 practice 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, leaves you prey for the con artist.

You may use our Contact Us page for question or comment.....  Your education starts

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.)
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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.
In any business, knowledge is power. In the
International Trading business, knowledge is