GLOSSARY

 

Table of Contents:

1  -THE PLAYERS:  Buyers, Sellers, Suppliers, Mandates, Agents, Consultants, Brokers, Facilitators. 

2  - BANK RELATED DOCUMENTS/TERMINOLOGIES:  BG, BCL, DLC, RDLC, Pre-Advice, Soft Probe, SWIFT code MT 760,799, 700, 103. 

 3  - BUYER’S DOCUMENTS:    LOI, IPO, ICPO, POF. 

4  - SELLER’S DOCUMENTS:    POP, FCO, SPA.  

5  - INSURANCE DOCUMENTS:         PB.  

6  - BUYER’S, SELLER’S AND SUPPLIER’S, INSTRUMENTS:   CPB, CP. 

7  - SHIPPING TERMS:    CIF, FOB, Dip & Pay, TTT.  

8  - MARINE DOCUMENTS:  ATB, CPA, NOR,  ETA. 

9  - GENERAL TERMS:    TTM, ASWP,  RWA,  DD.  

10  - AGENTS, FACILITATOR’S, BUYER’S AND SELLER’S DOCUMENT:  NCNDA, IMFPA. 

11  - MARINE RELATED TERMINOLOGIES:   Destination Point, M. or F. Vessel, Receiving Vessel, Along Siding, Lightening, Tank Farm.  

 12  - CONTRACTS:  CIF, FOB, TTT.   

13  - CONTRACT PROCEDURE: Procedure, Required Documents Before Payment:  

14  - DISCOUNT PRICES: Gross discount, Net discount.  

15 - Documents templates:  LOI ,  SCO,  ICPO  CIF,  FOB and  FOB VESSEL,  SPA,  NCNDA/IMPFA,  Warning  Letter,  Draft verbiage MT 760, MT 799, MT 700, MT 199. 

1.  THE ACTORS: 

We refer to all the participants above as “the players”. They all play important  roles throughout the process of any Oil deal. These participants are paid from the  commission account commonly known as the discount. The players from the  buyer’s side are paid from the buyer’s side of the discount while those on the  seller’s side are paid from the seller’s side of the discount. If you are working for  the seller, you will be paid on the seller’s side while you will get paid from the  buyer’s side of the commission if you came into the deal as the buyer’s agent or  facilitator. It is always good to be at the buyers’ side because the account  is always open to accommodate you

1.a) Buyers.  

A buyer is an individual, company or a group of individuals who sign a contract  for the purchase of crude oil from the seller or directly from the supplier. A buyer  may also sign a contract with a broker for a final purchase of a crude oil product  from the seller or the supplier.  

1.b) Sellers.  

A seller is an individual or group of individuals, or companies who would sign a  contract with a supplier and sell the crude oil product to an end-buyer. Notice the  word  End-Buyer. The seller could sell to another broker or directly to an end  buyer. A seller is an individual, group of individuals or companies who would sign  a contract and passes it unto an end-buyer for a final purchase agreement . 

1.c) Suppliers:

A supplier is the seller who has an irrevocable power to a specified crude oil  allocation and has the exclusive right to sell the allocation. He may or may not  posses an export license, and can empower any seller who has an export license  to sell his allocation on his behalf to a potential buyer.  

1.d) Mandates:  

There are two kinds of Mandates, Buyers’ and Sellers’ Mandates. A mandate is  an individual, who is empowered by the buyer, the seller or the supplier to  negotiate and sign a contract on their behalf. The Mandate can sign and seal a  contact on behalf of the buyer, the seller or the supplier. Realistically, he has the  power to sign on behalf of who-so-ever he represents.   

1.e) Agents:  

An agent is an individual, group of individuals or company who negotiate on  behalf of the buyer, sellers or the suppliers to conclude any oil deal transaction.  The agents deal directly with the facilitators or the seller/buyer.  There are two  types of agent, viz: The buyer’s and the sellers Agents.  

1.f) Consultants:  

Consultants are companies or individuals who negotiate the terms of the contract  as contained in the contract procedure working in close conjunction with the  agents, facilitators and mandates. They could be paid either by the buyer or the  seller. If a consultant is brought into a deal, his/her commission would be paid by  the party who brought him/her into the deal.   

1.g) Brokers:   

A Broker is the buyer who signs a contract with a supplier on behalf of another  buyer and passes the contract to the end-buyer. The broker is quite like the  seller. He is not the final buyer. A broker posses technically as a buyer and finally  flips the contract over to the end-buyer.   

1.h) Facilitators: 

The facilitator is the individual, or group of people arranging business activities as  contained in a contract and bringing two parties into a mutual agreement towards  the smooth implementation of a contracts as defined in the procedures of the  contract   

2.  BANK RELATED DOCUMENTS/TERMINOLOGIES:      

2.a) BG: 

Bank Guarantee: A Bank Guarantee is a financial instrument issued by a  bank confirming that full payment will be made by the issuing bank when  conditions stipulated in the  (SPA Procedure) Sale and Purchase  Agreement procedure are met. The holder can borrow against it or secure  a higher line of credit based on the value of the instrument.  

2.b) BCL:  

Bank Comfort Letter: A Bank Comfort Letter is unlike a Bank  Guarantee. It rather states the financial position of the account holder,  (the Buyer). It cannot be cashed or borrowed against, nor can it be used  to increase the holder’s credit line. BCL is not a valid financial instrument.  

2.c) DLC:  

Documentary Letter of Credit: A Documentary Letter of Credit is a financial instrument issued by a bank and payable at full face value upon successful production of the required documentation  as  contained  in  the  body of  the  document  (DLC).  When  the  required documents are tendered  and verified by the issuing bank, payment will be transmitted to the  recipient’s bank by swift within the number of hours or days as specified  in the contract procedure.

2.d) RDLC:   

Revolving Documentary letter of Credit: RDLC is the same thing as  DLC but revolves around  the life of the contract.  

2.e) Pre-Advice:    

Bank Pre-Advice: A Pre-Advice is a document sent by a bank advising  the recipient’s bank about her intention to open a financial instrument. For  example, bank “A” will send a notice to bank “B” about her readiness to  open a DLC in favour of the seller who is a customer of the bank, Bank B.   Bank  B will respond confirming her readiness to receive such financial  instrument on behalf of her customer.  

2.f) Soft Probe:   

A soft probe is a means by which a bank conduct a brief credit worthiness  of a customer and also confirm if that customer’s account is in good  standing. It could be summarized as a “light credit check”.  

2.g) SWIFT:  

SWIFT is the coded means by which banks transfer funds and documents  through wire process.  

What Is  SWIFT?  SWIFT  is  the  Society  for  Worldwide  Interbank Financial Telecommunications.  This  organization  operates  a  closed  network which  operates between  banks  and  financial  institutions  for the  purposes  of  exchanging  messages relating to financial information. SWIFT was founded in Brussels, Belgium, in 1973 at a time when it was fast becoming apparent that globalization was a major market force, but banks in various countries were having trouble keeping up with the emerging demand for quickly and  efficiently sending  money and  communicating  financial  information  across borders.   

When it was first founded, the SWIFT network operated in just fifteen countries and had less  than  300  banks  and  financial  institutions  associated  with  its  network.  Nowadays SWIFT operates in 208 countries and there are well over 8,000 banking institutions who make use of the SWIFT messaging network.   

SWIFT Codes SWIFT codes are simply a means of differentiating between different kinds of  SWIFT  messages.  The  SWIFT  messaging  network operates  using  a  series  of  standardized  message  types.  In  order to  send  a  SWIFT  message,  the  banking  officer simply  fills  in  the  appropriate  information  in  the  appropriate  fields,  and  sends  the message. In order to identify the different types of SWIFT message, there are numbers assigned to each of them. The ‘MT’ prefix stands for ‘Message Type’, and the three digit number that follows it represents a specific message type.   

2.g.1) SWIFT CODE MT 760   

The MT-760 is a type of SWIFT message that is sometimes requested in trading because it  functions  much  like  a  Bank Guarantee.  Essentially,  a  MT-760  is  a  SWIFT  message which guarantees that a bank will make payment in favour of a client of another bank. 

When  a  MT-760  is  issued,  the  issuing  bank puts  a  hold  on  its  client’s  funds,  thereby ensuring that the funds are in place to make payment to the recipient of the MT-760.    

2.g.2) SWIFT CODE MT 799   

The MT-799 is a free format SWIFT message type in which a banking institution confirms that funds are in place to cover a potential trade. This can, on occasion, be used as an irrevocable  undertaking,  depending  on  the  language  used  in  the  MT-799,  but  is  not  a promise to pay or any form of bank guarantee in its standard format. The function of the MT-799 is simply to assure the seller that the buyer does have the necessary funds to complete the trade.  The MT-799 is usually issued before a contract is signed and before a letter of credit or bank guarantee is issued. After the MT-799 has been received by the seller’s bank, it is then normally the responsibility of the seller’s bank to send a POP (proof of  product)  to  the  buyer’s  bank,  at  which  point  the  trade  continues  towards commencement.   

2.g.3) SWIFT CODE MT 700  

MT 700 is a swift message type that is used by issuing banks when opening a letter of credit, this swift message is sent by the issuing bank to the advising bank, it is used to indicate the terms and conditions of a documentary credit which has been originated by the  Sender (issuing  bank),  according  to  latest  UCP rules,  UCP 600,  unless  otherwise specified, a documentary credit advised to the beneficiary or another advising bank based on  a  SWIFT message  constitutes  an  operative  credit instrument  which means  that MT 700 swift message is an operative letter of credit. No written message need to follow, the advising bank must advise a documentary credit, including all its details, in a way that is clear and unambiguous to the beneficiary. 

2.g.4) SWIFT CODE MT 103   

SWIFT MT-103’s is the most commonly used form of SWIFT communications, and one which many people will have utilized without even knowing it. For most bank customers, they are known not as MT-103’s at all, but rather as wire transfers, telegraphic transfers, or SWIFT transfers. A SWIFT MT-103 is used by the bank when its customers wish to make payment to customers of another bank in another country.   

3.  BUYER’S DOCUMENTS:  

3.a) LOI:   

Letter Of Intent: A letter of intent is the initial request sent by the buyer  (either directly or through his/her, agent, facilitator or mandate) to the  seller, expressing their intention to purchase a product from the seller, the  supplier or the broker. The letter usually will describe the product, the  quantity, method of payment, method of shipping and their banking  details. The LOI must be in the buyer’s letterhead and must be signed and  sealed. In some instances a buyers mandate can sign and seal an  LOI on  behalf of the buyer. A trusted agent can do so, only if, an approval has  been given by the buyer.  

3.b) IPO:  

Irrevocable Payment  Order: An  Irrevocable  Payment  order  is  a  document issued by the buyer to his bank to effect payment irrevocably to  all agents, facilitators, consultants, mandates and any party whose  banking (information) coordinates were provided in the banking coordinate  page(s) of the contract (SPA) and in (MFPA) master fee protection  agreement. When the paying bank receives the payment order, they will  effect payment irrevocably in accordance with the specific instructions in  the IPO and MFPA. (Master Fee Protection Agreement).

3.c) ICPO:  

Irrevocable Corporate Purchase Order: After the buyer has received an  offer from the seller called, FCO (Full Corporate Offer), the seller may  request for an ICPO to confirm that the buyer has accepted his initial offer.  

The 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 buyer must usually sign and seal the  ICPO.   

3.d) POF:  

Proof Of Fund: 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.

4.  SELLER’S DOCUMENTS:  

4.a) POP:  

Proof Of product: The proof of product is a document issued by the seller  to the buyer to prove that he /she has the product being sold.  The proof of  Product is subject to verification by the buyer. The 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.

4.b) FCO:  

This document is issued by the seller as an acknowledgement of the  buyer’s LOI and confirmation and acceptance of the specifics in the  procedure. After receipt of the FCO, the buyer issues an ICPO if such  document is demanded by the seller.  

Some Sellers, directly uses the SPA after the ICPO the order is SCO, ICPO, SPA. 

4.c) SPA:  

Sales / Purchase Agreement  (Contract): SPA stands for Sale and  Purchase Agreement and it is the same document we refer to as  contract.  The buyer and the seller or their mandates must sign and seal the contract before it becomes binding. If contract is not signed and sealed  by both parties, (buyer and Seller), such contract is not effective.  

5.  INSURANCE DOCUMENTS:  

5.a) PB:  

Performance Bond  (operative and non operative: 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 breaches   (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. 

6.  BUYER’S, SELLER’S AND SUPPLIER’S, INSTRUMENTS:  

6.a) CPB:   

Cash Penalty Bond: A Cash Penalty Bond is a cash amount held in  escrow by a designated bank to pay penalty to a party by a defaulting  party. Both parties are usually required to post same amount in cash.  In  most cases, it is usually held in the buyer’s bank or a jointly appointed  attorney to maintain an escrow account for this purpose.  Most sellers  object to cash bond being held by the buyer in his own account.  

6.b) CP:   

Cash Penalty: Some contracts stipulate that if the buyer or seller defaults  (failed to carry out some clause in the procedure), the defaulting party will  have to pay the other party to compensate for a possible financial loss or  losses incurred as a result of their default (breach of Contract). Both  parties, each will deposit an agreed sum of money into their bank  accounts or a selected bank account. The banks take charge of the  amount. If there is any defaulting party, that party looses his or her  deposit. This is a sure way to make both the buyer and seller play a fair  and honest game in the transaction.  

7.  SHIPPING TERMS:  

7.a) CIF:  

Cost Insurance and Freight: Cost Insurance and Freight method is the  safest shipping method for the buyer.  The seller pays the shipping, the  Insurance and cost of the product. The Seller will be paid by the 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 very small compared to TTT and FOB transactions.   

The seller or supplier loads the vessel, inspects the product onboard 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 seller or supplier based on  the result of the inspection after the seller or supplier has submitted all  relevant documentations as specified in the (SPA Procedure) contract.  

This is the best and safe way to buy crude oil. We will discuss the  commission aspect of a CIF transaction later. There is usually a 2%  performance bond involved in this kind of transaction.  

7.b) FOB:  

Freight On Board: In FOB transactions, the buyer provides his vessel  and a copy of his charter party agreement (CPA) to the seller or the  supplier. His vessel sails to the loading destination (port) and his vessel  load the cargo. He pays for his vessel charter and all insurance. This  method is also good because the buyer pays after his vessel is loaded  and inspected to ascertain  (Q&Q) Quality and Quantity.  

7.c) Dip & Pay: 

Dip  &  Pay  Are  the  fastest procedure:  the  Buyer must  demonstrate  that  has  tank available  to  inject  the  product  and  once  presented  the  TSR,  ATV and  RTR,  the  Seller begins to inject the product into buyer tank and buyer confirm the fuel and Pays against SGS report

7.d) TTT   

Tanker-to-Tanker Transfer: Tanker-to-Tanker Transfer (TTT) transaction  is usually conducted in the International waters. The buyers and sellers’  vessels exchange communication document and commence  communication. The seller’s vessel would send a marine document called  (NOR) to the buyer’s vessel. NOR stands for Notice of Readiness. This  means that the seller’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 Buyer’s vessel will respond with an “ETA” which stands for  “Expected Time of Arrival”. This is the time he expect to arrive at the  agreed meeting point for a TTT transaction.  TTT is a very risky type of  transaction. The ocean could be very cruel. Among the three forms of  crude oil delivery to the 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 seller that the buyer will not steal  the product and run away.   

8.  MARINE DOCUMENTS:  

8.a) ATB:  

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 onboard 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. Some fake  sellers will send a fake ATB to buyer just for the purpose of defrauding  him. Just to open a DLC  so that they can borrow against it.  

8.b) CPA  

Charter Party Agreement: 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.  

8.c) NOR:  

Notice Of Readiness: 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 request 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.   

8.d) ETA:  

Expected Time of Arrival: 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.  

9.  GENERAL TERMS:  

9.a) TTM:  

Table Talk Meeting: A table talk meeting “TTM” is a meeting held  between the buyer and the seller or their mandates to negotiate and come  to a final mutual agreement to complete and sign a contract. TTM could  also be held after a contract has been signed. At the TTM, buyers and  sellers discuss and agree on areas in the contract that has plagued its  execution. It is also a forum for the players to meet and know themselves.  

9.b) ASWP:  

Any Safe World Port: This stands for Any Safe World Port. This is  usually associated with a CIF    transaction where the seller and the buyer  mutually agreed to deliver the cargo at a safe place (port).  

9.c) RWA:  

Ready Willing and Able: RWA means Ready, Willing, and Able to  transact an Oil Deal. The seller and buyer must both express their  readiness, willingness and ability to hatch and conclude a deal as specified in the (SPA Procedure) contract.  

9.d) DD:  

Due Diligence: Due Diligence is the process by which both the buyer and  the seller conduct a fair investigation on each other’s ability to deliver and  perform. This may include reviewing each other’s financial background  and business records, including business ethics.  

10. AGENTS, FACILITATOR’S, BUYER’S AND SELLER’S DOCUMENT:  

10.e) NCNDA  

Non Circumvention Non Disclosure Agreement: NCNDA as it stands is  a document which protects all parties’ financial interest. (which is the  commission fee).  A Non Circumvention Non Disclosure Agreement is  usually signed by all involved parties before the SPA is signed could be  embedded in the SPA. 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.  

10.f) MFPA:  

Master Fee Payment Agreement: This is a document usually embedded  in the contract, signed by the buyer and the seller, guaranteeing the  payment of commission to all the parties involved in the deal. Since the  buyer pays all the parties from the discounted price, he is the party  required to sign and seal the document. It is always a good practice to  have this document in the contract as an integral part or as an  addendum.  

11. MARINE RELATED TERMINOLOGIES:  

11.a) 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. 

11.b) Mother or Feeder Vessel:   

A Feeder or Mother vessel is a vessel with a loaded cargo 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.  

11.c) 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.  

 11.d) 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.  

11.e) 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.  

 11.f) Tank Farm:  

A tank farm is a storage facility where crude oil is stored and finally  pumped into awaiting vessels.    

12. CONTRACTS:  

12.a) CIF:  

Cost Insurance and Freight: Cost Insurance and freight method is the  safest shipping method for the buyer.  The seller pays the shipping cost,  the Insurance and cost of the product. He gets paid by the buyer upon  safe delivery and inspection of the product plus presentation of all required  documents as specified in the contract. The discount for this kind of  delivery is very small compared to TTT and FOB transactions.  The seller  or supplier loads the vessel, inspect 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 will then pay the seller or supplier based on the result  of the inspection report conducted by his inspectors, after the seller or  supplier has submitted all relevant documentations as specified in the  (SPA) contract.  This is the best and safest way to buy crude oil. This  contract is executed and completed at the buyers and sellers mutually  agreed port of discharge.  

12.b) FOB:  

Freight On Board : In an FOB Contract, the buyer provides his vessel  and a copy of his charter party agreement (CPA) to the seller or the  supplier.  

The buyer’s vessel would sail to an agreed loading destination (port) and  his vessel loads the cargo. He pays for his vessel charter and all  insurance. This method is very good because the buyer pays after his  vessel is loaded and inspected to ascertain  (Q&Q) Quality and Quantity.  

The contract is usually executed and completed at the sellers loading port.  

12.c) TTT:   

Tanker-to-Tanker Transfer: Tanker-to-Tanker Transfer (TTT) transaction  is usually conducted in the International waters. The buyers and sellers’vessels exchange communication document and commence  communication. The seller’s vessel would send a marine document called (NOR) to the buyer’s vessel. NOR stands for Notice of Readiness. This  means that the seller’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 Buyer’s vessel will respond with an “ETA” which stands for  “Expected Time of Arrival”. This is the time he expect to arrive at the  agreed meeting point for a TTT transaction.  TTT is a very risky type of  transaction. The ocean could be very cruel. Among the three forms of  crude oil delivery to the 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 seller that the buyer will not steal  the product and run away.    

This type of contract is usually executed and completed at a mutually  agreed point by both vessel captains in international waters.  

13. CONTRACT PROCEDURE  

13.a) PROCEDURES: 

As I stated earlier, every contract has a procedure.  It is the specifics in the  procedure that is followed during the execution of any contract. A procedure is  like an engine in a car. It is the driving force. Without an engine, a car cannot  move. Therefore, without a procedure, there is no execution specifics to be  followed.  

Before a contract is signed and sealed, it is the items in the procedure that are  being negotiated upon. It is the hub of the contract and must be followed strictly.  

If any item in the procedure is not followed sequentially, that will be characterized  as a default or a breach of contract. It is the contents of a procedure  that are   generally the objects of discussion in a TTM. A procedure specifies the order of  business in respect with a contract. It states how and when things could be done  within the specifics in a contract. It is the pillar in a house without which, the  house cannot stand. The importance of a procedure cannot be overemphasized.   

When a contract is drawn, it specifies what the seller and buyer will do at a given  time period.  The specifics of the procedure come into effect as soon as the  contract is signed and sealed by both parties. Time is of essence in any  procedure.

13.b) Required Documents Before Payment:  

Some of the documents which, will be handed over to the Buyer for confirmation that the product  has been discharged are as listed below:  

a) Original and 3 copies of commercial invoice.  

b) Full set of 3 original and non-negotiable copies of bill of lading   

c) 1 original and 3 copies of Certificate of Quantity   

d) 1 original and 3 copies of Certificate of Quality  

e) 1 original and 3 copies of Certificate of Origin   

f) 1 Original and 3 copies of master’s receipt of samples  

g) 1  Original  and  3  copies  for master’s  receipt  of  each  one-copy document,  excepting           commercial     invoice  

h) 1 Original Ullage report issued at loading terminal.  

i)  1 Original and 3 copies of cleanliness report at loading port. Certificate of Ownership  

14. DISCOUNT PRICES: 

14.a) Gross discount  

A Gross Discount is the amount a price would be reduced to purchase  crude oil at a lesser price from the quoted ongoing market price  Sometimes used to refer to the price differences between futures of different delivery months, as in the phrase “July is trading at a discount to  May,” indicating that the price of the July transaction is lower than that of  May.   

It is the total price less than a specific amount setup as an incentive to  purchase the (Crude Oil) product. This gross is equitably distributed  between the buyer and the seller of the crude oil product.   

If the present market price is  $60.00 per barrel with a $10.00 gross  discount, the buyer will pay to the seller, $60.00 less ten dollars per barrel.  

This means that the seller will only be paid $50.00 dollars per barrel.  

14.b) Net discount:  

A net discount is the percentage share of the total discount (gross) that is  allocated to the buyer.  For example, if the gross discount is $10.00 and   the net discount is $6.00 dollars, the buyer will pay the seller the market  price less $10.00 and $4.00 left over from the $10.00 will be distributed equally between the seller and buyer sides agents, consultant’s mandates  and facilitators. That means that each side will get $2.00 dollars from the  $4.00 discount.  

15. Documents templates: 

15.a) LOI Download

15.b) SCO Download

15.c) ICPO CIF Download

15.d) ICPO FOB Download

15.e) ICPO FOB VESSEL Download

15.f) SPA Download

15.g) NCNDA/IMPFA Download

15.h) Warning Letter Download

15.i) Draft verbiage MT 760 Download

15.j) Draft verbiage MT 799 Download

15.k) Draft verbiage MT 700 Download

15.l) Draft verbiage MT 199 Download