IMPORTANT INFORMATION FOR BUYERS
PLEASE READ THE FOLLOWING CAREFULLY - IT WILL ASSIST YOU IN? COMPLETING YOUR CONTRACT WITH THE SELLER WITH MINIMUM DELAY
Many contracts between buyer and seller fail not
because of price but because there is a fundamental misunderstanding of
the sellers procedures.
Procedures are put in place not
because the seller wishes to put obstacles in the buyer's way but more
to assist the buyer to progress his prospect efficiently and with
minimal delays. Take the time to read the procedures and understand
exactly what they say.
Once you have read and understood the
procedures - follow them to the letter and see how quickly both this
and the seller's infrastructure respond to you and your requirement.
LOI / ICPO
Either one of these are required to
progress a prospect. This is not because the seller wishes
to avail himself of confidential information, this is because the
sellers contract calls for this information.
The LOI/ICPO save much time and
frustration as they spell out the buyer's requirement and deliver
information that will be required to complete the contract.
Upon receipt of the LOI the seller
will issue an FCO - the FCO will verify the terms and price by which
the seller will provide the produce. Sign and seal the FCO and with a
Proof of Funding, return the FCO back to the seller direct or to this
infrastructure.
The ICPO is
very much in the same format as the LOI with the exception that it is
an IRREVOCABLE CORPORATE PURCHASE ORDER - this should be supplied with
your proof of funding attached. When the seller receives an acceptable
ICPO and proof of funding, he will go straight to draft contract.
At this stage there is no need for the issue of an FCO unless the buyer requests it.
PROOF OF FUNDING
This is a very important
integral part of the documentation when first commencing a prospect.
Due to much time wasting in the past, all sellers insist on PROOF OF
FUNDING to give them a level of comfort that the prospective buyer is
real and does have the funding to enter into a contract.
Speak with your bankers first,
establish and have ready a proof of funding.
Make sure you have the funds
available before making the approach - too many buyers will place
themselves in a situation whereas they will negotiate a price and
contract, then find out they cannot raise the funding to support their
commitment.
This does little less then
frustrates all parties from buyer through to seller to introducing
intermediary. Funding should always be available for the total face
value of the financial instrument you have agreed.
CONTRACT VERBIAGE
The seller will where
appropriate supply a verbiage of the Contract. Study this carefully and
respond to the seller with any questions that you feel you may need
answering. Please ensure that any issues you have with the contract are
addressed and resolved at this stage and not after it has been signed.
PERFORMANCE BOND / POP
The seller may issue a
PERFORMANCE BOND in some cases. A NON OPERATIVE PERFORMANCE BOND
against the pre advised L/C with a POP. The PB will either be drawn on
or confirmed by a Prime Western Bank.
The activation of the L/C
automatically activates the PB. A POP will only be supplied under these
conditions - there is no point in requesting it under any other
circumstances.
FINANCIAL INSTRUMENTS
The seller will only accept the
following Financial Instruments. BANK GUARANTEE - IRREVOCABLE,
TRANSFERABLE, DOCUMENTARY CREDIT 100% at SIGHT - TRANSFERABLE STANDBY
L/C . DEFERRED PAYMENT L/C's are not acceptable as a rule.
AN IRREVOCABLE, TRANSFERABLE,
DOCUMENTARY CREDIT 100% at SIGHT permits the seller to liberate the L/C
by the amount of the shipment value against production of shipping
documents.
ALL FINANCIAL INSTRUMENTS ARE IN CONFORMITY TO UCP500
REFERENCES
Some Intermediaries have asked
that we provide them with references - the answer to this is an
emphatic NO. References will only be provided by the sellers bank to
the buyers bank by way of a POP and this is conditional upon the buyer
proving financial capability first and submitting the request for a
reference in writing - there are no exceptions.
PROOF OF PRODUCT / SAMPLES
POP will be supplied as defined under the topic of PB above. Samples cannot be supplied for a variety of reasons.
A seller who agrees to deliver
a sample to a buyer is entering into a contract to supply the final
produce from the same batch as the supplied sample - this is not
possible.
There is no guarantee that the
final produce arriving at the buyer's destination port will be from the
sample-supplying factory let alone form the same batch.
The buyer has the protection of
the SGS inspection against the product specification as is in the
contract. SGS will reject a shipment and not issue a conformity
certificate if the produce is not of International Accepted
Specification and Quality Standard.
The buyer also has the ability
by prior arrangement with the seller and at his own account, to be
present at time of loading with the seller's representative.
CONTRACT
Never sign a contract unless
you are 100% sure that you can perform within the terms and conditions.
It is too late if you have signed the contract to return to the seller
and ask to have terms and conditions modified.
As SOME contracts carry a 2%
PB against the total face value of the contract, so will they carry a
2% contract failure breach clause against non-performance by the buyer.
You the buyer would without
hesitation collect the 2% PB in the event of the seller not performing
according to the terms of the contract, you should not express surprise
that the reverse is true of the seller. After all said and done, this
is a legal document and must be respected as such.
DO NOT SIGN OR EVEN REQUEST A CONTRACT until you are satisfied that you can progress the prospect to a final conclusion.
INTERMEDIARY PARTICIPATION
Unless specifically requested by the
buyer and committed to in writing, the seller will deal direct with the
buyer via it's own infrastructure and representatives.
Documents such as FCO, Contract etc are confidential to the buyer and seller and will not be shared with a third party.
Should the buyer require the
Introducing Intermediary to be involved at each stage of the process
then a letter of authority under the buyers seal will need to be sent
direct to the seller naming the third party.
A copy template of the authority
letter is available in the main menu - this should be copied and pasted
onto the buyer's letterhead, signed and sealed.
PREVARICATION
This is one of the biggest problems
suffered by seller's. Because the Commodities Market is so volatile and
reliant on market forces, prevarication often means that by the time
the buyer has obtained funding, decided on volume, product origin etc.,
the market has moved on with prices having changed either for produce
or packaging and the whole process has to begin again.
Always insure that these issues are
addressed before you request an FCO or Contract. To do this after the
event will only lead to disappointment.
PROCEDURES
Buyer submits LOI / ICPO on own letterhead not older than 2 days signed and stamped with official seal.
The LOI / ICPO should contain the
following information as a minimum and should follow the format of the
attached LOI template where possible:
1. Specification of Produce required.
2. Volume of order.
3. Bulk or Bags.
4.Shipping Details Proposed Volumes.
6.Discharge Rate.
7. Destination Port
8. Target price.
9. Financial instrument
10.Full banking co-ordinates including account number, SWIFT Code, Contact name at bank, Confirming Bank Name and Address if bank issuing LC is not a prime bank.
11.Name of Authorised Contract Signatory.
12. Introducing Accredited Broker Code or Joint Partner Name and e-mail address if applicable.
- Buyer financial capability will be verified prior to issuing the draft contract.
- The seller will issue an FCO for the buyer's signature together with the verbiage of the contract.
- The buyer signs the FCO and provides Proof of Funding with verbiage of Proposed Financial Instrument.
- Upon receipt of the signed FCO, Proof of Funding and Verbiage of Financial Instrument, the Seller issues contract with full banking for signing and sealing.
- Buyer's bank sends pre-advised Agreed Financial Instrument for non-operative 2% PB, POP and Bank Guarantee of Product Availability.
- POP and POF will only be accepted Bank to Bank via SWIFT Banking Procedure.
- Financial Instrument and PB activated as per procedure in contract.
- Shipment will commence within 30 to 45 days from the date the Financial Instrument is activated.
