Transactions with petroleum products: Deciphering key terms and abbreviations

Welcome to the world of petroleum products trading, where the language of business is not only words, but also acronyms, terms and abbreviations. In the process of concluding deals and executing documents in this industry, specialized terms and abbreviations are often encountered that can cause confusion for even experienced professionals. That’s why we’ve compiled this glossary of terms and acronyms to provide you with a reliable resource for clarifying the meanings and usage of key terms used in petroleum product transactions. Whether you are new to the field or a seasoned professional, this dictionary will help you navigate the world of petroleum trading more confidently and successfully conduct business negotiations. Together, let’s dive into the terminology that will become your trusted companion in your work!

Terms and abbreviations used in preparation of documents on petroleum product transactions:

LOI – Letter of Intent
Letter of Intent. A letter of intent should inform the supplier of the buyer’s intentions that the buyer really wants to purchase. The letter of intent is an optional document issued by the buyer and this document does not commit the buyer to a future transaction, but only declares its intentions.

ICPO – Irrevocable Corporate Purchase Order
It is a document similar to a Letter of Intent (LOI) used by companies to communicate their intention to enter into a transaction with a supplier company and to confirm the terms of the purchase, banking information and company. finance.

In petroleum product transactions, it refers to a one-time transaction, without any long-term commitment.

The term means in negotiations and execution of documents, denoting as a trial (first) delivery within the framework of a long-term supply contract.

NCND – Non Circumvention Non Disclosure
The purpose of this document is to protect the agent (intermediary) who wants to receive a commission for connecting the Buyer and the Supplier.

SPA – Sales And Purchase Agreement
Contract for the purchase and sale of a resource. Supply contract.

IMFPA – Irrevocable Master Fees Protection Agreement.
The IMFPA helps ensure that intermediaries are fairly remunerated for their role in facilitating transactions and provides a clear and binding agreement governing the payment of commissions.

FOB – Freight On Board
The basis of delivery is Cargo on board, in accordance with Incoterms. FOB terms require the seller to deliver the goods to the port and load them on board the vessel nominated by the buyer; the seller bears the costs of delivery. In some ports, in FOB deliveries, the buyer bears the loading costs. The risk of accidental loss of or damage to the property is borne by the seller until the goods have crossed the ship’s side and by the buyer from that moment.

CIF – Cost, Insurance and Freight
An international commercial trade term for the price of goods, which implies payment for delivery at the seller’s expense for the cost of loading the goods onto a ship, transportation and insurance to destination.

ICC – International Chamber Of Commerce
An independent, self-governing, non-profit international organization established in 1919 that brings together chambers of commerce, business organizations, and individual companies to develop international trade standards, jointly protect interests in international organizations, and resolve commercial disputes.

ATS – Authority To Sell
Authorization to sell issued by the refinery to its customer. In general, in practice, this document is issued by the intermediary as proof that it has been authorized by the refinery to resell the resource.

POP – Proof Of Product
This is an essential document in the petroleum trade that documents the existence of the product. The PОP is critical from the buyer’s point of view, but an important point about product proof for the buyer is that it must be independently verifiable, which means that there must be a third party (a person or organization other than the buyer or seller) that provides documents that indicate or confirm that the product exists.

РРОР – Partial Proof of Product
Partial proof of product. Incomplete, partial package of documents for the product (resource).

TTT – Tanker To Tank
FOB transaction procedure – Tanker to tanker. A transaction procedure when a resource is sold inside a port by transferring it from the seller’s tank (oil storage facility) to the buyer’s tank (oil storage facility).

TTO – Tanker Take Over
FOB transaction procedure – Tanker take over. A transaction procedure when the seller sells his resource together with the oil storage, i.e., assigns the lease of his tanker (oil storage).

FOB transaction procedure, in which the supplier first authorizes the buyer to come to the seller’s oil storage facilities, take samples of the goods, and after confirming the quality and quantity, direct payment immediately.

A transaction procedure in which the supplier sells the resource on the high seas together with the vessel. After acceptance of the ship on the high seas, the buyer generally pays for the freight of the ship to its port of destination.

TTV – Tanker To Vessel
An FOB transaction procedure in which the supplier pumps from his onshore oil storage facility into the buyer’s ship. This is in fact the classic FOB procedure under Incoterms.

Not officially an incoterm, but commonly used in seller quotes, such as “CIF ASWP” and widely used. CIF ASWP in the quote implies that CIF shipping will cost the same for delivery to any safe port in the world, regardless of the distance to the source.

ATB – Authority To Board
Authorization to land. Used for the shipment of crude oil and petroleum products. Usually a SATCOM message issued by the ship’s master, it authorizes the buyer to board the ship to confirm the presence, quantity and quality of the cargo. It is usually given to the supercargo team and an inspector to conduct a dive test. You cannot board a cargo or oil ship without this authorization.

A series of space communications satellites designed and operated by RCA American Communications. It is used by ship captains for communication and messaging.

Product Analysis Report. Laboratory testing form.

ATSC – Authorization to Sell & Collect
The document is mainly issued by the middleman as proof that he has been authorized by the refinery to resell the resource.

Q88 – Vessel
Ship details (ship passport). Complete and detailed information about the ship, with all technical details, technical ship passport.

NOR – Notice of Readiness
Notification of readiness of oil depot or buyer’s ship for fuel injection with full coordinates of oil storage facility.

ETA – Еstimated time of arrival
Estimated time of ship (cargo) arrival at destination.

SGS report
Swiss company providing independent examination, inspection, testing and certification services. SGS’s services include inspection and verification of the quantity, weight and quality of goods; product testing for various safety and quality indicators; certification of products, management systems and services against standards set by governments, standardization bodies or SGS clients; and services to verify that products and services comply with international or national legislation.

TSA – Tank Storage Agreement
Tank storage agreement. Agreement with an oil storage tank farm for storage.

TSR – Tank Storage Receipt
Actually a receipt for an above-ground oil storage tank, showing all the details of the storage facility and authorization for use. Issued to the TSA as authorization to pump a specific fuel into a specific tank.

DIP test – DTA – Dip Test Authorization
Admission of the buyer’s representative to the supplier’s tank for sampling and checking the presence, quantity and quality of fuel.

UDTA – Unconditional Dip Test Authorization
Unconditional authorization to test fuel. Allowing a representative of the customer to enter the supplier’s tank to sample and verify the presence, quantity and quality of the fuel without any conditions or fees that prevent the customer from testing the fuel and obtaining product confirmation before being required to make payment for the fuel.

Complete information on the counterparty (company) with constituent information, bank details, copies of constituent documents and copies of passports of signatories.
ATV – Authorisation to verify
Authorization to inspect the oil storage facility or ship. Authorization for the client’s representative to enter the ship or tank farm to check the availability of fuel.

CPA – charter party agreement
Ship charter contract with a shipping company

TTTIA – Tank to Tank Injection Agreement
An agreement between the buyer’s tank farm and the seller’s tank farm to pump from tank to tank. It is used in FOB (intra-port sales) transactions.

Supplier’s irrevocable offer, i.e. the supplier undertakes to deliver the goods on the terms and conditions specified in the offer. The supplier has no right to change any of the terms and conditions. The offer usually has a specified validity period.

SCO – Soft Corparate Offer
To start negotiations in international trade, the parties exchange documents that define the subject matter and terms of the negotiations. If the seller is the first to come out with an offer, it sends an SCO.

R&E – Contract with Rolls & Extension’s
Long-term export contract between buyer and seller. The same as a SPA, but for a longer period of time.

JVA – joint venture agreement
A joint operating agreement, or an agreement to conduct business together and establish a joint virtual enterprise. In most countries, intermediaries’ commissions cannot exceed a certain amount. In practice, in case of large commissions in transactions, this contract format is used instead of a commission agreement.

This is actually a document in which the buyer and seller agree on specific dates (schedule) for injecting the resource into the buyer’s oil storage facilities.

P.A.S CODE – Port Authority Security
An acronym for “Port Authority Security” and “Code” or “Identification Code,” it can be assumed that “P.A.S CODE” refers to the security code that is required to access documents or information about oil storage facilities at the port.

Is a notarized legal document provided by the seller of a piece of property, confirming the status and certain facts about the property, including ownership and the existence of any legal issues. The Certificate of Title is designed to protect the buyer.

Invoice for payment

Generally provided by the seller as proof that the supplier has previously injected the resource into its oil storage facility

It is a type of agreement between two or more parties in which it expresses a convergence of will between the parties, indicating an intended common line of action. In petroleum product transactions, it is an additional document after the ICPO, which is rarely used mainly to fix the transaction procedure in a separate document.

TTVIAC – Tank to Vessel Injection Agreement Contract
Tank-to-ship injection agreement contract. This is a document in which the buyer and seller agree on the fact that injection from the seller’s land-based resource at a port into a ship chartered by the buyer will take place.

EL – Endorsement Letter
This document format is mainly used in petroleum product transactions in situations where the supplier needs additional confirmation from the customer’s contractor that it is ready for the transaction. For example, the supplier may request this letter from the customer’s tank farm. To confirm the tank farm’s readiness for the transaction.

DD – Due diligence
The name of the process of conducting an audit of a counterparty and its documents.

Terms and abbreviations used in preparation of documents on petroleum product transactions:

BCL – Bank Comfort Letter
Also known as a “Bank Capability Letter” or “Bank Confirmation Letter”, this is a letter from the buyer’s bank, sent via SWIFT, indicating the buyer’s ability to make the purchase, confirming the availability of funds to fulfill this financial obligation. It is not a guarantee of payment and cannot be used by the seller’s bank. Therefore, it is not a valid banking instrument and is used in the oil business only as proof of funds availability.

BG – Bank Guarantee
A banking instrument sent through the SWIFT system indicating the availability of funds that are set aside (blocked) to make a purchase. BG is stronger than a bank letter of guarantee, but still not a valid banking instrument, meaning the seller’s bank cannot use it. It is strong enough to load the ship, but usually not strong enough to assure the seller’s bank of the issuance of a performance guarantee. It can and usually is used as a filler until the final determination of the shipment is made by Q&Q test and the delivery documents are presented to the seller’s bank for payment. Payment is then usually made by standard bank transfer, MT103.

POF – Proof Of Fund
This is a letter or document that certifies that an individual, institution, or corporation has sufficient funds (money) to complete a transaction. A POF is usually issued by a commercial bank or depository agent to provide assurance or confidence to another party – usually the seller – that the individual or entity in question has sufficient funds to make the agreed-upon purchase.

SBLC – Standby Letter of Credit
This is a subspecies of letters of credit, i.e. the obligation of the bank issuing such a letter of credit – to pay a sum of money to the beneficiary in case of impossibility of fulfillment of financial obligations by the bank’s client. The mechanism of operation is that the bank, at the request of the client, freezes the funds, which remain so until the end of the implementation of the transaction or for a certain fixed period of time.

DLC – Documentary Letter of Credit
Letter of credit is a bank’s obligation to pay a certain amount of money to the seller of goods or services upon timely submission of documents confirming shipment of goods or fulfillment of contractual services. Documentary letter of credit is one of the most important means of financing in international trade, as the letter of credit is an instrument that removes most of the risks from both the buyer (importer) and the seller (exporter). Documentary letter of credit is a very flexible and convenient settlement instrument, which has the widest recognition and acceptance in the world.

RWA – Ready, Willing and Able, SWIFT MT799
A Ready, Willing & Able (RWA) bank letter confirms that a bank or financial institution is ready and able to act on behalf of a customer for a specified financial transaction, that the bank customer has sufficient funds to complete the transaction and that these funds have been temporarily set aside specifically for this transaction. In fact, it is a preliminary bank message before issuing a bank guarantee or letter of credit.

PB – Performance Bond
Performance guarantee. A bond (obligation) issued by one party to a contract as a guarantee against the failure (non-performance) of the other party to fulfill its obligations specified in the contract. For example, a supplier may issue a PB bond to a customer for whom goods are to be delivered. If the contractor is unable to deliver the goods in accordance with the specifications set out in the contract, the client is guaranteed compensation for the financial losses incurred from lost profits. Generally in the market, a Bond is issued by the supplier in response to a Letter of Credit received from the client and its amount is generally around 2% of the contract value.

RB – Reference Bank
Bank reference letter of any free form.

It is a type/format of SWIFT bank messages used in the payment system of the Society for Worldwide Interbank Financial Telecommunication to send cross-border/international bank transfer messages between financial institutions for customer money transfers. In fact, it means a direct cash payment without any guarantee.

The SWIFT payment system uses different types of messages between banks when making international money transfers. MT 199 is a text message between two banks. This message is composed in free form. It is essentially an interbank messenger. MT 199 in transactions with petroleum products is mainly used when transmitting information about the solvency of the customer to the supplier.

SWIFT MT760 bank message format is a bank guarantee issued as a security for the obligations of the customer (buyer) to the supplier (refinery), the legitimacy of which is confirmed by transferring the message through the international SWIFT system from the buyer’s bank to the seller’s bank.

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