FOB transaction procedures with petroleum products in key world ports: Rotterdam, Fujairah, Houston.

International trade in petroleum products is a key element of today’s global economy, driving price trends and providing energy security for countries and regions. In this article, we will focus on FOB (Free On Board) in-port fuel sales and purchases, highlighting the most common procedures associated with these transactions, as well as the risks that may arise for both customers and suppliers during the implementation of these procedures. We will detail information on what to pay special attention to when dealing with various procedures, what are the hidden nuances and possible frauds, what risks arise when using these or those procedures, and how to maximise efficiency in such transactions.

The FOB transaction procedure in the oil products sector, in its classical form, implies that the supplier sells his oil products in his port of departure and the buyer charters a vessel and sends it to the seller’s port for loading.

Historically, many large world ports have grown, more and more oil storage facilities have been built inside the port and some world ports have become like huge trading platforms, where transactions are carried out even without loading ships, but inside the port – where the seller pumps oil products from his oil storage facility to the buyer’s oil storage facility inside one port. Such global hubs for oil products trading are the ports of Rotterdam (Netherlands), Fujairah (UAE), Houston (USA), Singapore and others.

For this reason, FOB petroleum product transactions can be divided into two directions:

1) A classic FOB transaction, where the seller loads the buyer’s ship from his onshore tank.

2) Intra-port FOB, when the seller transfers the resource from his storage tank to the buyer’s tank farm, or assigns to the buyer the lease of his tanks at the port.

For example, the port of Rotterdam has its own intra-port oil pipeline, which can be used to transfer oil products from one tank to another, or from tank to ship. All oil depots in the port are connected by pipelines.

Seller and buyer are always competing parties. Apart from the classic struggle for price and quality, in petroleum product transactions, when the market is full of fraudsters, there is also a struggle for the terms on which the transaction will be made. Customers always want to see the product documents first before showing money, and the seller wants to see the money and the buyer’s storage facilities/ships first before showing the product documents.

Why doesn’t the seller want to be the first to show product documents?

Often intermediaries and fraudsters pretend to be real buyers. They come to the seller, claim to be buyers and take a full package of documents for the goods from the seller. But they do not have the purpose of buying the goods by getting the documents. In the best case, they start sending the documents to all their potential customers and offer to resell the goods, thus making the confidential documents available to the public. In the worst case, the fraudsters who have received the documents for the goods, go to other clients and tell them that it is their goods, get prepayment from the clients for the delivery and disappear. Deceived customers then come to the real owners of the cargo with claims, although the real owners of the resource and did not know that the fraudsters using copies of his documents for the goods, have already sold several times this product and collected money from customers. In order to avoid rehearsal risks, wasting time on fraudsters, suppliers are reluctant to show the documents for their goods and put a number of conditions to the buyer in order to check whether the buyer is a real buyer.

Why don’t buyers want to be the first to show the availability of money for purchase, whether they have ships to load or leased oil storage facilities in the port?

For the same reason as sellers – buyers fear that they are in contact with a fake seller. Buyers fear that they are not negotiating with the real owner of the petroleum products, but with an intermediary or a fraudster. There is often a situation when a customer gives the seller a bank statement that he has tens of millions of dollars in his account for the purchase as proof of his financial capabilities. But the supplier turned out to be not real and just a middleman, who starts “running around the market” waving bank documents in search of goods for this client and send this statement to different counterparties. In the best case, the distribution of confidential bank documents is fraught with the company problems with its banks and rehearsal risks, but there are much more sophisticated fraud schemes, when because of their trust buyers get direct losses. Therefore, buyers are reluctant to show their bank, ship and oil storage documents until they are sure of the supplier.

There are a lot of well known companies on the market, both buyers and sellers, with world renowned reputations that do not need to be checked and their reputations speak for themselves. But then again, big world famous buyers purchasing large volumes will never pay a seller too much, just as big world famous sellers with a name and reputation will never sell their goods at throwaway prices. So buyers will always keep looking for new sellers with lower prices, and sellers will always keep looking for new buyers who will pay more.

Our observations suggest that the market for petroleum products is a sellers’ market. Sellers try to impose their procedures and conditions, while buyers enter the negotiation process trying to soften the requirements and conditions of sellers

According to our estimates, 70-80% of the petroleum products market are long-term multi-year contracts, established relationships between the major whales of the industry. But there is always 20-30% of the market of active transactions, where everyone is looking for profit and good prices, and therefore this zone of deep turbulence. In order to organise this turbulent sea of sellers/buyers, the practice of drafting transaction procedures has been developed, so that the parties before the start of the transaction would prescribe clear rules of the game between themselves.

Let’s go through the most common FOB transaction procedures in Rotterdam, Fujairah or Houston, their specifics, what to look out for and where are the pitfalls for buyers and sellers.

Procedures can be different and each transaction is always unique. The final text of a transaction procedure in petroleum products trading is always the result of negotiations and discussions between the two parties. We provide only samples of the most common procedures that our company has encountered in various projects

Customers in the petroleum products market have historically placed their trust in SGS documents. Virtually all customers trust SGS documents as documents that confirm the actual availability of goods from the seller, confirming their quality and quantity. SGS is a Swiss company that provides independent examination, inspection, testing and certification services. It is a globally recognised laboratory whose expertise is trusted. You can easily contact an SGS office to verify the authenticity of a document. Another important point is that SGS insures its risks, and if there is a situation where the SGS product inspection report is not true, you can even get compensation for the inaccuracy of the SGS laboratory reports on petroleum products.

Suppliers, in turn, are very reluctant to share their SGS reports with their customers because SGS is trusted by everyone, including banks, and we know of cases where customers have even taken out loans from banks to purchase goods on SGS’s honour.

Recently, it has become a common practice for suppliers to provide a copy of the SGS certificate for verification not to the buyer, but to the buyer’s storage facility. This is done by suppliers in order to prevent the SGS copy from falling into the hands of fraudsters and circulating on the market, and also to verify the customer’s storage facility, as the storage facility is unlikely to accept the SGS report for verification if the tanks have not been paid for by the customer.

But it is important to realise that there are also fraudsters among sellers who play a combination of several moves. Here is an example of one of the variants of fraud. First they impose their fake oil storage facility on the client, then they supposedly show him a copy of SGS, and then the fake oil storage facility writes an Email that it has checked the copy of SGS and invoices the client for the rent of tanks that do not exist.

Distinctive features of all FOB procedures:

In the vast majority of procedures, the transaction starts with the customer writing an ICPO (Irrevocable Corporate Purchase Order). In almost all procedures, before any transactions start, the supplier together with the ICPO requests two other documents – a BCL (Bank Comfort Letter) or other convenient for the parties format of the bank document. The third document requested by the seller is either a copy of the TSA (Tank Storage Agreement) agreement, if it is a TANK TO TANK transaction, or a copy of the СРА (Сharter Рarty Аgreement), if it is a TANK TO VESSEL transaction.

In turn, on the supplier’s side also, in the absolute majority of cases, the FOB transaction starts with the provision of FCO (Full Corporate Offer) and as a consequence CI (Commercial Invoice). The deciphering of abbreviations in petroleum product transactions is described in this article.

In other words, virtually any FOB petroleum products transaction starts with a basic exchange of courtesies. The customer provides ICPO + BCL + TSA or CPA, in return the supplier provides FCO + CI to the buyer. And after the exchange of basic courtesies, various variations of transactions begin.

Also an interesting feature of FOB oil products transactions is that the parties most often do not specify the need to sign a contract in the transaction. This is due to the fact that FOB transactions do not entail any long-term commitments or serious preparation in advance, as CIF transactions do. These are so to say quick transactions within the port in a few days. Accordingly, ICPO documents from the customer and FCO documents from the supplier actually replace the contract for the parties.

There is an interesting trick during a DIP test. There is a DTA (Dip Test Authorisation) document and there is a UDTA (Unconditional Dip Test Authorisation) document. There is a fundamental difference in these two documents. UDTA is an unconditional invitation to perform a DIP test. After receiving the UDTA the client can immediately leave for the test without any conditions. And in the DTA document there may be some conditions, for example, the seller will want the buyer to pay for the rent of his tanks for the period of testing or we have met cases when the seller’s oil storage took a fee for entry to the oil storage. Be careful and pay attention to hidden conditions. Which can be when conducting a DIP test.

1. Submission of TSR (Tank Storage Receipt) by the buyer. FOB transaction procedure for petroleum products, tank-to-tank within the port.

A key feature of this procedure is that the supplier – before showing the original documents for his goods to the buyer – requests the buyer to provide TSR, the rent receipts for the tanks that the buyer intends to use to pump the goods.

Risks: the buyer pays for the storage tank before he sees the goods. Consequently, there is a risk that the supplier does not have the goods and the buyer has already rented and paid for the storage tank.

SAMPLE TEXT OF THE PROCEDURE:

1. Seller confirms procedure and pricing to the buyer directly.
2. Buyer sends irrevocable company purchase order (ICPO), and tank storage agreement (TSA) to Seller.
3. After acceptance of the ICPO, and a positive due diligence (DD), on the buyer, the refinery issues a commercial invoice (CI) for the availability quantity in the seller storage tanks.
4. Buyer signs CI and returns it to Seller for seller’s approval.
5. The buyer will contact their oil storage facility and obtain a TSR valid for at least 6 days and give a copy of the TSR to the supplier for verification.
6. Seller provided (below) proof of product (POP) documents to the buyer.
   LIST OF DOCUMENTS PROVIDED.
   6.A. AUTHORIZATION TO PHYSICALLY VERIFY PRODUCT (ATV).
   6.B. THE UNCONDITIONAL DIP TEST AUTHORISATION (UDTA), TO BE ENDORSED BY BUYER’S TANK FARM.
   6.C. PRODUCT PASSPORT.
   6.D. COMMITMENT AND GUARANTEE LETTER TO SUPPLY.
   6.E. AUTHORIZATION TO SELL AND COLLECT (ATSC).
   6.F. FRESH SGS REPORT, LESS THAN 48 (forty-eight) HOURS OLD.
   6.G. TANK STORAGE RECEIPT (TSR).
7. Buyer verifies SGS report and has the option to elect to book retest with SGS (at buyer’s expense) in seller’s storage tank. Buyer will provide Q&Q reports to the seller free of charge.
8. Within 24 (twenty-four) hours, buyer makes 100 % (hundred percent) TT wire transfer payment, seller changes title of ownership to the buyer at the same time of receiving full payment.
9. Subsequently monthly shipment continues as per terms and conditions of the CI, and extension of transaction by issuing 12 (twelve) months contract to buyer for proceeding. Payments by MT 103.
10. Seller issues 12 (twelve) months contract to be signed with all parties and allocation license.

2. Submission of ATV (Authorisation to verify) by the buyer. FOB transaction procedure for petroleum products, tank-to-tank within the port.

For suppliers of oil products on FOB terms there are two important points that are critical for them to receive from the buyer – confirmation of solvency and confirmation of the availability of tanks at the buyer for pumping the purchased resource. Suppliers try to structure the procedure in such a way that the customer first pays for and leases onshore tanks for storage of oil products, and only then suppliers agree to show the original documents for the goods. Since if the customer has paid for the tanks, then in addition to confirming the availability of oil storage tanks, the supplier also indirectly confirms the availability of money, as the customer has made a payment for the tanks.

In the classic, previous procedure – the supplier asks for a copy of the tank receipt (TSR). But most customers don’t want to give a receipt for the tanks. Therefore a similar procedure has appeared, where the supplier does not ask for a copy of the TSR, but for authorisation to inspect the customer’s tanks – ATV (Authorisation to verify). But in fact it is the same, because no oil storage facility will not allow the supplier to inspect the tanks if the customer has not rented the tanks beforehand, because if the customer has not rented a tank, there is nothing to inspect.

Risk: The buyer pays for the storage facility before seeing the goods. There is a risk that the supplier does not have the goods and the buyer has already rented and paid for the storage facility.

SAMPLE TEXT OF THE PROCEDURE:

1. The buyer accepts seller working procedure and issues ICPO with bank-to-bank BCL to the seller.
2. The Seller shall issue an CI (Commercial invoice) an ICC Warning letter and it shall bear the signatures of both parties, indicating their acknowledgment and acceptance of its contents.
3. The buyer sends the TSA agreement to the seller and ATV (Authorisation to verify) issued on the oil tank storage letterhead to the seller authorising physical inspection of the tanks by the seller.
4. The seller signs the IMFPA agreements with the intermediaries.
5. The seller sends it along with the PPOP documents to the buyer for evaluation:

• Product Availability Statement.
• ATSC
• Commitment to Supply Statement.
• Injection program
• Fresh SGS

6. The Buyer shall provide the Seller with a Tank Storage Agreement (TSA) authorization, granting permission for the Seller to utilize the leased tank on behalf of JJ MARINA.
7. The buyer provides signed IPA (Injection Programming Agreement) with his tank company to engage injection Programming.
8. The seller provides buyer with ATV (Physical Verification) with Product Passport.
9. With the result with the dip test accompanied by a newly issued SGS report affirming the quantity and quality of the product, the operation ends.
10. The buyer will ensure that 100% of the total product price is paid and received by the seller’s bank through its bank within 24 hours The Seller confirms the Payment and gives the title of ownership of the product to the buyer.
11. The seller pays the commissions to intermediaries in 48 hours after receiving the payment from the buyer.

3. Purchase through DIP test. FOB transaction procedure with petroleum products, from tank to tank inside the port.

A key feature of this procedure is that the supplier gives the buyer the opportunity to DIP test the goods by taking samples from the seller’s tank before paying for the goods.

Risk: It is very common for vendors to impose on buyers, before conducting a DIP test, to pay for an extension of the vendor’s tank rental for 2-3 days, for the duration of the test. It is also common for the seller to ask the buyer to certify the invitation to the DIP test at the buyer’s oil storage facility in order to make sure that the buyer has its own paid oil storage facilities for the future receipt of goods, in turn, oil storage facilities generally charge the buyer a fee for signing the DIP test.

Fraudulent schemes: Fraudsters forge documents and offer non-existent goods, and then offer to pay for the extension of their tank farm until the DIP test. After the customer pays for 2-3 days extension of the seller’s tanks, the scammers disappear and it turns out that you paid a non-existent tank. Check the seller’s depots carefully to see if they are real. In the port of Rotterdam alone there is an official blacklist of more than 700 fake non-existent tank farms.

SAMPLE TEXT OF THE PROCEDURE:

1. Buyer accepts seller-working procedure and issues ICPO addressed to the seller refinery
2. Seller issues commercial invoice (CI), buyer signs and returns back commercial invoice.
3. Seller provides buyer with the below listed PPOP.
   A. Tank storage Reservoir Receipt (TSRR)
   B. Product Passport Quality and Quantity Analytical Report
   C. Authority to sell and collect (ATSC)
   D. Statement of Product availability
   E. Certificate of Product Origin
   F. DTA
4. Upon receipt of the endorse DTA buyer extend seller tank For 3 days and upon confirmation of buyer Extended tank for three days, seller conduct fresh SGS (A DAY OLD) and present the result to buyer for Verification, buyer confirm SGS report.
5. Buyer confirm SGS and release payment of the product by MT 103 Seller changes the title of Ownership.
6. Seller pay commissions to all intermediaries involved as per IMFPA signed between Seller and Beneficiary Paymaster

4. Signing of IPA (Injection Programming Agreement) by the buyer’s oil storage facility. FOB transaction procedure with oil products, from tank to tank inside the port.

The key feature of this procedure is that the supplier obliges the seller’s oil storage facility to sign an injection programming agreement before showing the full set of documents for the goods.

Risks: In this procedure, the customer actually signs a daily schedule of when and how much fuel will be injected without seeing the product documents themselves. To sign such a document, the oil storage facility basically charges the customer for future storage of 6-10 days. In other words, the customer first has to pay for the future rent of his oil storage facility before he can see the actual documents for the goods.

Fraud: When a buyer signs a consent to inject without checking the paperwork for the product, they are effectively giving permission to fill their tanks with the product on a certain date. Sometimes it happens that the seller injects substandard goods. And the buyer becomes in a desperate situation because back pumping and cleaning of tanks is so expensive that he has to negotiate with the seller and at best take this product at a discount. There are still situations when the seller conducts the injection of goods that originate and station country. The buyer is also looking for ways out of the situation because he did not check the documents for the goods before signing the IPA.

SAMPLE TEXT OF THE PROCEDURE:

1. Buyer accepts seller’s working procedure and issues ICPO to the End seller via Seller’s representative.
2. Seller issues a commercial invoice and ICC Warning letter and Buyer signs and returns commercial invoice and ICC Warning letter on the due date along with Buyer TSA.
3. The Seller issues the following PPOP to the buyer for evaluation:

• Statement of Product Availability
• IPA ( Injection Programming Agreement ).
• Letter of Guarantee
  Upon receipt of the above PPOP Documents, the buyer provides signed IPA (Injection Programming Agreement) with his tank company to engage in injection Programming.

4. Seller provides the buyer with an Injection program,

• Fresh SGS,
• Certificate Of Origin.
• ATSC (Authority to Sell and Collect)
• Tank Storage Receipt (TSR)
• Injection Report, and ATV (Physical Verification) with Unconditional DTA for Dip Test in the seller tank for product reconfirmation.
• After successful Dip Test, injection commence from seller tank to buyer tank

5. Buyer makes 100% payment by MT103 TT wire transfer for the total product and Seller pays commission to all intermediaries involved in the transaction within 24 hours after confirmation of the buyer’s payment.
6. Seller issues draft SPA to the buyer to review for R&E monthly deliveries.
7. Buyer reviews and approves the SPA and issues SBLC/IRDLC irrevocable, non-transferable, auto revolving for 12 months shipment value, documentary letter of credit for length of contract and for each lift per schedule. Buyer pays after Dip Test by MT103 Wire Transfer one each monthly quantity.
8. The subsequent delivery shall commence according to the terms and conditions of the contract.
9. Seller pays commissions to all intermediaries as per IMFPA/NCNDA 24 hours after receiving payment from the buyer

There are also several variations of this procedure where, together with the IPA, the supplier asks the customer to sign a TTTIA (Tank to Tank Injection Agreement) or NOR (Notice of Readiness) in his storage facility. But these are essentially the same thing, the same processes are just named differently. Here are some examples of procedures where TTTIA and NOR documents are used instead of IPA.

Transaction procedure with signing of TTTIA (Tank to Tank Injection Agreement) documents:

1. Buyer accepts seller working procedure and issue ICPO addressed to the seller refinery.
2. Seller issues commercial invoice (CI), Buyer signs and returns back commercial invoice and tank storage agreement (TSA).
3. Seller provide buyer with the below listed PPOP.
   A. Authorization To Verify (ATV)
   B. Product Passport (product analysis report)
   C. Irrevocable Commitment Letter to Supplier
   D. Statement of Product Availability
   E. Tank-to-Tank Injection Agreement (TTIA) to be signed by all parties
4. Seller provides buyer with SGS report, Injection Report, unconditional DTA.
5. (NCNDA/IMFPA) will be signed, buyer within 24 hours after successful dip test in seller tanks provide tank storage receipt (TSR) seller proceed for Tank to Tank injection and provide buyer with the injection report of the product into buyer tanks.
6. Buyer make payment for total cost of product injected into buyer tanks via MT103,
7. Seller transfer title ownership to buyer with all exportation documents required of buyer for the transaction.
8. Upon conclusion of first lift transaction seller pays all intermediaries involved in the Transaction and proceeds with the signing of contract with Buyer.

Transaction procedure with the signing of the NOR (Notice of Readiness) document:

1. Buyer issues an official ICPO along with Tank Storage Agreement (TSA) accompanied by company certificate of registration and valid means of identification.
2. Seller issues:
   a. commercial invoice (CI) for the available quantity in the storage tank
   b. product passport (Product Analysis Report),
   c. Notarized Statement of availability of product
   d. Authority to verify (ATV) via email or phone call.
   e. Notice of Readiness(NOR)
3. Buyer returns the commercial invoice and NOR duly signed by the buyer andbuyer’s logistic company.
4. Seller issues to the buyer the listed below documents:
   a. Unconditional dip test authorization(DTA)
   b. Fresh SGS inspection report
   c. Injection Report
   d. Certificate of Origin
   e. Notarized and endorse NCNDA/IMFPA
   f. Authorization to sell &collect(ATSC)
   g. Tank storage receipt(TSR)
   h. Commitment letter to supply
5. (Optional) Buyer SGS team re-conducts dip test inspection on the product in seller storage tanks on buyer expense
6. Upon successful dip test inspection, buyer pays for the total product value and seller immediately transfer the title of product ownership to buyer with all export documents
7. Seller immediately commences injection of the product into buyer’s tanks
8. Seller pays intermediaries.

5. Co-payment by buyer and seller of buyer’s tanks. FOB transaction procedure for petroleum products, tank-to-tank within the port.

This procedure arose for two reasons. First. When suppliers bring their resource, for example, to Rotterdam, they discharge it into a common port pipeline system, from which it is pumped to a specific onshore tank. To save time and money, suppliers do not rent tanks at the port, but want to pump oil directly into the buyer’s tanks. Accordingly, they are ready to take over the first 2-3 days of the lease of the customer’s tank while the injection is in progress.

The second reason for this procedure is that due to the proliferation of fake sellers, suppliers in order to prove to the buyer that they are real resource holders, are willing to assume part of the cost of the client to rent tanks.

Risks: Since the supplier bears part of the cost of tank rental, the supplier checks the storage facilities offered by the buyer and chooses the one he likes and is willing to pay for. Very often suppliers impose their trusted storage tanks on their customers, with which the buyers have no previous experience.

Fraud: We have witnessed several times when a supplier imposed his tank farm on a customer, made the first payment to the tank farm, and then the customer paid his part of the tank farm rent. After that the tank farm turned out to be non-existent, and the payments about the alleged first payment to the supplier turned out to be fake. Be careful with oil depots, check the real availability of tanks. There are a lot of fraudsters who charge for the lease of non-existent oil storage tanks in the port.

SAMPLE TEXT OF THE PROCEDURE:

1. Buyer issues ICPO and Company Registration Certificate or any I.D. With TSA for seller’s approval.
2. Seller issue Draft Commercial Invoice, Buyer signs and returns to Seller.
3. Seller present product SGS Report to Buyer’s Tank farm only to verify and confirm product specification, upon confirmation of SGS report by Buyer tank farm storage company, Seller lease and pays the buyer’s tank for 3 days and Buyer do pay his Tank Farm Company for 3 days after his Tank Farm Company has received the payment from Seller Company.
4. Seller provides buyer with PARTIAL POP Documents:
   A. Authority to Sell & Collect (ATSC)
   B. Letter of Commitment to Supply
   C. Product Authentication Certificate
   D. ATV – Authorization For Physical Verification. ATV (Authorization For Physical
   Verification) is to be signed by buyer’s tank farm and Endorsed.
5. Seller provides buyer with COMPLETE FULL POP Documents:
   A. Fresh SGS Report less than 48 hours
   B. Dip Test Authorization-Unconditional
   C. Injection Report
   D. Tank Storage Receipt with GPS Coordinates
   E. Tank Farm Bar-code Information.
   F. Registration Certificate & Export License Copy
   G. Endorsed Injection Schedule by the buyer & buyer Tank Farm
   H. Irrevocable Commitment to Supply for Spot and 12 months Contract Injection Schedule signed by buyer & buyer’s tank farm
6. Buyer conducts Dip-Test in seller’s tank, via SGS on buyer’s cost seller inject the fuel I to buyer’s tank and Buyer makes payment based on Q&Q by MT103 wire transfer / TT according to the final Commercial Invoice.
7. Seller transfers the title of ownership as per Buyer’s instruction. Buyer lifts the product.
8. Seller pays all intermediaries involved in the transaction and subsequently monthly contract shipment continues as per terms and conditions of the sales and purchase agreement contract between buyer and seller.

6. FOB procedure from the onshore tank to the buyer’s ship. Signing of TTVIAC (Tank to Vessel Injection Agreement Contract) by the buyer ‘s shipowner.

It can be said that this is a classic FOB TANK TO VESSEL oil sale procedure. The key feature of this procedure is that the buyer needs to have a chartered ship before he has access to check the goods in the seller’s onshore tanks.

Risks: the supplier first provides an incomplete, partial package of documents for the goods, which in fact cannot prove the actual existence of the goods, but in return the buyer must charter a ship for loading, sign a consent from his shipowner to inject the goods into the ship, and pay the port pipeline to carry out the injection. It is only then that the seller will show the full package of documents for the goods or provide the opportunity for a DIP test. The key risks for the buyer are that the buyer may spend a lot of money upfront and the supplier may not have the goods in stock.

This is the most common in our opinion FOB TANK TO VESSEL transaction procedure, and the key task of the buyer in the negotiation process is to extract from the supplier, before the start of his expenses, maximum documents confirming the real availability of goods.

SAMPLE TEXT OF THE PROCEDURE:

1. Buyer sends ICPO along with the Company Profile to the Seller along with:
   a) Buyer banking details Certificate of incorporation,
   b) Authorised to Verified Letter
   c) Company Profile (CP) and International Passport Copy along with company
   d) Latest Buyer Proof of Fund or Bank Confirmation Letter (BCL) its, to shows that buyer has capability to take over allocation stocks from the seller.
2. (i). Seller issues a Commercial Invoice (CI) for the Buyer to sign and returns the CI with Vessel Charter Party Agreement Contract (CPA) to the Seller acknowledging Buyer is legally binding commitment to purchase under the terms and conditions herein.
   2 (ii). Seller sends the Buyer the following POP Document for Buyers verification.
   a) ATSC (Authority to Sell Cargo),
   b) Product Passport (product Analysis Report), c) Availability of the Product Letter,
   d) Commitment to Supply Letter.
3. Sellers provide the Storage Reservoir Company details of where the Seller product is currently stored for the Buyer to contact and sign the Tank to Vessel Injection Agreement Contract (TTVIAC) with the Reservoir Company, in Other for Buyer to pay Tank to Vessel Injection charges Fees.
4. Buyer issues and present the Tank to Vessel Injection Agreement Contract (TTVIAC) and Payment Receipt to Seller for verification and acceptance.
5. Seller issues Dip Test Authorization document (DTA), which is countersigned & sealed by the Buyer, Seller, and Reservoir Company, along with the NCNDA/IMFPA, to signs by the Seller and Buyer sides, and all Mandates and Intermediaries involved.
6. After the countersigning of DTA by all parties, Seller provides the Reservoir Receipt, a Notice of Readiness (NOR) and injection schedule to Buyer upon injecting the fuel into Buyers’ vessel.
7. Seller injects the total product allocation into Buyer’s vessel and furnishes Buyer the full Injection Report document to notify and show the Proof of the Products injected into Buyer’s vessel and Buyer pay the total product cost by MT 103 T/T to Seller account. The Seller transfers the Title Ownership Certificate to the Buyer.
8. Seller pays commission to Agents, Brokers and Intermediaries involved in the transaction and Negotiations.

7. Confirmation of customer’s solvency via SWIFT. FOB transaction procedure with oil products, from tank to tank inside the port.

There are suppliers who only care about confirmation of the customer’s solvency, but the seller wants this confirmation in the most reliable way that currently exists – in the form of a SWIFT message from the buyer’s bank via MT 199/799.

In order for a customer to give proof of solvency via SWIFT MT199 or MT799, the customer needs to have the full amount collected in their current accounts. Most banks not only require that the money is available before sending SWIFT, but also that this money “lay” on the accounts before this 3-5 days. The bank will also charge a % commission for issuing this SWIFT. Often on such large transactions buyers use credit facilities. If the buyer wants to issue proof of solvency at the expense of the existing credit line, the bank’s commission for issuing such SWIFT will be even higher.

Risk: The buyer collects in his accounts the full amount needed for the purchase. The buyer actually pulls money out of circulation and freezes it for a few days to confirm his solvency, but in return he has no guarantee that the seller actually has the resource available right now.

SAMPLE TEXT OF THE PROCEDURE:

1. Buyer issues LOI and sends along with CIS/KYC documentation.
2. Seller issues FCO and sends along with KYC documentation.
3. Buyer returns signed FCO and issues ICPO and Charter Party Agreement (CPA)
4. Seller issues Commercial Invoice.
5. Buyer signs Commercial Invoice and returns it seller.
6. Buyer provides acceptable POF (MT199 / MT799 Pre-Advice (Not Blocked Funds) / DLC / SBLC) as per Appendix 1.
7. Seller provides the following PPOP within 3-4 working days of the verification of the MT799 Pre-Advice:

• Com itment to supply.
• Certificate of origin.
• Product passport.
• DIP Test Analysis. (Fresh Q&Q from an accredited testing company in Rotterdam 24-48 hours old)
• Tank Storage Receipt (TSR) (Includes GPS Co-Ordinates & Tank Hub Numbers)
• Injection Report.
• ATV / Authorization to verify (physical verification of TSR).

8. Buyer conducts Q & Q analysis on product in Sellers tanks.
9. Buyer pays within 24 – 48 hours via MT103 as well as providing Seller with Vessel information and NOR from his Shipping Company and details of Port Clearance through the nominated vessel terminal.
10. Seller on receipt of MT103 bank transfer and Buyers Port Clearance Payment:

• Commences the injection/lifting into the Buyers vessel as per schedule.
• Releases the complete POP documents to the Buyer including the Resource Confirmation Letter
• Issues Authority to Sell and Collect (ATSC) and Transfers Title of Ownership into the Buyers name.

11. Seller issues 12-month delivery contract for acceptance.
12. Buyer issues a revolving IRDLC/MT700 OR SBLC/MT760 for the contract.
13. Seller pays Seller Intermediaries and Buyer Intermediaries within 48 hours.

8. Ideal procedures for the buyer. FOB transaction procedure for petroleum products, tank to tank inside the port.

In most of the procedures described above, we have pointed out the risks that arise for the buyer. But are there any buyer-perfect procedures in which the buyer has virtually no risks. Customer-centred procedures in which the buyer spends no money to confirm the availability of the goods. Yes, there are such procedures and here is a sample of one such procedure.

SAMPLE TEXT OF THE PROCEDURE:

1. Buyer sends Company Profile along with ICPO, Tank Storage Agreement TSA /CPA and data page of buyer ́s passport.
2. Seller issues commercial invoice (CI), Buyer signs and returns commercial invoice back to seller .
3. Seller verify buyer TSA by letter and Seller issues the following POP documents to buyer:
   Documents:
   A. Statement of Product Availability
   B. Commitment Letter to supply
   C. Unconditional Dip Test Authorization (UDTA)
   D. Authorization to Sell and Collect (ATSC)
   E. Authorization to verify the product in seller ́s tanks (ATV)
   F. Fresh SGS report Not more than 72hours
4. NCNDA /IMFPA will be signed among all parties involved.
5. Buyer options conducts Dip Test on the product and makes the payment for the total value of product injected into the tanks through the means of MT103.
6. Seller pays commission to all intermediaries involved in the transaction and subsequently monthly shipment continues as per terms and conditions of the commercial invoice and extension of transaction by issuing 12months contract to buyer for proceeding.

It is important to note that all the procedures described above are working and are used by many contractors in their work. But since there are a lot of dishonest intermediaries and outright fraudsters on the market, be careful. In each, even the most good and convenient procedure of oil products transaction there are “bottlenecks” where you can be cheated. For this reason, we have described in each of the procedures where there may be risks and what aspects of the procedure can be exploited by fraudsters.

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