In the world of international wholesale trade, including oil and petroleum products, where large volumes of goods are shipped across different countries and continents, ensuring the transparency of the transaction and verifying the authenticity of the goods is a matter of paramount importance. However, there are many fraudsters in the oil trade who seek to defraud customers by forging documents or offering non-existent or substandard goods. In order to protect the interests of customers and ensure successful transactions, it is necessary to strictly adhere to a certain set of documents, as well as to pay special attention to the details of verification of these documents. First of all, the presence of a correct and complete set of documents is necessary for the legal import of goods into the customs territory of the country of destination for customs clearance and import procedures. But also – the initial check and analysis of documents before the transaction, will allow the client to initially identify potential fraudulent actions on the part of the seller and make the right decision whether it is worth to make this transaction at all.
POP (Proof Of Product) value
In working practice they say “provide a POP for a product”, in fact it stands for providing a package of documents on product certification. We have described the deciphering of terms and acronyms in a separate article. The POP is a key element in petroleum product transactions. This document confirms the actual existence and availability of the product for sale. The importance of the POP is as follows:
- Confirmation of the existence of the goods: The POP gives the buyer confidence that the goods actually exist and are available for purchase.
- Transparency: These documents are proof that the seller possesses the goods offered for sale and clearly defines their characteristics.
- Preventing fraud: Since many fraudsters try to defraud buyers by offering non-existent goods, having a POP helps reduce the risk of such fraudulent schemes.
It is important to realise that there is no standard unified set of documents that is used. Each transaction is unique, depending on the agreements reached between the buyer and seller, the terms of delivery and region, and many other factors. We conditionally distinguish two main directions for ourselves:
- FOB package of documents. It is a convention for all intra-port transactions when you buy goods inside the port, in a barrel, without delivery. That is, the document package includes port storage and accumulation documents in addition to the documents for the goods.
- CIF document package. This is a symbol for all transactions in which the goods are sold with delivery to the customer, i.e. in the package of documents, in addition to the documents for the goods themselves, there are also documents related to logistics and delivery.
In terms of the number of documents to be provided, the package of documents for the goods is divided into two types:
- PРОР (Partial Proof of Product). Partial, not full PОР. The supplier provides the customer with only part of the documents for the goods, having previously agreed with the customer the list of documents to be provided.
- POP (Proof Of Product). A complete, final package of documents for the goods, which is already complete and cannot be supplemented in the future by other documents.
There is often a practice when the supplier does not want or is afraid to give the buyer a full package of documents, because among buyers there are also fraudsters who can use these documents for other purposes, so there is a practice in the market when the supplier first gives a partial package of documents (РРОР), thereby proving to the client partially that the goods are still there. After that he obliges the client to do some actions, mainly to confirm his solvency or make some deposit, and after that he sends the rest of the documents forming a full package of documents for the goods (РОР).
It is important to note that one of the most common fraud schemes is when a supplier issues a partial РРОР from documents that cannot be verified by independent sources and asks for an advance payment for goods that do not exist, because the documents that have been provided to the customer look good on the one hand, but on the other hand they cannot be verified.
Our advice – if you are at a stage in the transaction where you need to start spending money, insist that your partial РРОР includes documents that can be verified by independent sources. For example – an SGS report can be verified with SGS itself, and an injection report for an onshore tank or ship can be verified by calling the port. At the same time – a letter of guarantee from the seller about the supply of the resource does not tell you anything, because if the seller is going to cheat you. If the seller is going to cheat you, he will issue you any letter you want on his letterhead.
Document Authentication
The authentication of all documents is an integral part of the transaction process. Below are a few basic principles for the initial verification of any document:
- Reconciliation with databases: Checking submitted documents with official databases or registers can confirm their authenticity. Many document registers are public online.
2 Analysing signatures and seals: Careful examination of signatures and seals on documents will help identify possible forgeries. If the documents bear the signatures of other organisations independent of the seller, contact these organisations and confirm that they signed the documents. - Documents issued by third parties: If the documents are issued by an independent organisation, laboratory, etc., contact this organisation and confirm that they signed the documents. Contact this organisation and verify the authenticity of the document. Pay attention to the organisation itself, check that it is real and reputable – often there may be fake laboratories or non-existent oil storage facilities that generate documents in the interests of fraudsters.
- Counterparties who issued the documents: pay attention to the companies, so that in all documents the owner of the goods would be exactly so, the company with which you have deals, and not some third-party organisation. Check the names of the signatories. Fraudsters often take someone else’s documents and pass off for their own – pay only the real owner of the goods that are in the documents.
- Originality of documents: pay attention to the seals and signatures that they would be original on the documents. In most cases, you can see with an unarmed eye. If stamps, signatures or other elements of the document imposed artificially on the document, using Photoshop or other specialised programs.
- File metadata: by clicking on the properties of any file, you can see its metadata. For example, if you are provided with an SGS created on 4 March in Rotterdam, but the file metadata tells you that the file was created on 20 March in Nigeria, it is worth considering and more seriously checking the authenticity of the document.
- Consult with experts: If necessary, experts or agents with experience in international oil trade can be contacted to verify documents and obtain opinions.
There are many schemes and techniques for checking counterparties and their documents. Surely expensive corporate security professionals know dozens of times more methods of document verification. We have given examples of only basic verification methods. We have also written a separate article on Combating fraud in the oil products market, basic principles and methods of checking counterparties.
POP (Proof Of Product) for CIF transactions, transactions in which the goods are sold with delivery to the customer’s port of destination.
It is important to divide documents into two groups – documents that regulate the relationship between buyer and seller (Contract, LOI, ICPO, FCO, Invoice, etc.) and documents directly on the goods themselves. Documents regulating relations between counterparties are described in a separate article. Here we consider the list of documents that come with the goods themselves:
- Certificate of Origin. Any good has an origin of the country in which it is made. The Certificate of Origin is issued mainly by the Chamber of Commerce and Industry of the country where it is made and confirms the origin of the goods. This document is important for the customs clearance of the goods at the port of arrival. These documents are often forged on the market in order to hide the real origin of the goods from countries that are under international sanctions.
- Product Passport. Any goods, including oil and petroleum products, have certain qualitative indicators. They must comply with international standards. When goods are shipped from a refinery, the manufacturer issues a product passport. In fact, it is a list of qualitative indicators of goods at shipment.
- SGS report. This is a laboratory report from an independent laboratory that has taken samples and confirmed the quality and quantity of the goods at a certain stage of delivery. Basically, there are two SGSs in a transaction – from the port of departure made by the seller and from the port of destination made by the buyer. During the delivery process, it is possible to go beyond the two sampling points and take samples at any stage, depending on how the parties agree. Other laboratories may also be involved, but SGS is the most popular and well known. We have written a separate article on the importance of laboratory testing of petroleum products in the trade and a list of the most common and well-known laboratories.
- Bill of Lading. When a ship is loaded and dispatched, the main shipping document that is issued for the ship is the Bill of Lading. When analysing the Bill of Lading, pay attention to all the details of the document – cargo owner, ship owner, details of the ship and the goods.
- Q88. Ship details (ship’s passport). Complete and detailed information about the ship, with all technical details, ship’s technical passport.
- Cargo Manifest. Cargo Manifest is a document that gives a full and complete characterisation of the cargo that is in the ship. This document is prepared by an agent at the ship’s loading port in accordance with the data contained in the bill of lading. The cargo manifest is used to control the acceptance and delivery of cargo and payment of freight. This document is also necessary for the customs service, as it is used to calculate duties and charges, and it is also used to keep statistics of export-import cargo turnover in the customs service of the port.
- E.T.A (Estimated Time of Arrival). When a ship is dispatched, the ship’s captain plans the estimated time of arrival of the ship at the port of destination. This document is primarily important for the consignee to schedule and book for specific dates at the port of destination the capacity to unload the ship.
- NOR (Notice of Readiness). A notice of readiness of the oil depot at the port of destination to receive the ship and pump fuel with full coordinates of the oil depot. This document is signed between the shipowner and the port of destination, mostly already in the course of the ship’s movement 3-5 days before its arrival. This document is important for the seller and the ship’s captain to be sure that the ship will not be idle on arrival (demurrage), that it is waiting at the port of destination for unloading on certain dates.
- ATB (Authority To Board). In order for sampling (DIP test) to be carried out by the buyer’s hired laboratory technicians, the seller issues an authority to board the vessel. Usually a SATCOM message issued by the ship’s master, it authorises the buyer to board the vessel to confirm the presence, quantity and quality of the cargo. You cannot board a cargo or oil ship without this authorisation.
We have given you a basic package of documents, which is provided by default, but it can be supplemented with many more documents at the request of one of the parties to the transaction or at the request of the local authorities at the port of departure or arrival. This package may also include such documents as: a document confirming that the ship has been cleaned before loading from the previous cargo (clean on board), a copy of the ship’s charter contract or a receipt of payment for the ship’s charter by the seller, the original of the cargo insurance policy covering all risks issued by a first class insurance company, a copy of the report on the injection of the goods into the ship from the land port tank at the port of departure and many others at the request of one of the parties to the transaction.
POP (Proof Of Product) for FOB transactions, transactions in which the goods are sold at the seller’s port of departure, without delivery. Intra-port transactions.
- Commitment letter to supply & Statement of Product Availability. A letter issued by suppliers committing to deliver goods within a specified time, on specified terms, quantity and quality.
- ATV (Authorisation to verify). Authorisation issued by the seller to carry out document authentication, verification of product availability and other verifications at the port. It is important to note in this document what the seller authorises. Often the seller will only authorise a phone call or mail to the depot. We would recommend buyers to insist on an extended ATV which allows the buyer to physically go to the depot for verification, contact the port authorities and give them documents for verification and much more.
- ATSC (Authorisation to Sell & Collect). This document is mainly needed by middlemen so that they can use this document issued by TitleHolder to prove to their final buyers that they are related to the product and are allowed to resell it further.
- DTA (Dip Test Authorisation) or UDTA (Uncondidonal Dip Test Authorizadon). Authorisation for the supplier to allow the buyer’s laboratory technicians to take samples and perform testing to confirm the quality and quantity of the goods. The difference between DTA and UDTA is described in more detail in a separate article on FOB procedures in key world ports.
- Tank Storage Receipt (TSR). A land tank rental receipt is issued as confirmation that the seller has a land leased tank in which the goods are now stored. This receipt contains tank numbers, their GPS coordinates and other sensitive data to verify and confirm the actual presence of the tanks in the port.
- Injecdon report. This is a report of the injecdon of the commodity into the seller’s land tank. By providing this document. The seller actually proves that he has previously bought this commodity and he injected the previously bought commodity into his tanks on certain dates. This pumping from the arriving ship to the land tanks is carried out by the pipework system of the port, so the authenticity of this document can be checked with the port authorities.
- Cerdficate of Origin. Any commodity has the origin of the country in which it is made. The certificate of origin is mainly issued by the Chamber of Commerce and Industry of the country where it is made and confirms the origin of the goods. This document is important for customs clearance of the goods. These documents are often forged in the market in order to hide the real origin of the goods from countries that are under international sanctions.
- Product Passport. Any goods, including oil and petroleum products, have certain qualitative indicators. They must comply with international standards. When goods are shipped from a refinery, the producer issues a product passport. In fact, it is a list of qualitative indicators of the goods at shipment.
- Fresh SGS Inspecdon report. We believe this is the most important document in FOB transactions. It is a laboratory report from an independent laboratory that has taken samples and confirmed the quality and quantity of the goods at a certain stage of delivery. It is important to insist on fresh sampling done no later than 2-3 days ago. SGS is a world-renowned laboratory trusted by most marketers. And if the laboratory has confirmed that at the time of sampling at a particular seller in a particular tank there was an appropriate amount of product in a particular tank that was of the correct quality, then this is the key confirmation in the paperwork. Other laboratories may also be involved, but SGS is the most popular and well known. We have written a separate article on the importance of laboratory testing of petroleum products in the trade and a list of the most common and well-known laboratories.
We have given you a basic package of documents, which is provided by default, but it can be supplemented with many more documents at the request of one of the parties to the transaction or at the request of the local authorities at the port of departure or arrival.
In conclusion, ensuring transparency and authenticity in oil and petroleum product transactions is crucial to preventing fraud and ensuring successful trading relationships between parties. Following the above recommendations will help to minimise risks and ensure efficient interaction in the international trade market.
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