AboutDavide Andrew Papa Expertise All matters pertaining to assisting Private import export INTERMEDIARIES, AGENTS and BROKERS Regarding International trade Laws and procedures,Letters of credits, as per UCP 600,Presentation, Commissions,International Rules of agency, and Incoterms 2000. All matters pertaining to shipping documents relating to the Import and export of products from one country to another.All matter for buyers and sellers of commodity products relating to the import and export industry.FTN with the introduction of UCP 600 will release the publication "The world is yours"(2004) made specifically for Intermediaries.Current inhouse tra ining manual is "Follow the Yellow Brick Road"(2008) Our advice website is www.ftnexporting.com
Experience FTN exporting founder Davide Papa has been trading for over 20 years- and has dealt with a huge variety of corporate entities including Gold and crude oil suppliers. FTN appeared in a major controversial Newspaper editorial in 1994. FTN Exporting official publication "International Trade and the Successful Intermediary"(ITSI) is about to be released world wide (December 2009) by the prestigious U.K publishing firm Gower's (U.K) and is listed on Amazon.com (Keyword: International Trade Intermediary) ITSI is ostensibly the first uniform intermediary trading doctrine of its kind, and will become the standard intermediary practice world wide in years to come. FTN exporting has created the said doctrine and supporting rules of trade defined as "URPIB" (Uniform Rules and Practice for Intermediaries and Brokers), which will (has?) become the most successful set of private intermediary rules ever created.
Publications The World is Yours and "Follow the Yellow Brick Road" www.ftnexporting.com . Author of "International Trade and the Successful Intermediary " (ITSI) 2009 excepts on http://www.gowerpub.com/default.aspx?page=637&calcTitle=1&title_id=11177&edition_id=12138
Education/Credentials Let school early. Became a master chef . Took up business management and later studied "international Trade at Stott's college Melbourne, Australia.
I am back again with another questions. I took notice of your recommendation to post my questions here instead directly via email, so here it goes:
1. What is the difference between Non Operative DLC and Pre Advised DLC?
2. Our supplier of agricultural commodities uses following procedure (is this an accurate procedure):
- Formal request is sent to supplier by buyer in format of LOI & BCL
- Supplier issues a formal corporate offer directed to the buyer.
- Upon signed acceptance of this offer, the Supplier issues the Sales Contract to the buyer for signing and sending back.
- Once received by the Supplier, the buyer is to open a Non operative DLC in favor of the Supplier.
- Once received the Non Operative DLC, the Supplier bank issues the POP to the Buyers bank for activation of the financial instrument and make it operative.
- Shipment is commenced according to chosen Incoterms 2000.
3. The Supplier uses following guarantee:
Guarantee of delivery: The non comply with the delivery of goods by the seller or the suspension of the contract by the buyer will be sanctioned with a penalty clause in the contract by the amount that the buyer prefers. We do not deliver "PB". This clause legally ensures full compliance by both parties, both buyer and supplier. We offer a 100% guarantee of delivery in the contract.
Is this an accurate way of operating the guarantee?
As allways, any response by your side will be highly appreciated and I hope that more users of this site can take advantage of my questions with answers.
Best regards,
Martin
Answer Dear Martin
Please follow the answer to your questions below-most of which are covered in URPB rules found on www.itsi.itgo.com as well as past Allexperts anwers-
(1)No operative DLC means nothing. As for PA-ITDLC
As it relates to an intermediary -A Pre advised Irrevocable transferable DLC once issued as a UCP600 endorsed instrument, means the Buyer issues a PA ITDLC , the seller provides to act upon a single condition of the credit - once such is given, the bank converts the PA ITDLC to a full active DLC which is able to be transfered.If the condition is not met the credit cannot be transferred. (I.e: Condition: Evidence of goods certificate as defined on contract)
under UCP600 so long as the condition has ben met - the issuing bank MUST make the cedit active and as such cannot be canceled-one supplier is disclosed- Thus it's cheaper for the buyer to open and is ideal for intermedary use. A pre advised credit even as issued from a UCP600 adhering bank is not used by all banks hence the buyer must ask his bank if they are prepared to open a PA ITDLC before contract is signed.
(2)End Buyer working with supplier can apply whatever methods they want -They can use coconuts to cloes a deal if they want- and go to court later as many have ,when delivery fails. When an intermediary is involved LOI/BCL and the likes cannot be used- Already stated many times in past answers- Supplier , end buyer and intermediaries must use the best safest procedures- thse Quote, Offer, Payment ,(P.G) Delivery, Collection is the best and safest uniform application.
(3)Guarantee: Already well answered in past answers- Performance guarantee is not a usual trading application in this busness but once such an issue is raised then the buyers DLc is issued and accepted first , the seller then issues a performance guarantee in the form of a UCP600 SLC or ISPB 98 SLC equal to and not more than 2.0% percent of the shipment value - 1.50% is good.NEVER EVER ACCEPT TO ISSUE A SLC P.G FIRST ..NEVER.
An SLC cannot/SHOULD NEVER BE used for payment of goods but can be used for payment of commission and other matters such as a 'Performance guarantee"-(NOT Performance Bond AS MANY INCORRECTLY STATE-EVEN BANKS )
Ths Failure for the supplier TO Deliver goods on time means that the BUYER makes a call upon the sellers P.G 9SLC) which is paid automatically without question based on the single condition of issuance- So the delivery is late , the buyer still calls upon and collects the P.G VALUE-
Thus the SLC is an "unconditional insturment" in where once a single condition fails to be met,(Performance of Delivery) the SLC can be collected upon ..No if's or But's. In where a DLC is A"Conditional"INSTRUMENT dependent of many delivery applications /documents to become apparent before collection can be applied for.
Thus "The non compliance with the delivery of goods by the seller or the suspension of the contract" is nonsense- That's a breach of contract.
The Buyer provides the DLC, once such is accepted (5 days or less) in return, the supplier produces the irrevocable SLC PG- Very simple.
Delvery fails, buyer collects on SLC, shipement is deliverd, or next shipment is delivered.
Hope it helps- assume there is a lot more to each one of the above answers, but the basic premise is defined.
Regards
Davide Giovanni Papa
www.ftnexporting.com
www.ftnx.9f.com
www.itsi.itgo.com
