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.
Question QUESTION: Hello Davie,
I am doing a contract deal for 12 months, as the PIA I have discussed with buyer to open a PA UCP 600 IRTDLC which he will do. So we will be dealing with DLC as financial instrument.
My plan is to repeat steps 17-22 on trading path for each shipment. Every time shipment goes out, supplier sends docs etc.
Does that make sense or what would you advise?
ANSWER:
Dear Paula
You have to guarantee the whole contract otherwise the buyer will buy one shipment and cancel the contract then go to the supplier directly-
So all step are correct except - Make sure it s a non cumulative revovling credit that is being sought " guaranteeing" the value for then whole contract in where 3 shipments in advance always remain the active status value until the last 3 shipments in where the credit reduces to 2 then one in where the DLC expires a month there-after.
Make sure they can open such a credit-Not all bank will open a Pre advised credit-
make sure the pre advised credit turns into a full active credit, once you have provided information to take then pre advbised status off-
See how you go
Regards
Davide G.A Papa
Author : "International Trade and the Succesful Intermediary(ITSI)
www.ftnexporting.com
www.ftnx.net
---------- FOLLOW-UP ----------
QUESTION: After I asked my question I kept reading and I came across the non cumulative revolving credit info so I talked to mandate and and he can do 4 months shipment lots. However when you say guaranteeing whole contract amount, for educational purposes I will use easy numbers so we are on same page.
If whole contract is for 100M, are u saying he opens DLC for whole 100M coz he says they wont do that but they will do like upto 4 shipment lots. Please clarify what you mean by guaranteeing whole contract amount.
Thanks
Paula
Answer
Dear Paula
Non cumulative revovling credit- (in the USA it's somtimes referred to "evergreen credit")
A credit value for one value is taken from the top, another value is replaced on the bottom-
Therefore- if I have a DLC expiring in 10 Months (plus one month for delays say 11 months) - and the monthly non cumulative revolving rate is 10 million dollars- and I ask for 2 shipment value to apply as the opening revolving rate -
The the opening value is 20 million dollars irrevocable non cumulative revolving for 10 months at 10 million dollars values- The ostensible value of the credit itself if for 100 million.
That's what the bank will guarantee based of performance month per month- The end buer has to assure his bank before such will open the revolving credit - and has nothing to to with the deal-
If you don't get such a credit the supplier will not entertain you as well-
Usually 3 is asked for but 2 revolving values is OK depending of the goods being bought and sold-
If you only have Two credit values and as it always happens two ships end up being loaded too close to each other in the same month - documents could arrive for two payments to apply- Late delivery means Performance guarantee will be claimed by the supplier every month-as one ship arriving late could destroy your schedule
if shipment were lest say two month apart then one revolving credit value could be applied-(one credit taken at collection , delivery is cleared, next credit established)
The revolving application also provides to prove financial capability- You need to test and see if the end buyer is RWA (Ready willing and financially able to perform) hence asking for 2 or 3 shipment values also achieves this issues-
Thus 3 is always the preferred minimum application- if there are lest say 20 ships per 10 month period - then 6 revolving opening value should be sought-etc...
It strange that some End Buyer want to buy lets say 500 million dollars of good over lets say 12 monhts , yet they cannot open a non cumulative credit of lests say 60 million dollars- Why?
The End buyer will not get a revolving credit opened unless their credit worthiness is good.(Most cases the end buyer applies for a special import /export loan to do so)
You cannot buy 100 million dollars worth of goods at a great price by simply opening 10 million dollar credit , month per month, at will. You are asking for trouble-
If you need to take legal action agaisnt the end buyer for noth opening lest say the sixth credit for breach of contract it will cost you hundreds and thousands of dollars to take the matter to internationl courts - and on top of that if you do not perform with your supplier the same will happen from that end -
On the 7th payment drops to 2, then final 1 credit as final delivery is initiated-
Ypu are a professional intermediary defined as a buyer /seller - Parties MUST perform to your limited capabilities so you can perform...or no deal..
Also have you read my article about mandate ship claims????
Hope the above is clear-
Regards
Davide G.A Papa
www.ftnexporting.com
Author: International trade and the succesful intermediary
