Procedures
Terms and Procedures
Understand the main instruments and modalities used in international commodity trade.
Understand the main instruments and modalities used in international commodity trade.
In the FOB model, the seller is responsible for the goods until loading at the port of origin.
In the CIF model, the seller assumes costs, insurance and freight to the agreed destination port.
A financial instrument issued by a bank, guaranteeing payment to the seller if the buyer fails to meet contractual obligations.
A documentary letter of credit used to guarantee payment upon presentation of documents required in the contract.
A formal request or guarantee document in commercial transactions.
Under FOB (Free On Board) the seller delivers the goods on board the vessel at the port of shipment and the buyer pays freight and insurance from that point. Under CIF (Cost, Insurance and Freight) the seller also pays the sea freight and a minimum insurance cover to the destination port. In both terms the risk passes to the buyer once the goods are on board.
A Standby Letter of Credit is a bank guarantee issued by the buyer's bank in favour of the seller. It is only drawn if the buyer fails to pay under the contract. It is transmitted bank to bank (typically by SWIFT MT760) and is governed by ICC rules such as ISP98 or UCP 600.
A DLC (Documentary Letter of Credit) is the primary payment method: the bank pays the seller when compliant shipping documents are presented. An SBLC is a backup guarantee that is only called on default. Many commodity contracts use a DLC for payment and an SBLC or performance bond as security.
Typically the commercial invoice, bill of lading, certificate of origin, packing list and the inspection and quality certificates named in the credit (for example SGS). Banks check documents strictly against the credit terms, so any discrepancy can delay payment.
A Demand Letter formally records a request for contractual performance or payment. It is used to formalize commercial intentions, to document obligations, and as a pre-legal step before dispute resolution.
No. Every operation is subject to KYC and compliance verification before any offer or instrument is exchanged. We work only with parties that can be identified and whose bank instruments can be verified through their issuing bank.
Want the long version? Read the trade instruments guides: SBLC, DLC, ICPO, SCO vs FCO, FOB vs CIF and SGS inspection, each with its own FAQ.