Verse Oil Service terms of glossary for import/export
ASWP – Any Safe World Port
The buyer can choose their delivery to any safe world port in the world
BCL – Bank Comfort Letter
The buyer’s bank issues this letter . This letter confirms that the buyer is capable of the payment requirements. However, This letter does not imply any kind of guarantee of payment
BOL or B/L – Bill of Loading
Bill of Loading is the receipt given by the shipping company stating that the goods are loaded on board. Also this letter is important because it gives the Title to the goods. The buyer needs this document to obtain goods from the port
CFR – Cost and Freight
This is the cost of loading and freight of goods to the named destination port. This does not include unloading charges
CIF – Cost, Insurance and Freight
This is the same as CNF, but also includes insurance to the named destination port. e.g. CIF Jebel Ali.
DC – Draft Contract
This is the initial contract that the seller draws up to the buyer. The buyer has the opportunity to make amendments and send it back to the seller for consideration. This process continues until both parties are satisfied with the terms of the contract.
DDP – Delivered Duty Paid
The exporter pays all delivery charges and duties till the named destination that the buyer has selected e.g DDP NewYork
EXW – Ex-Works
The buyer pays all costs of transport from pickup at the suppliers premises. e.g. EXW Hong Kong.
FAS – Free Alongside Ship
The supplier pays costs only to the port of loading. it is buyers responsibility Loading and shipment. However the supplier must clear the goods for export. e.g. FAS Los Angeles.
FOB – Free on Board
This means that the supplier pays only to the point where the goods are loaded on board the carrying vessel. The seller must clear the goods for export. It is the buyers responsibility as soon as the goods are over the ships rail.. e.g. FOB London.
FCA – Free Carrier
The supplier must deliver the goods, cleared for export, to the carrier nominated by the buyer at the named place.
FCL – Full Container Load
The supplier does not supply less than one full container. Because of this purchaser’s any other goods are not allowed in the container
FCO – Full Corporate Offer
The seller issues this after the preliminary stages of negotiations are complete. For e.g. The buyer issues a letter of intent. The seller issuing a soft probe on account of the intent letter. A full corporate offer is a document that outlines the conditions of the sale.
ICPO – Irrevocable Corporate Purchase Order
The commercial buyers draw up this document. This document contains the quantities and the type of commodities required. This document also contains the other conditions that the buyer would like for the sale to proceed under. Once the seller accepts this document, it is deemed to be binding. And also the corporation is obliged to complete the sale.
L/C or LOC – Letter of Credit
The buyer’s bank issues this letter to the beneficiary of the letter of credit ( the seller) guaranteeing payment. This document abides only as long as the terms and conditions in the letter of credit are met. L/C can be transferable and subject to terms( eg. On sight, 30 days, 60 days, 180 days, etc.). L/C’s are often utilized if the shipments are regularly revolving.
Letters Of Credit are defined as follows
A Confirmed Letter of Credit (CL/C)
A letter of credit given by foreign banks. The validity is confirmed by a first-class (usually US or European) bank. A seller with CL/C terms assures of payment even if the foreign buyer or the foreign bank defaults.
A Documentary Letter of Credit (DL/C)
However, A Bank guarantees the payment of buyers drafts for a specific period and for a specific amount in a DL\C. The documentary line of credit offers a more secure medium for transactions in import-export trade than the documentary bills collection (see Bill of Exchange). The letter of credit is the medium by which the seller obtains payment when banks approve of transmissions, In the seller’s country. The necessary documents are required to be given to the bank on the decided date. If the terms of the credit are agreed, a seller can receive payment from a bank immediately.
On the contrary, a seller with CL/C terms has a guarantee of payment even if the foreign buyer or the foreign bank defaults. A CL/C (Confirmed Letter of Credit) is a letter of credit given by a foreign bank with validity confirmed by a first-class (usually US or European) bank.
Irrevocable Letter of Credit (IL/C)
In case of an Irrevocable Letter of Credit (IL/C), no cancellation or amendment can happen without consent from the issuing bank, the confirming bank (if confirmed) and the beneficiary. The bank guarantees the payment if the credit terms and conditions are fully met by the beneficiary. An IL/C is the letter where once the seller approves of the buyer’s conditions in the letter, they constitute a definite undertaking by the buyer’s bank and cannot be revoked without the seller’s agreement.
Revocable Letter of Credits
On the other hand, you can use the Revocable Letter of Credits. The buyer can amend or cancel the terms of trade at any time without informing the seller.
Revolving Letter of Credit (RL/C)
Additionally, you have the Revolving Letter of Credit (RL/C) where the amount involved is automatically reinstated on complete utilization of the amount. This means the amount becomes available again without issuing another L/C and usually under the same terms and conditions within a period of time (usually several months to one year). It saves the administrations in case of multiple shipments.
Stand-By Letter of Credit
However, for a guarantee on the finance statement, you have the SL/C. The Stand-By Letter of Credit is a financial guarantee or performance which a bank issues on behalf of a buyer. It is a written obligation of the issuing bank to pay a sum to a beneficiary on behalf of their customer in the event that the customer himself does not pay the beneficiary. The SL/C is regulated by the ICC-500 rules.
In case, a buyer wishes to enter into negotiations with the Seller in the hope of purchasing a commodity, the buyer can use an LOI. The Letter of Intent is a document given by the Buyer to the Seller for negotiations. The LOI is only a starting point for negotiations and not a legally binding document.
RWA – Ready, Willing and Able
Similarly, the buyer can have an RWA – Ready, Willing and Able, a document which is issued by the Buyer’s bank. In this case, the bank confirms that their client has the sufficient fund in their possession and are ready, willing and able to engage in the contract.
Otherwise, the seller may also issue a Performance Bond to the buyer. This is a bank guarantee stating the seller would meet the terms of the contract. Often, the bank issues an amount of 10% to 15% of the total amount of the contract. the Buyer can draw upon a Performance Bond in the event that the Seller breaks the contract and fails to provide the product which was stipulated in the contract.
POP (Proof of Product)
In several instances, the customers and agents may request for document provide them with some guarantee of the existence of the product and ability of the supplier to deliver the product. This document is the POP (Proof of Product). In practice many POPs are false. POP offers no proof at all because once a POP drafting happens it is automatically out of date – the product can be sold to another buyer and therefore no longer exists.
Nevertheless, a seller/buyer might occasionally request for a POP as an apparent proof that a seller/broker has the product, which is possibly not the case.
Bank Confirmation Letter (BCL)
However, it is only the buyer’s bank that can issue a POP when the Buyer’s bank issues a Bank Confirmation Letter (BCL) to the Seller’s bank via SWIFT. A global service, Swift (Society for Worldwide Interbank Financial Telecommunication) is responsible for facilitating communication between banks. Most payments happen via SWIFT.