Millions of barrels of crude oil are traded every day around the world, worth billions of dollars. To manage and standardize this type of turnover, we need very precise and defined procedures and processes that leave very little room for ambiguity. These procedures play a huge role in facilitating the deal and sometimes also help weed out the non-serious players in the deal.

Each provider may establish a different set of terms and conditions that should be carefully studied before going ahead with compliance. Any deal without a 2% return guarantee should be avoided to be on the safer side. In general, these procedures are developed with the objective of

a) remove non-serious or fraudulent players,

(b) establish precise conditions of trade that define the stages of change in ownership and the responsibilities of each party involved,

c) help each party to ensure its interest in the deal and

d) Minimize and manage non-compliance.

Later in this article we will briefly discuss the “TTO” procedure and how it works.

Through Transport Operator (TTO)

• A Purchase-Sale Contract (SPC) is signed between the two parties involved with the coordination of the Banks.
• The buyer’s bank sends a notice LC to the seller’s bank.
• Upon receipt of a prior notice LC, the seller’s bank activates the performance bond or performance bond based on the agreed SPC.
• Once the performance bond is active, the buyer can proceed with the establishment of the operational Letter of Credit. Any commission costs to agents or facilitators must be included in this operational letter of credit.
• Within 72 hours of receipt of such operational LC, the seller issues ATB to the independent inspectors designated by the buyer.
• With the ATB, inspectors can come on board and perform their inspection and report back to the buyer.
• After receiving a positive quality and quantity (Q&Q) report from the inspector, cargo reassignment is done in the buyer’s name and all original documents are delivered to the buyer through the banks involved within the next 4 days. . From this moment, the ownership of the cargo is transferred to the buyer.
• Buyer’s super cargo ships within three days of change of title.
• Last but not least, payments are transferred to all parties involved within the next 72 hours.

I hope you liked the above informative and useful.