Commodities Latin América
Procedures and Payment Terms
|a) You send to us the end buyer’s LOI (Letter of Intent) or ICPO (Irrevocable Corporate Purchase Order), this document should be on buyer’s letterhead and should be signed and sealed by the buyer and include buyer’s banking details to allow the supplier to check buyer’s financial capability.
Some suppliers require, in addition, buyer’s BCL (Bank Capability or Comfort Letter).
b) On receipt of the LOI/ ICPO and BCL, the supplier will send to the buyer a Pro Forma Invoice, sales/purchase contract and/or FCO (Full Corporate Offer)
c) Once the buyer and suppliers have agreed and signed on the pro-forma invoice, FCO and/or contract, the deal is executed in compliance with the terms of the agreement.
2) method of payment is generally Fully Funded Documentary L/C payable at sight (FFDLC), Revolving Documentary L/C (RDLC), Stand-by L/C (SBLC), Bank Guarantee (BG), Escrow Account or wire transfer after inspection (100% or x% deposit and y% balance after inspection).
To a great extent prices are determined by your method of payment. This is why you should always specify your method of payment in the LOI and, whenever possible, provide the text of your proposed payment instrument.
The L/C must be issued or confirmed by a prime International Bank acceptable by the supplier.
3) Buyer’s LOI is also generally required by the supplier to provide soft price quotes. In some cases, the supplier may require the LOI and BCL before he provides a soft quote.
THE RATIONALE FOR THE PROCEDURES
1. LOI: tells our seller exactly what the buyer wants and reveals which bank he will be using through which he will pay the supplier, and how he will be paying. Seller now knows specifications, shipping schedule, etc., and can decide if he can meet all those buyer conditions. If not, he will inform the buyer and that part of the LOI is negotiated to an acceptance point by both principals.
You can now see why we structure all of our transactions this way. The procedures do not favor either the buyer or seller but do favor the successful completion of the transaction. These procedures will very quickly stop a transaction dead in its tracks if either the buyer or seller is not serious. It does stop a broker chain immediately.
Our suggestion is that you please make your buyers aware of the above procedures to see if they will accept them. There is no reason that they would not, but one never knows how people will respond, and none of us want to waste time.