Security for the buyer and the seller

 

Before staging the banks for any market the seller needs:

  • The fully completed Customer Information Sheet (CIS), including a copy of the buyer’s passport and a copy of the company’s registration certificate,
  • An RWA letter (template that the seller provides when sending the FCO) signed by the buyer’s bank. The RWA letter must be sent to the buyer by his bank; not to the seller!

Once the seller’s bank give green light, the seller will be able to draft a Sales and Purchase Agreement (SPA) including its bank data and provide it to the Buyer. Without this RWA letter the seller cannot, normally, go forward to the next step.

After confirming the RWA letter, the buyer’s bank sends the MT799 / Notice and the seller’s banker enters into secure communication with the buyer’s banker to exchange all the information needed to secure the transaction for both banks. Only when both banks give the green light to their customers – buyer and seller – an instrument must be issued. The seller’s bank guarantees with full banking responsibility for the transaction based on the SPA and it expects the same from the buyer’s bank for the funds.

This instrument then enables seller to deliver POP/SGS/etc. to Buyer’s bank in the name of the Buyer as new titleholder within 48 to 72 hours most probably. There is no way that any party can start a fraudulent activity in this process. It is based on total security for both sides. The transfer of the guarantee in the second step is absolutely seamless as both bankers are already in direct connection at this stage.

 

Procedure for FOB deliveries

  1.  Buyer sends LOI or ICPO to Seller. Seller sends SCO to Buyer. Buyer signs SCO and reverts to Seller.
    2.  Seller sends FCO to Buyer and Buyer reverts the following documents properly filled out to Seller:
  2.   Completed FCO with Buyer’s bank data, signed and sealed.
    b.   Customer Information Sheet (CIS; template provided by Seller) on Buyer’s letterheads, containing also:
  3.    Copy of Company Registration Certificate
    II.   Passport copy of signatory
  4.   RWA letter issued by Buyer’s bank (template provided by Seller)
    d.   Authorization to verify the RWA letter by seller’s bank

 

  1. Seller drafts Sales & Purchase Agreement (SPA) and Commercial Invoice (CI) to be lodged in both banks. Seller and Buyer execute final contract. Seller sends final contract electronically in PDF format. An electronically executed final contract can stand as original.

 

Procedure for CIF deliveries

  1.  Buyer sends LOI or ICPO to Seller. Seller sends SCO to Buyer. Buyer signs SCO and reverts to Seller.
  2.  Seller sends FCO to Buyer and Buyer reverts the following documents properly filled out to Seller:
  3.   Completed FCO with Buyer’s bank data, signed and sealed.
    b.   Customer Information Sheet (CIS; template provided by Seller) on Buyer’s letterheads, containing also:
  4.    Copy of Company Registration Certificate
    II.   Passport copy of signatory
  5.   RWA letter issued by Buyer’s bank (template provided by Seller)
    d.   Authorization to verify the RWA letter by the seller’s bank
    3.  Seller drafts Sales & Purchase Agreement (SPA) and Commercial Invoice (CI) to be lodged in both banks. Seller and Buyer execute final contract. Seller sends final contract electronically in PDF format. An electronically executed final contract can stand as original.
  6.  Buyer’s bank sends MT799/Pre-Advice (verbiage provided by Seller’s Bank) to Seller’s bank and Buyer’s sends copy immediately to Seller’s company email address. After Seller has received the copy of the transferred SWIFT and forwarded to his bank, Seller’s bank opens communication with Buyer’s bank on basis of the lodged SPA to discuss all relevant items and documents for security on the deal for both banks (Buyer/Seller).
  7.  After successful mutual confirmation of the MT799/Pre-Advice between both banks Seller’s Bank confirms by SWIFT MT799 and Buyer’s bank sends SWIFT MT760/BG/SBLC (verbiage provided by Seller’s Bank) about the amount for the first delivery to Seller’s bank within 3 banking days.
  8.  Within XX days (depends on the product and other parameters) after confirmation of the instrument by Seller’s bank and depending on SGS inspection timeline loading starts as per delivery schedule agreed in the contract.
  9. Vessel sails to destination Port, Seller gives DTA at discharging port and Buyer makes Dip Test / SGS/ CIQ or similar organization.
  10.  Buyer’s bank pays for each shipment 100% by TT or MT103, at sight in the discharging port against presentation of the shipping documents.
  11.   Seller provides 110% insurance in favor of the buyer.
  12. Transaction closed

 

Practical Procedure:

  1.   Buyer issues LOR on his letterhead including his request specifications, terms and conditions in details
  2.  Seller issues SCO to the buyer for study.
  3.  Buyer issues LOI on his letterhead.
  4.  Seller issues FCO and sends to the buyer.
  5.  Buyer returns the FCO signs, seals, with a notation of “acceptance”.
  6.   Seller issues SPA draft for buyer’s perusal.
  7.  Buyer returns the SPA with any suggested changes, seller Reviews and applies the changes made by the buyer in the egyptian draft SPA (if approved). Once agreed, seller issues final executable spa via fax or e-mail.
  8.  Buyer returns the spa to the seller duly completed, signed, sealed with his full banking coordinates together with his passport copy and produces the final spa in four originals via express mail courier service.
  9.  Within 4 banking days after buyer returns the SPA, seller issues to buyer a pro-forma invoice worth of delivery product value and issue 5% pb bank guarantee to buyer Bank.
  10.   Within 7 banking days buyer causes his bank to issue operative DLC covering the shipment value 11. Within 10 banking days from ther DLC issuing date seller sends the full set of documents, by banking courier to the buyer’s bank.
  11.  Payments from buyer to seller for cargo shipment to be made by a bank wire transfer for 100% of CIF invoice value, payable against delivery, upon the vessel arrival and obtain the final inspection by issuing the egyptian health certificate as stipulated in the SPA. Product insurance: sellers shall provide insurance at their sole expense and responsibility. Insurance shall cover the usual mercantile e risk for one hundred and ten percent (110%) of supply invoice value for each shipment. Such insurance shall be provided through a reputed International mercantile insurance company.