Flawed Terms and Applications Intermediaries Can Not Use (Written by an Intermediary Advisor for the Intermediary Trader) Information provided here is a guide to international trading as it pertains to the Intermediary..

tra International Commodity Training for The Intermediary Trader Introduction: The effective procedures taught here are supported under the Rules of Delivery (intcoterm2000), Rules of Collection (UPC522) and The International Rules of Banking (UCP600). Years ago Intermediaries had no effective uniform policies or any set of guiding rules available to rely on for international commodity trading. For years Intermediaries were doing the best they could with little or no rules at all. While other institutions have rules of some sort which an Intermediary was relying on, but its basis are informally applied and not fully constructed as uniform applications. Although these informal applications are somewhat appropriate for the End Buyer and the Supplier dealing directly with each other they are not applications that can work for the Intermediary. An enterprise known as Foreign Trade Negotiator Exporting had developed an effective doctrine and a guiding set of rules which was tested in 1998 and over many years it was refined and perfected so it could be applied in 2005. For the first time in years the Intermediary could apply a safe legally defined set of standards and be able to act in the position of a professional international trade Intermediary with secure, safe, procedures and applications. These rules are founded on the doctrines of English Law, International trade rules and UCP 600. These rules and regulations are the only effective applications an Intermediary can successfully close a deal. Look at the many deals on the net, you will see many Intermediary sellers are using incorrect procedures and flawed documents that just can t work for the Intermediary. ie: Seller required Letter or of intent (LOI), with bank comfort letter (BCL) required, allowing for soft bank probe. Goods offered, CIF ASAP ( Any Safe World Port) Payment by SLC (Stand by letter of credit) required..etc.etc.. These are all flawed, silly foolish and extremely dangerous procedures that Intermediaries MUST NOT apply, yet 99% of such do...why.. because no one has taken the time to learn correct trading procedures and proper applications. Everyone is copying the bad trading applications of others out on the internet. "The blind leading the blind.. trader commodity b2b

tra Unfortunately the Intermediary with no knowledge of proper procedures will undoubtedly suffer consequences or at the very least great disappointment. The Reasons: If the proper procedures are not followed, the deal will never close. Or even get to the acceptance of the offer from the End Buyer. If an Intermediary use the flawed LOI/ BCL/ ICPO/ POP/ MPA/ NCND/ PB/ ASAP documents, they are an untrained trader that has been misguided by another unskilled and untrained trader. Note: A trader using the above flawed terms and ambiguous procedures is investing their time on deals that simply cannot be closed. Flawed Terms & Acronyms An Intermediary must not use. LOI: Letter of Intent This term is used out on the internet by inexperience traders as a Letter of Intent which is incorrect. LOI mean Letter of Indemnity. Inexperience Intermediary Seller who is claiming to be the supplier will ask for a Letter of Intent to purchase goods. Or a Buyer/Intermediary is offering a LOI is misinformed or, is trying to con you. You as a buyer/seller Intermediary can not give a letter of intent to buy goods as your intentions are not to buy goods but to sell the title of the goods. So your letter of intent to buy goods would be a lie. Giving a Letter of Intent only means Yes I intent to buy the goods today but tomorrow I might change my mine. A letter of Intent is not a binding contract. The Letter of Intent is a total waste of time on a worthless piece of paper. An Intermediary can only give to the supplier an Offer to SELL the suppliers goods. Your intentions as an Intermediary are in the Offer to the Buyer and the Supplier. There have been actual suppliers that have asked a buyer for a LOI and it is given to the supplier to appease him. (This is the only exception to the rule with a LOI.) This is only to the supplier (the person who own and in possession of the goods) not to a seller (buyer/seller) Intermediary. trader commodity b2b

tra ICPO: Irrevocable Corporate Purchase Offer This term mean Irrevocable Corporate Purchase Offer is inappropriate for an Intermediary. The ICPO is a misused term by intermediaries. The intermediary is not the corporation purchasing the goods so he/she cannot issue an ICPO. This term may be effective for the End Buyer to the Supplier but not for an Intermediary. International Trading Law states even when no Intermediary is involved it is not effective. The ICPO is used in local or interstate trade, particularly in the USA. An ICPO must also be backed by assets. If an end buyer issues an ICPO and then attempts to cancel the obligations a week later, the supplier could claim breach of contract, as the ICPO is a binding contract. The supplier will only accept an ICPO from a corporation with assets. An intermediary cannot and must not issue or request an ICPO as in doing so they are putting themselves in a fraudulent position. As an Intermediary, different applications apply. ICPO's are only used in international trade between large corporations and where one corporation has a subsidiary office in another country outside the USA. The ICPO document is frequently used in some countries and some industries to establish corporate intent for certain undertaking, such as to purchase real estate, or to enter into some sort of deal, but there is no standard usage of this document in International Trade for the intermediary! Once again an Intermediary cannot irrevocably offer to purchase the goods when they are not purchasing. They are offering to sell the Title to the said goods not purchase or take possession of goods. If any Intermediary offers you an ICPO you know they are misinformed, inexperience or trying to scam you. The Intermediary should first ask the Supplier for a RFQ (Request for Quote) not issue a (LOI). The next document is an Offer for you as a Buyer/Seller Intermediary to consider from the Supplier- ( Offer ) to sell -Not (ICPO). This is all that is needed (Quote, Offer) Unmistakable, Fully Defined Clean Documents Not understanding the proper applications for an intermediary one of two things will happen. 1. The deal will collapse, and/or 2. You as an intermediary will be circumvented. LEARN, STUDY, PRACTICE and UNDERSTAND. ICPO: FFDLC: (Fully Funded Documentary Letter of Credit) There is no such thing. A bank issues a DLC which is an active financial instrument. Fully Funded makes no sense. Is the bank going to issue a ½ Funded DLC??????? trader commodity b2b

tra BCL: Bank Comfort Letter (A BCL is not RWA) The BLC is only a capability to a possible obligation as it is not a legally enforceable document. The Bank Comfort Letter is also known as Bank Capability Letter, and Bank Confirmation Letter. In a BCL there is no such thing as bank account numbers or any other information. It is an official letter from the customer's bank confirming his ability only to meet a certain level of payment requirements. It should however be understood that this does not imply any guarantee of payment. BCL is nearly impossible to obtain anyway. The BCL is normally only valid a few days. If an Intermediary asked for a BCL from an End Buyer & the End Buyer gave a Genuine BCL, then the Intermediary has to continue with the deal which means disclosing the Supplier to the buyer s side and here is the problem. A bank Comfort Letter can be cancelled anytime. The Supplier is disclosed and the End Buyer changes his/her mind, then returns to the supplier at a later time and circumvents everyone in the group. IMFPA: Irrevocable Master Fee Protection Agreement This term stand for Irrevocable Master Payment Agreement and must not be used by Intermediaries. This flawed document cannot be made to apply because one statement applicable to mistake of facts or information could render the whole MPA as invalid. This making all names applied on such a document an invalid situation. Payment agreements must be personally issued by the guarantor to the beneficiary at the start of the deal and must be supported by a financial instrument once the deal has closed. The FPA (Fee Protection Agreement) and NCND are usually attached to each other. FPA / NCND is not the proper way to protect Intermediary/broker s interests. Beware if someone claims to be the Mandate, Supplier, End Buyer while at the same time requesting FPA and NCND. A real mandate never fears circumvention as he is protected by the one who extended the mandate to him. A real supplier and a real End Buyer don t get commission. trader commodity b2b

POP: (Proof of Product) A Proof of Product ('POP') is often requested by customers or agents who believe it will give them some guarantee of the existence of the product and ability of the supplier to deliver. In practice many POPs are produced which are false. In practice it offers no proof at all, because once a POP has been drafted it is automatically out of date - the product could have been sold to another buyer and therefore no longer exists. Nevertheless, a POP is still occasionally requested as apparent proof that a seller/broker has the product, which is possibly not the case. A POP for large quantities is not genuine as it is unlikely that a manufacturer has stockpiled possibly millions of tons of a product..a POP without a contract reference is also worthless, a POP with a contract reference can and will only be issued once a financial instrument has been put in place, so is therefore superfluous. In reality, the best and only real proof of product is when the seller can demonstrate the products in his possession at the dock side. A BCL is not a guarantee of purchase- if you give POP on a BCL- then bye..bye Circumvention is assured. NCNDA: (Non Disclosure and Non Circumvention Agreement) The sourcing intermediary who cannot take the position of a Controlling intermediary. In a string of sourcing intermediary must seek protection from an informed honest Controlling intermediary in order to have any chance of getting his commission inn a closing deal. This term stands for Non circumvention Non Disclosure Agreement. This misunderstood flawed nonsense document will not guarantee payment of commission and is a waste of time for the Intermediary. How can the Intermediary prove circumvention if they are shut out of the actual deal? Can the group listed on the NCNDA agreement prove the deal even closed and with whom. The NCND agreement is a waste of time unless it is between two people or more in the same country in the same state. MT SWIFT: No one outside of a swift terminal room would ever use the term MT-103. MT- 103 is an unconditional and authenticated transfer of funds from one account to another.. No strings attached. An Intermediary can not be involved in such a

stupid payment method. The UCP600 documentary letters of credit is the only financial instrument an Intermediary can be involved in. If someone try s to tell you something different then they are trying to con you or they do not have the knowledge to be in this business. It is a "UCP 600 DLC" or NO DEAL, IT S THAT SIMPLE MPA: Master Protection Agreement or IMFPA stands for (Irrevocable Master Fee Protection Agreement.) The FPA (Fee Protection Agreement) and NCND are usually attached to each other. FPA / NCND is not the proper way to protect Intermediary/broker s interests. Beware if someone claims to be the Mandate, Supplier, End Buyer while at the same time requesting FPA and NCND. A real mandate never fears circumvention as he is protected by the one who extended the mandate to him. A real supplier and a real End Buyer don t get commission. PB: Performance Bond This term stands for Performance Bond. The PB is a guarantee that follows the goods to the destination port in where if the goods can be rejected for any good reason, then applying on the collection of P.B supported by a B.G. Both the Performance Guarantee and the Performance Bond are "based" on performance yet both are different type of performance assurance. A Performance Bond is for a DES deal that works for the supplier in possession of goods and an End Buyer taking possession of goods. The delivery of title documents cannot be secured so an Intermediary is not to enter into such deals. The correct guarantee given by the seller s bank to the buyer s bank is a Performance Guarantee in the form of an unconditional Stand-By letter of Credit. If the delivery fails and the delivery documents are not presented to the bank on the date specified in the contract, the bank just automatically pays buyer bank the Performance Guarantee unconditionally, No questions asked. Note: The Intermediary must ask the seller to issue a Performance Guarantee (PG) of XX% (Not a Performance Bond) of the total cost as defined in contract, issued as unconditional as per Stand-by Letter of Credit procedures defined under UCP600 banking rules, issued with in 3 days of buyers transferred DLC. Scams: #1-In some instances you will get a buyer asking for the PG (Performance Guarantee) first before the DLC (Documentary Letter of Credit) is in place. A PG

active or inactive is an unconditional application that if Delivery Fails The PG can be collected with no questions asked as per the conditions of the contract. The buyer can ask the seller an impossible demand and the supplier says no he cannot do, then the deal collapses, delivery has failed and the buyer can collect on the PG. CIF ASWP: Cost Insurance and Freight to Any Safe World Port This stands for Cost Insurance and Freight to Any Safe World Port. The CIF part of the term is valid, the ASWP however is wrong. There is a simple logic behind this. The shipment cost cannot be the same to ANY World s Port! For example the CIF price to ship sugar from Brazil to China would be double compared to if it was shipped from Brazil to South Africa. In only one small ship load (12.500 MT) that makes over half a million dollars price difference. No buyer would be willing to pay extra just to get an easily quoted CIF ASWP price. The CIF ASWP was probably developed by scammers because they did not have access to the ever changing real prices so they needed something more general they could quote on the fly. You buy the title from the Supplier using a UCP600 (Uniform Custom and Practice for Documentary Credit) formatted Transferable Letter of Credit. After the letter of credit from your buyer, has been placed in the Controlling Intermediary s account, it can only be transferred once, from you directly to the Supplier. Swift MT 103 or MT 760 S.W.I.F.T stands for Society for Worldwide Interbank Financial Telecommunication. Swift was established in 1973 by European bankers who needed a more efficient and secure system for inter bank communications and transfer of funds and securities. MT (Message Type) and the numbers indicate one of the many standardized message formats which comprise the SWIFT messaging system. No one outside of a swift terminal room would ever use the term MT-103. The MT-103 is an unconditional and authenticated transfer of funds from one account to another.. No strings attached. An Intermediary can not be involved in such an unworkable payment method. These types of payment are internal bank applications for transferring money- Intermediaries CANNOT use such applications. When a bank issues an MT

760 it practically issues a payment guarantee, on behalf of a customer, typically having first blocked the same amount of funds in the customer's account. Impossible incorrect flawed applications. Intermediaries CAN only use Non cumulative revolving UCP600 Bank issued Irrevocable Documentary Letter of Credits (PA IDLC) when attempting to close a deal. Note: The UCP600 documentary letters of credit is the only financial instrument an Intermediary can be involved in. If someone try s to tell you something different then they are trying to con you or they do not have the knowledge to be in this business. It is a "UCP 600 DLC" or NO DEAL ITS THAT SIMPLE RWA: Ready willing and Able This term means (Ready Willing and Financially Able.) Like the BCL the same applies to RWA. ( Look I have the money to buy"- IT DOES NOT MEAN I WILL BUY) If an Intermediary asks for a RWA or BCL from a Buyer and the Buyer gives a Genuine RWA/BCL, then the Intermediary has to continue with the deal which usually means disclosing the supplier to the buyers side - and here is your problem -The supplier is disclosed and the buyer changes his mind, then returns to the supplier at a later time and circumvents everyone in the group. The buyer just saved himself millions of dollars. Free Downloads Needed Incoterms 2000 (International Commercial Terms 2000) Incoterms are a set of trade terms compiled and adopted by the International Chamber of Commerce (ICC) in Paris for the contract of sale regarding the delivery of goods. The responsibilities of the buyers and sellers are clearly defined in Incoterms 2000. These terms (Incoterms 2000) are internationally accepted and should always be used in order to avoid misunderstandings between trading partners. The thirteen Incoterms are the ICC Publication No. 560; Official Rules for the Interpretation of Trade Terms published in September 1999 became effective, January 1, 2000. Download: http:///incoterms2000.html The revision of Incoterms 2000 will be released in the fall of 2010 and will take effect January, 2011. The official name will be Incoterms 2010.

URC 522 (Uniform Rules for Collection No 522) The Uniform Rules for Collections, ICC Publication No 522, shall apply to all collections and was first published by the ICC in 1956. Revised versions were issued in 1967 and 1978. This present revision was adopted by the Council of the ICC in June 1995. It is issued with the title ICC Uniform Rules for Collections as ICC Publication No 522. This English language gives the official text of the 1995 Revision. Download: http:///files/urc522.doc UCP 600 (Uniform Customs Practice 600) The 39 articles of UCP 600 are a comprehensive and practical working aid to bankers, lawyers, importers, and exporters, transport executives, educators, and everyone involved in letter of credit transactions worldwide. Download: http:///files/ucp_600.pdf Download: Intermediary Payment Guarantee Document. There really is not any document that is 100% guarantee for anything. The document to protect your commission that I personally use, that was created and perfected by FTN Exporting in Melbourne Australia and is supported by UCP600 and ICC (PARIS, FRANCE) AND ( INCOTERMS 2000), will give you 99% protection in a court of law. How to Use the IPG (Intermediary Payment Guarantee) This "IPG" (Intermediary Pay Guaranteed) document needs to be in the hands of the Controlling Intermediary FIRST, filled in and signed by the "controlling intermediary" (the one who is paying your commission). A hard copy of this IPG document sent to the sourcing intermediary from the "Controlling Intermediary" should be sent by courier, UPS, FED. etc, not email. The sourcing intermediary KEEPS THE ORIGINAL COPY with the "Controlling Intermediary's" signature. Copy, fill in, sign the "IPG" and send back by courier, UPS, FED etc, not email. Do not accept or sign electronic signature in this case. Each person has their own "Intermediary Pay Guarantee" with the Controlling Intermediary. There is only one beneficiary on the IPG and that would be an intermediary who assisted in the deal. Anyone else in the same group will obtain their own "IPG" from the "Controlling Intermediary".

Please read (terms and condition) and (collection procedures) of this document very carefully and fully understand the content of the "IPG". If the "IPG" document is incorrectly handled it will become invalid. Note: A well informed Intermediary knows everything about a banks business, but a bank knows very little of the overall Intermediary process. Most Lawyers know very little about banking and the Intermediary process but they are good at producing contracts...etc...etc and Intermediary has to know a wide range of things about the whole process. My Very Best To You j.hollister Other Resources to Help With Your Studies