As you know there are millions of misguided intermediaries attempting to get huge commissions through international trade which is very lucrative. Over ninety-nine percent will never, ever achieve success. So what is the solution? We, through our own experience, had to get hoodwinked by those to learn the hard way. Where are we going to start?
We decided to start with a basic trade rule and regulation that you, as the intermediary, are allowed to do. Do you know that according to international trade law, if you are next to the supply you can represent yourself as the "Seller?" Yes, it is true. If you have a supply of sugar, which you know for a fact, you can represent yourself as the seller of sugar. On the flip side, if you do not know that you have a legitimate supply of sugar, and if the buyer issues anything in your name, you may have issues with trade regulations and law. Therefore, Bill the computer guy can offer a supply of sugar just as much as your security dealer on the New York Stock Exchange.
UCP: Uniform Custom Practice for Documentary Credits Publication 600. Financial instruments are letters of credit that are imperative for the intermediary. To secure any type of fee from the end buyer the UPC 600 letter of credit is necessary. The rules are international practices that govern the way letters of credit are secured and transacted upon. What this means is that once you as the intermediary secures the financial instrument marked with the term UCP 600 APPLIED with the end buyer then such rules take over in trading transactions in matters of securing your payment for goods being purchased and/or sold.
With this fact at hand, how do you know if you have a genuine supply? You don't, if you are pushing offers over the internet. You have to establish a communication of trust and meet in person. Here is an example: Let's say you meet Mr. Y who is a supplier of sugar. You get to know Mr. Y through a few phone calls. You go and meet Mr. Y and you find out that he has a genuine supply of sugar. You tell Mr. Y, 'I am going to help sell your sugar for you, but I am going to do it in such a fashion where I am the seller.' (Remember, you can do this with trade regulations). Mr. Y would like to have more business and prefers not to do a lot of work. He says okay.
What is the point? Once you know for a fact that you have a legitimate source, you can represent yourself as the seller, and the buyer can issue a documentary letter of credit in 'your' company name. Once you have the documentary letter of credit (in your company name) you are protected from circumvention, you can open the doors to the supply of sugar, and you have a very well established relationship with the seller and the buyer. You solidified the deal in a business like fashion. In this scenario, both the buyer and seller will commend you for your business ethics.
We are going to use a DCL or documentary letter of credit as a simplified example according to UCP which we mentioned above. A DCL is a document used by financial institutions for an irrevocable payment undertaking. Most Documentary Letters of Credit are irrevocable which means the DCL's cannot be amended or canceled without prior arrangements with the beneficiary. When you have a DCL issued by a buyer then you are guaranteed payment. It is imperative to have the DCL worded correctly for the transaction, and if you have any doubts please consult your attorney. We know there are various forms of the DCL, but we are using the basics for illustrative purposes.
You can do this with all bulk commodities. You are not breaking any international trade law or regulations. In fact, you are performing as international trade would like you to. There is a way for you to protect yourself in bulk commodities, and the way we have explained it is the way it is done. If anyone is asking for a BCL, ICPO, or the like, do not entertain it whatsoever. Make sure to get yourself next to the supply side of the deal. Then you are the supply. Do it right, and if not, you are wasting your time.
0 comments:
Post a Comment