SMICE BULLETIN BOARD
From May 6, 2020
As we return to normal operations while SARS COVID 19 restriction are lifted, worthy questions asked by PCT’s, updates to doctrine news and personal opinions of SMICE will be advised below in short form in a manner only understood by those who have purchased the FTNX doctrine of trade 2015 onwards.
INSPECTION AT PORT OF LOADING
MAY 7, 2020
May be applied by the agent of the supplier or end buyer at port of loading but not the end buyer personally while actual loading takes place and is completed; is a strict rule that must not be broken. PSI (In personam type) is paid for this reason whether its secure at port of loading or from place of production/mine.
FACE MASK DEMANDS
MAY 8, 2020
Many ‘cowboy’ suppliers of ‘face masks’ are asking for upfront deposit as high as 50%. Many are also promising very fast delivery by air cargo. Such request for upfront cash payment MUST not be entertained. Either a supplier is ‘export’ ready with ‘In Rem ISO’ certification in hand or they are not. If they cannot accept a UCP endorsed DLC. No deal!
BUSINESS WITH CHINA
MAY 8, 2020
Despite rumours and inappropriate remark made by some countries, trade with China continues to apply with FTNX and PCT’s ‘without prejudice.’ COVID 19 was an accident; to say anything else ‘just to sell papers’ is both reckless and foolish. China is very capable to address health issues within Wuhan, which I’m sure they will, just like USA did when San Fransisco introduced the much feared HIV to the world, or when Africa did the same when Ebola was discovered etc.etc. It happened–this time in China; let China fix the problem and lets get on with business. Information must be shared and inquiry should be allowed, to appease the world that China is on top of the situation; albeit such an inquiry will not produce any benefit as it applies to easing the matters of the pandemic. If China want to act aggressively for other reasons, then its China who has the most to lose.FTNX will trade with China ‘on our just terms’ on the premise that ‘business is business.’ China’s ‘trust bank’ is at a long time low at their own doing, as such strict bonded procedures will apply or no business would be possible.
DELAY PORT OF LOADING
MAY 8, 2020
Up to 3 months delivery delay at some busy ports may be evident, accordingly offering a LDD rather than a P.G may be a more friendlier and sound approach when sourcing supply.
NO CRUDE OIL DEALS
MAY 8, 2020
Forget about crude oil supply for the moment, unless you have secure storage facilities, as over 12 KSA ships full of crude oil sit idle at USA ports and tanks at Cushing USA are full to the brim. Refined fuels like ULSD is the best product to trade in at this time.
MAY 9, 2020
Iron ore followed by coal will continue to prevail as a top exportable product to source in 2020. As for ‘climate change’ I’m sure the rhetoric will commence once COVID 19 issues subsides.
MAY 9, 2020
If a PCT is located in a country holding sanctions with USA, then western banking access will not be possible - but applying FTNX procedures MUST still apply if the trade is conducted with a country not holding sanctions with i.e: Russia as Russian banks accept UCP endorsed DLC’s.
BREACH OF CONTRACT AGAIN!
MAY 13, 2020
China has suspended beef imports from Australia citing certification issues ( excuses). Four abattoirs all geared up for exports will need to soon close if they issue is not resolved quickly. Year of profits and infrastructure development wiped off with one single unwarranted action. Why ? Politics? May-be ! Improper or unacceptable trade procedures? For sure! This is what happens when an exporter pander to the needs of the importer so as to ‘close a deal’ in a manner beyond what is normally deemed as acceptable; with many concessions served. We see it all the time. In essence, no matter the deal or country, no short cuts, no delivery at DAP, application of strict proper procedures, without government involvement in such deals–is always the best basis. The use of safe ICC UCP 600 endorsed DLC to pay for goods must always be apparent; has become an unconditional matter. China’s arrogance will come back to bite them another day, for today however it’s the exporter doing impractical business with China, are then entities who are going to suffer form such ‘excuses.’ Placing all eggs in one basket is always a precarious situation. Serving smaller new markets in other countries has much more value than serving one large market. The chances of a ‘total crash’ are much more remote. China will breach a contract on a whim is another issue; which could take year and billions of diallers to settle.( if ever?)
ALL BELLIGERENT BUYERS MUST PAY BY DLC AND PG
MAY 13, 2020
FTNX will seek from belligerent buyers from any country, a DLC for payment of goods and up to 10.0% P.G deposit for “intentionally breaking a contract without a legitimate reason” is the new norm in 2020. I strongly suggest other countries vary their contract conditions accordingly. A DLC from a Chinese bank in China cannot be accepted without the DLC being confirmed form another bank ‘not in China.’ For now a confirmed DLC out of Hong Kong is still acceptable, as situation which may change with little notice. Update July 4, 2020. DLC out of Hong Kong must now also be issued as confirmed, as China new security laws are in effect as China moves to control the whole region. Doing business in China has become a precarious affair; a country who has failed to honour their agreements with England and Hong Kong will not honour a trade contract, incoterms or UCP rules– may also be assumed. A Buyers Performance Guarantee may also be invoked when doing with China.
FINAL TRUMPET BLOWING FOR TRUMP
MAY 17, 2020
Trump announces that the USA will have a cure for COVID-19 by years end. If he fails, America will look incompetent to the rest of the world. USA will be deemed to be nothing more than, ‘a circus run by clowns.’ If he succeeds, then the status of USA as the most powerful country in the world would be upheld. Trump is playing the Machiavellian card. An untruth can be readily forgiven by the people; if he wins; and condemned accordingly if he fails to find a cure.
FIRST DELIVERY DELAYS
MAY 17, 2020
It would be prudent that the first delivery shipment of any contracted business have some added tolerance factors to allow the supplier and end buyer to ‘fix the routine’ found in the contract. The first delivery shipment should have a higher discount applied to the goods, that was offered in the rest of the contract, and that the buyer must not collect on the suppliers P.G on first shipment delivery for any delays therein. Currently some port have berthing delays of up to 4 months. First delivery is given a special status pertaining to ‘establishment the first delivery routine’ would save a lot of issues and angst between the transacting parties. Once all the issues of first delivery are ironed out, the expectations thereafter follow contacting terms and conditions.
TRANSFER FEE DLC
MAY 17, 2020
Supplier may be asked by the FTNX (PCT) to pay for the transfer fee, when a PCT is ready to transfer the letter of credit into its accounts. This aspect serves a specific puropose. It allows the supplier to claim the DLC immediately and verifies that the DLC has gone to the named supplier and account applied on contract. These are security feature that a PCT can readily apply at its discretion. The End buyer will be asked to pay for the transfer fee is the normal expectation , when the end buyer has received an excellent below market price basis for goods ordered. When there is very little incentive ( margin) for the end buyer ( price is high), this is when the supplier may be asked to pay for the transfer fee instead, which is an allowable and acceptable aspect. A PCT must stipulate this aspect on its offer to procure, if the intention is for the supplier to pay for the TF. Under UCP banking rules ‘the beneficiary’ to the UCP DLC is the supplier, not the PCT to which the rules states that the ‘beneficiary’ shall pay for the TF ‘unless otherwise agreed upon.’ The differing perspective comes from the correct status of the PCT who is the ‘buyer’ to the supplier and therefore not the ‘producer’ of the goods being sold to its end buyer. Since the PCT must negotiate and secure the offer from the supplier as buyer, it is at this time that the PCT can readily assess who should pay the TF, based on the buy price. In the majority of cases (90%+) a good price for goods is secured, and thus the standard application does not justify the added expenses of suggesting that the supplier also pay for the TF. The PCT must never pay for the TF from its own pocket.
THE END BUYER AND PRE-ADVISED DLC
MAY 17, 2020
FTNX will accept a pre-advised DLC in most cases (Quid Pro Quo) if the bank of the end buyer is prepared issue such a financial instrument. It is the duty for the end buyer to first and out if a PAIDLC can be issued by their bank. To sign a contract only to find that the bank will not issues a PAIDLC is a breach of contract, if a normal IDLC is not advised instead. FTNX has terminated contract is the past due to this aspect, at cost to the end buyer (compensation). The end buyer serves a PAIDLC; FTNX surrenders its PPIC (evidence of supply) in return which removes the PA status and converts the instrument into an active credit. A PA DLC is ‘irrevocable’ just like a normal DLC and cannot be cancelled once the PPIC is served-as some end buyer have tried to do. An end buyer with good credit history with its bank is the type of entity who is able to opens a PAIDLC. Under UCP rules , a UCP adhering bank has the option to issue or not issue a PA-IDLC.
SUPPLIER MUST MAKE AN OFFER
MAY 18, 2020
We have seen some very poor document in our time; especially offers. There is NO contract without an offer, this means even if a contract is signed without an offer the contract is invalid. Six elements are needed to form contract. The 6 elements are as follows; (a) Intention, (b) Offer (c) Valuable consideration (d) Legal capacity (e) Genuine consent and (f) Legality ( objects agree upon). In (f) other tests must also be satisfied as to the ability or capacity to enter into and sign a contract, in where corporation rules via its MOU, international or even domestic laws could play a role in disallowing certain people from entering into contract; i.e: Aliens, infants, corporation, lunatics, a drunken person, married women, bankrupted, Parolee, criminals, and Convicts. A PCT must observe these elements and aspects before considering entering two a commodity transaction as a ‘Buyer/Seller.’
MAY 18, 2020
We have noticed some PCT applying a ‘mail order ‘ business on the side. Mail order business was big business long before the internet, which means anyone can apply such business with no training. A Person makes a claim that they have a product to sell locally, when in fact all they are doing is processing the delivery of ordered goods directly from the manufacturer in another country based on the issuance of a pro forma invoice. Instead of receiving the goods in ‘5 days’ as claimed, the customer receives the goods 4 or 5 weeks later, in where the supplier is simply filling up FCL ( defined as a HCL) with many smaller orders. False description of goods and excessive delivery time way ‘beyond the scope’ are genuine grounds for a refund.
NEW IMPORT RULES CHINA
MAY 22, 2020
“THE BUYER MAY NOW ASK CUSTOMS TO INSPECT GOODS” means, “ The Chinese importers will have no choice ‘but to ask customs’ to intentionally inspect good and look for ‘added issues.’
It’s a new internal Chinese ‘pop up’ rule coming into effect from June 1, 2020 made to ensure that, ‘certain suppliers’ have goods intentionally delayed for weeks or months, before clearing customs in China which has nothing do with PSI inspection of goods, signed contract nor ‘delivery.’ A concerned importer could have asked inspection services in country of loading to do added analysis of goods for certain i.e; toxins or undesirables content; but this is not what is being sought. Customs do not offer analytical services, because they are not ‘experts’ in such matters. Hence China is simply being arrogant and belligerent towards some countries by creating such a new rule (the first of many) Solution? When selling goods into China ensure only FOB or FCA Incoterms is offered. To offer CIF and especially DAP incoterms to Chinese importers is considered a precarious offer. If they are going to intentionally delay aspects unloading, then they will be applying such delays for their own orders. China has lost trust of the economic community. It’s time to move away from selling large revolving shipments of goods to China and commence trading in smaller lots of much wanted products to other countries and continents like Africa and the EC. Changing the sourcing aspect to least 10 FCL’s minimum or 12,500 MT single shipments is now considered a viable option-even for FTNX, in where a PCT should only offer large revolving deal as they becomes evident, is the new norm. It will make PCT more busier over the longer term, than simply wasting a whole lot energy on revolving deals, on country who has now increasingly turned belligerent. Single FCL should be avoided. A new extended FOB contract model exclusively made for , when dealing with Chinese buyers and sellers will soon be available via SMICE. Normal contracting modes applies otherwise for all other countries is now accepted practice for all PCT’s.
AUSTRALIA IN FRONT
JUNE 23, 2020
Australia retains its AAA credit rating during this SARS Cov 2 Pandemic and is only 1 of ten countries in the worlds to do so. This aspect indirectly also reinforces the continuing aspect that Australian banks are amongst the top 100 safe banks of the world when it comes enacting on matters of finical instruments.
JUNE 22, 2020
Perhaps its time Governments told its people the true nature of the COVID 19 virus and why its important to follow safe guidelines. The pathogen is actually SARS Cov 2 which is around Ten times more deadlier than the common flu. What else people should be aware of, is that for all our advancements in medicine, while many ‘treatments’ are available only a few cure for a virus outright has ever been created, taking decades to administer - and that was for small pox and Hep C. In fact medical experts can offer no answer nor remedy for this virus is also the truth. There will no vaccination for SARS anytime in the near future. Only a false prophet would assure its citizens otherwise. The virus is very small and very simple in design. It can subsist in a whole host of situation including oceans (except; for the ‘Dead Sea’ where salt content of the water at 35% kills all viruses and bacteria). It may be that a simple solution is needed to combat a simple bug. Looking in the ‘shallows’ can also be productive sometimes. Since the ‘experts’ can’t help perhaps opinion and ideas from the public may. My two cents worth are as follows of which I am practising. Salt may be an answer in controlling this virus. Copper bracelets of another era for the treatment or Arthritis; door nobs/handles and copper bench top at the checkout, in retail areas may be other concept also worth testing, as ‘easy to get’ Copper sheets is a metal that naturally kills viruses. Salt laden face masks may also be a good idea. As for trade; business has slowed down since early 2020 , but exports must still continue. The work/deals are still out there, the efforts needs to secure such is now greater. Smaller revolving period and smaller NBC/FCL single shipment of goods is the current trading aspect. PCT ’s now need to ensure genuine delivery times are stated as delays of up to 4 months on physical deliveries are becoming common.
JULY 1, 2020
In the last few months a huge increase in exports from Brazil has been recorded with 37% of all agricultural products from Brazil being sold to China. This in itself now suggests that the world is heading into precarious ‘supply’ waters once more. We have a pandemic ; what’s next ? I think the world will face famine of global proportions in the near future if the we all fail to ‘unite’ when facing an aggressive foe growing increasingly belligerent. When one country alone depends on such a high amount of food imports in where is shuns traditional suppliers like USA and Australia as some kind of political retaliation, then traditional markets unable to sell its agricultural goods overseas, will cease producing such goods. When a major exporter like Brazil records sustained crop failures; a perfect storm eventuates, suddenly and quickly. “After the plague and famine comes ‘fire’ from the sky. It has happened before, it will happen again.” India needs to bolster its ties with Australia and New Zealand to ensure production levels in Australia for agricultural/farmed products are maintained and guarantee itself a readily available future supply of grains and pulses, as countries move away from a ‘China’ that is quickly becoming estranged with the rest of the world. The world has much more real events to worry about now than the much lauded future pertaining to climate change and emission. Australia should also get rid of sanctions especially those applied to Russia and allow grievances to be served by a universal forum applying a set of laws agreed upon by members, and an adjudication process to settle differences quickly and swiftly based on a very simply assumptions arrived at applying the principles of ‘right and wrong.’ The first act to stabilise the world immediately is to GROT (Get Rid of Trump.) The second immediate concern is to work out way to effectively live with SARS Cov II. To try and defeat what which has survived through history and is deemed indestructible is a wasted effort. We cannot always arrive at the crumbling edges of a precipice, only to pull back from the brink of collapse.