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From May 6, 2020

As we return  to normal operations while  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. 


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. 


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! 


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, such an inquiry will not produce any benefit  as it applies to easing  the matters of the pandemic. Australia should have ‘asked’ China to participate in such an inquiry; after all this is how real ‘friends’ act. As for China; perhaps China should concentrate  on tightening matters of health inspection locally  instead of concentrating in destroying  the ‘democratic’ part of society still prevailing in  Hong Kong.  China has poor reputation when it comes to handling  heath issues and indirectly caused the release into the world of deadly viruses such as Covid 19, which I am afraid is  only the first kind of virus that the human race will need to live with forever, especially  when COVID  19 mutates to a much stronger and finally  indestructible  virus, which it will, as this is the nature of all viruses. Covid 19 came from  within a place in China where this virus was probably virulent for years if not decades, effecting  a few locals, or nobody at any given time while working at the Wuhan market place; the few who had antibodies already established barely effected the community in which the workers live in. So how did the virus leave the confines of one small place, to infect the whole world?. Tourism! The need for people to discover places ‘off the beaten track’ matched with an ‘ideal few good breeding days’ weather wise,  and an increase in tourist number at the market in a particular week, in my opinion is the cesspit which caused the outbreak world wide. In this light, China( Government)  alone is not to blame.  China has a lot to answer for; being arrogant servers no purpose, being interactive in  avoiding other outbreaks  in the future does. If one has the gaul to  slap another in the face, one should be expected to be slapped back–harder.”  Educating its people about matters of  personal hygiene and how to prepare food for human consumption should be a priority.We see Australian airport customs ‘all the time’ stopping Chinese people from bringing in some really disgusting and vile  smelling and even decaying  products ‘prepared at home’ to pass on to relatives here; such products which luckily are confiscated, otherwise we would have seen outbreak(s) of  ‘some thing’ much sooner.Education is key is stopping such ‘accidents.’ Perhaps the Government making efforts to teach Chinese people that we don’t have to kill and eat everything that walks and crawls would be a good start. Barbaric and ignorant customs and practices of one  era are not always accepting in another. Being ignorant of the facts, does not make for a good excuse.China needs to appease the world  that its doing what it can to  clean up its act, the rest of the world need to assist China in doing as much without incriminations.  Confucius “Real knowledge is to know the extent of one’s ignorance.” “Don’t complain about the snow on your neighbour’s roof when your own doorstep is unclean.”     


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. 


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. 


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?) 


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.


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. 


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.


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.


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.


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.


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. The job of Customs  is to ‘check’ and clear goods at Port of entry. Hence China is simply being arrogant and belligerent towards some countries by creating such a new rule (the first of many) is obvious. China is  a communist country when it suits, and a capitalist country when it suits. It makes rules and changes rules at will. 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 of unloading, then they will be applying such delays for their own ordered ships. China has lost trust of the global economic community.The need to regain such trust quickly.  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, on a case per case basis,  is the new norm. Commonwealth of Nations is our new sourcing arena. 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. As stated before, countries have to start making products that would otherwise come from China as a matter of urgency as business with China, just like their intentions are becoming precarious by the day. 


MAY 24, 2020

PCT Erik B. Johnson from USA has secured fuel /LNG storage facility in the USA  and has posed a good question lightly covered under the doctrine under ‘assignment’ which is worth posting. This demonstrates that related business can be applied under the doctrine, even though it did not  mention such matters intently. Here is my reply in short form 

No matter the form of ‘assignment’ taking place once allowed, it means that the ‘whole business’ and responsibilities therein in is able to be transferred from the PCT to the assignee. Part assignment cannot apply. Renting LNG ‘space’ by a PCT is tricky. Unlike handling tangible products like goods, dealing with matters which lack tangibility can be  problematic for an inexperienced PCT as agreement to the leasee issued by the PCT  needs to be constructed based on the  copy of the lease provided by the leasor and undisclosed principal. Goods are purchased and offloaded by the PCT quickly. Renting LNG storage space on the other hand makes  tenuring such a lease  an ongoing aspect as it pertains to obligations and responsibilities. If the PCT  fully takes up the ‘space’( rents the space)  as per the lease, then you could be lumped with ongoing expenses and problems. If the  PCT surrenders the space to the  client ( end buyer) , such could circumvent  efforts as the PCT  will need to 'disclose the supplier' at some stage, 'safely.' The term “At some stage safely" is what you need to work out. Use local laws to your advantage by ensuring matter of ‘evidence of your role’ is  clearly apparent.  Make the deal with the client (end buyer)  taking up the space, then  seal the agreement (with supplier) after funds from the end buyer  is secured. An ‘agreement’ rather than contract will suffice when dealing with the leasee. An agent of the leasor has no authority to allow a PCT to act on behalf of the agents principal (Remember Doctrine: Delegatus Non Potest Delegare). The PCT now secures the lease, for first delivery or for i.e: 60 days ( which ever comes first) then ‘assign’ the whole  lease to the end buyer  outright after ‘first delivery’; along with the  responsibilities therein. All you need from the 'supplier' (The leasor) is the simple assurance in writing that if YOU take up the space via a lease, the said lease can  be ‘assigned’ over  to another person later; to your 'Undisclosed Principal' who then takes over.  In other words the PCT  takes the lease to rent space from the ‘supplier’  but the PCT wants  the right to ‘assign’ the lease fully  to a disclosed principal at a later time, is a stipulated condition.  It’s  not a  mere aspect of subletting that is  taking place, its much more than that.  PCT get the payment for the first i.e year, or period agreed upon. You keep the difference  and pay the 'supplier.’ You sign the  suppliers lease, and assigned it to  the ‘end buyer’ who has already signed the leasing agreement with you, to you accept the lease but issued an agreement to to he ‘end buyer.’  This means the deal you make with the end buyer (leasee) must  fully reflect the deal you made with the supplier. So get the supply agreement/lease, ensure assignment is allowed as indicated on the lease , with your authorised  name on it as agent acting on behalf of a  disclosed  principal, then reflect it to your end buyer. He pays  the PCT. You pay the supplier. You then FULLY assign the lease to the supplier . Role of the PCT and  responsibly is over. The end buyer is now disclosed to the supplier, who now have to answer to each other. If payment for ‘space’  is ongoing monthly rather than a lump sum being initially served, everything  stated will still need  to apply. Once the PCT  secures the  first payment and commission and transfers the payment for rent, you know the deal went  through (No excuses later.) Thus if more monthly payment of commission is due after the first payment , the agreement with the supplier  must state that the difference in payment is  your commission, and that such commission payment is agreed upon  ( in part of or in full)  is to be paid  into you bank account monthly, once the supplier  receives each full payment rate that  PCT had originally secured from his client.  Other  aspects are available which will only suit very experienced PCT’s.   Not and easy deal. but doable


MAY 26, 2020

Remember, Incotems and UCP are separate matter of procedures  which are intricately tied to each other as far as a PCT is concerned. The PCT under UCP 600  MUST produce the shipowners BOL in a CFR, CIF and CIP  deal; the DLC rules dictate policy on this matter, which is another added unseen security feature. If the PCT offers FOB and uses the DLC to also support booking a ship under a charter party agreement, in its own   name then the offer is a FOB&F application in where all matters of FOB ICC  incoterms applies and that matters of the  BOL do NOT form part of the collection process. The contract states what the obligations  of the PCT are under ICC FOB Incoterms, the contract also states what the obligations are in matters of  pre payment of freight secured by the PCT. Prepayment of freight  is not ‘freight earned.’  The normal FOB aspect is what the DLC terms and conditions will follow. No  mention of the BOL is applied on the DLC , which is an obligation personally served by the PCT. Having said that, if it’s a CIF deal,  again UCP dictates this aspect. Under the rules the confirming  or issuing BANK will sight ‘clean’ transport presentation  documents including the shipowners endorsed BOL and allows payment to proceed inline with the UCP rules which states that ‘the freight component remains in the account” to favour  the position  of the end buyers as a credit, so that the end buyer can pay for freight at the ‘rate’ secured by the supplier, when the carriage process is completed and ‘earned.’ The supplier ‘books’ the ship and quotes the final rate  accordingly to the end buyer. The DLC rules and not Incoterm rules  dictates upon  this matter, this is why incoterms can be confusing to many if not interpreted correctly. For the  PCT to  charter a ship, the DLC to buy goods has to be secured first which will also support  the  ‘pre-paid’ status  of the ‘freight’ component  which is ‘collected’ by the  Shipowner  once it has ‘earned’ such freight (carriage). Free on board means there is no charge for renting space on board a booked ship in ‘lieu of carriage.’ So while a PCT acts on incoterms  in matters of documentary ‘delivery’ and the sale of goods, the carrier acts on a different undertaking where ‘physical delivery’ has to take place before freight charged  is ‘earned’ and thus collectible. When the goods arrive at destination, the end buyer is notified and carriage rate offered by the supplier  is used to pay for carriage which remains uncollected by the supplier as a credit serving the end buyers account.This is what the DLC  issuing  bank will apply because UCP 600 rules demands as much. This is why  while incoterms  is universally accepted, payment by DLC are not so accomodating, as they should be, even though such is the superior payment application among all others. Nevertheless  PCT has no choice , it MUST  for the sake of security use UCP rules in conjunction wth Incoterms to make the deal legally viable and doable.This is  the kind of advice you will not readily find online because so many supplier and end buyer simply do not  understand this ‘debit and credit’ application. For instance, ‘supplier’  pays for and secures  the preferential ’certificate of origin’ but  a debit against the end buyers accounts ( DLC) is made on the  ‘sellers invoice’ in where the money paid  to secure the COO is reimbursed to the supplier . Why? Because  the COO is a certificate  that is advised by the end buyer  as an  import requirement. Delivery ‘over the ship rails’ is defined as ‘delivery port of loading.’ Sellers invoice ‘debits and credits’ is a critical aspect of the collection process.Getting this part wrong will cost someone money that they ought have not lost if proper procedure where not followed.   


MAY 26, 2020

I’ll make this aspect very easy to understand. If an end buyer objects to opening a DLC  and offer another kind of lame payment application , then you have secured an ‘end buyer’ who is unable to open a DLC. The kind of  and end buyer who  perhaps  will not be entrained by a Bank  as having a credit worthy status in being able to open such a credit to begin within a precarious and risk laden  trader. If the end buyer objects about opening a DLC, you have no ‘end buyer’ is best assumed  - terminate the deal early and quickly. If the end buyer changes their mind after termination is advised; on   the second time around in were a second offer is advised, ask for a small performance deposit as well  with the return of the offer as a show of good faith. A real end buyer not concerned about the issuance of a DLC  will perform to the end; an end buyer looking to learn procedures or is seeking  added advice, will waste  your time for many months, before ‘changing their mind.’ We have had especially from Ukraine, Japan and China  many such ‘time waster’ lacking real buying intent for the start.  Offer must be returned as signed within 5  days  which comes back with no valid issues about  the DLC which the end buyer does not want to open, terminate the deal ASAP is our best advise based on over  30 years of experience. A pre-advised  DLC is an excellent instrument to  open by the end buyer if their bank issues such instruments( banks have such a discretion)  PPIC is released which converts the PA-CIDLC  status to a full active ICDLC, at minimum cost. At first PCT needs practice and gain experience  thus may apply this termination process once good trading  experience has been obtained  first.