ABOUT SMICE
THE PROCESS
THE END BUYER
DOCTRINE UPDATE
SMICE REFERENCE
PUBLICATIONS
SMICE IPG
FLAWED TERMS
Contact Us
SMICE Library
e-mail me
 

 

THE PCT AND COMMISSION PAYMENTS

Educational Series SADI: Posted / Edited;  January 24,  2020 :PCT Advice 


The issues about commission  payments has been grossly misunderstood and misinterpreted long before FTN Exporting came on the scene in 1988. Even wth the advice served to date in all our publication, we see  PCT’s acting incorrectly in servicing  such matters. This advice is presented  in a different light  found in our publications,  in showing  how commission payments are earned and served correctly on a closed deal. The payment of commission  has become a very complex  matter in the last 5 years  because the business itself has become more complex. The trivial aspect of commission payments seen online being plied by ill informed intermediaries are simply that–trivial, unworkable and uncollectible. Our procedures  and processes are continually  being refined and tightened in where  the  basic starting aspect offered in our publications on this matter remains in place  as an acceptable valid aspects. As the PCT advances on its own position  it should apply to ‘step up’ and  treat matters of commission payment more seriously and more intently if they intend to use SI’s often. If a PCT works alone with no assistance from ISS (Si’s)  and string formed thereon, then the matter of commission payments is irrelevant because the PCT earns a ‘gross profit,’ not a commission payment. But the PCT needs to know about such matters because  sometimes , an unavoidable or worthy deal will be presented by informed USCT traders acting as ISS wanting to form a string with a PCT who is  able to head such a  deal. So lets look at the aspect of a string and commission payments, explained in a simple way; assume the SMICE doctrine has much more. TRIBE Rules of Association (TRA)  directive apply for payment of commission. TRA has been refined, with one more edit /update to apply,  as we reduce the rules down to a basic premise.TRA will then be reviewed every five years instead of yearly from mid 2020. Once a PCT applies TRA  on it correspondence, or indicates that it adheres to TRA, then all commission payment rates / processes follow TRA.  The actual is actually  made on the buy / sell differential. In this aspect, it is  the price  of goods obtained from  supplier which dictates final gross profit rate.  FTNX is recent year has  simply cut this differential to below half, in where the greater portion is for the benefit of the end buyer.  Gross profits and OPX are then worked out for this lesser rate. If you do not give an incentive ( a better than normal price)  to end buyers, no sale can be expected.  Our job is to secure great quantity or  prices or both, this is what makes our position unique.   


Lets first create a string with the PCT (like FTNX) heading the deal. 

SUPPLIER-SI(Tom USA)-SI/P.A (Bill CAN)-FTNX AUSTRALIA (PCT)-SI(Jenny INDIA)-SI (SAM Sth Africa )-SI (Bob U.K) -SI( Hasan UAE) - END BUYER 

The PCT  closes the deal. The PCT has applied  6.0% gross on top the  buy price of goods sold to he end buyer. Lets assume the value of goods sold is US$ 100.00 per MT FOB.The deal if for 36  revolving monthly  shipments  over 3 years. The gross profit therefore is US$ 6.00 per MT.  The same kind of goods that can  be seen online selling for  US$ 108.00 per MT or more.  So the incentive for the end buyer  to ‘buy’ such goods is also very evident.  The PCT now has two option  in making ‘commission payments’ to those who assisted in the closing of the deal.


  1. The PCT may personally pay each string member their share of commission payments.
  2. The PCT may pay also lump sum to its P.A who in turn  pays each string member their share as assessed by the P.A  with support of the PCT  


If the PCT has a long string  and is busy  the PCT  may choose payment option (b) if a trusted   P.A is involved. The P.A was involved in  the above String. He is a long time trusted PCT P.A attached to the PCT (FTNX) for 8 years. In this case the PCT has no qualms to pay a lump sum to the P.A to distribute on behalf of the PCT,  commission  payments to all string members, as per each level of participation. This is an important aspect, because if  the PCT like FTNX does not clear commission payment ‘off its books’ in a very timely, transparent and expressed manner  it could face an  income tax bill for the whole gross profit  amount earned; meaning that each member is going to get much smaller share than first declared.The way payments are made is critical to this one issue. Taxation departments all over the world  who are ‘assisting each other’ in matters of  due diligence and information, is increasing yearly. 


What most string member don’t  clearly understand is that the PCT is closing the deal because he or she has attained such a skill to be able to do so,  where  ‘informed’  USCT endorsed string members conjoined to the PCT are still tying to do as much. The PCT is also bearing  all legal responsibilities of  the deal and consequences therein which may include the below described added ‘operational’ expenses/losses (OPX) on top of commission payments that need to be made later. Further more the ISS in an active string are paid for work done, once a deal is closed under contract,  while the PCT heading the deal as Principal has to remain with the deal until the  final delivery years later.  US$ 6.00 gross profit margin  will attract deductions that will  need to apply as  each delivery takes place; such as- 


  1. A LDD  for i.e : $2.00 per MT is payable on every late delivery, which will be claimed  more often than not , even if a P.G is not supporting such 
  2. Currency fluctuation has at times  will rise higher than when the deal was established at  an average of 50 cent per MT which  shed from the anticipated gross profit margin.
  3. To close the deal the PCT  has offered the end buyers  a rebate of $ 1.00 per MT  per month,  if the  end buyers accepts  each delivery without protest or ; pay the  supplier a rebate for each delivery ‘made on time.’
  4. Added expense  of using  a DLC and the bank charges or; out of pocket expenses  I.e: to pay one of its SI to  be at port to supervise loading on  behalf of the PCT every month. etc.etc.
  5. FTNX ©Humano charges paid to a disclosed charity as extracted from such gross earning  by the PCT on behalf of all string members.( This is the fee applied  by the PCT for serving advice and protecting the deals for others) 
  6. Commission payment as net payable to each string member participating in the deal. Once all expenses are paid out what is left is for the benefit of the PCT.  


So from the anticipated US$ 6.00 per MT, the PCT  is entitled keep  ‘up to’  60% of such gross profits (US$ 3.60 per MT) to ensure all of the above operational expenses are covered and to ensure his share of net profits are apparent. Lets assume the total expense for the PCT will average about to $3.20 per MT per month plus 40 cent from the deal itself for the benefit of the PCT. The PCT does not have to explain this process to anyone and could simply issue the rate on a ‘take or it leave it ’  basis prior to any disclosure being made.   What’s left ?  US$ 2.40 per MT  to distribute to the P.A and all  SI’s participating is a protected string deal. There are variables to this whole aspect. For instance, as per past experience, the LDD is only paid out on average 18 times over 36 month(or less) which means the PCT is to collect a small gross profit  per MT on the deal itself, plus on average another US$ 1.00 per  MT per month for LDD that was not claimed on the LDD offered; even more if a standard P.G SLC (if?) as secured from the supplier is supporting the LDD payments, as such a P.G is not collectible by the PCT may be assumed for this deal. In effect the PCT will secure a good gross profit earning, albeit the PCT will not  know what the final gross profit total will be  until, final delivery eventuates. This is not the same when paying commission to string members were given a set firm rate,  payable  every month,  on each and every successful delivery. 


  1. From the  US$2.40 Per MT left,  the P.A may allocate for  himself a higher rate than all SI’s  because the P.A is  managing  a string on  behalf of the PCT. To do as much a base individual payment rate is first established.
  2. The P.A pays  himself lets say 50% on what’s left over,  on this occasion because  he did most for  work compared to the others  in the string who did very little after the  initial string was formed. 50% is the P.A maximum entitlement.
  3. US$ 1.20 per MT for the P.A leaves US$ 1.20  per MT in total to distribute to his string. 5 remaining string members each  receive a set  irrevocable commission payment rate of 24 cents per MT per SI. 
  4. If lets say  Hassan had done  a lot more work that the  other SI’s , then  the P.A  could serve from his own share and added 10 cents per MT to Hassan. This is a judgement call make by the P.A .
  5. Above represent the simplest aspect  to delivering a complex subject matter. TRA  once released  in Mid 2020 will support this straight forward aspect.
  6. The one fact which  is true; the more ISS participating in the string, the smaller the such payment become , the more complex such matter become. It’s also true that a PCT working by itself , will make more from a smaller OPX rate applied to the sell price. 

 

Lets look at  at typical ill informed deal  still coming to our inbox everyday from ill informed traders.

FAKE NOT ASCERTAINED  SUPPLIER-SI(Mary)SI-SI-SI-SI-SI-SI-SI-SI-SI-SI-SINO END BUYER

Mary in Russia does know a ‘supplier of sorts’ who is  able to supply crude oil, but Mary has nothing writing  and takes the word of the un-ascertained ‘supplier.’Mary has been ‘trading for years’ in an ad hoc uniformed manner, and has a large number of other ill informed SI’s in other countries  who simply don’t know better either. Mary calls herself a ‘mandate’ to this newly acquired  ‘supplier.’  Mary was offered the crude oil at Dubai Platts less US$ 50.00 per MT discount. Mary is excited. Mary prepares an  offer as per a copy she found being used by other ill informed traders ‘years ago’ along with a NCNDA. She now issues by email an offer to all the one ‘traders’ she knows. Before long this one offer, has produced many offers  to perpetually orbit  the world ( as POOP) some times for years. All trader involved also take  their own ‘share’ of the  rates appearing  on the document, in where the document is changed to record lower commission rates (changing the offer rejects the offer anyway.) Mary is flat out ; all her  fake ‘Buyers’ want to buy the  fake crude oil, expect now they are all arguing about  fake commission payments, for weeks  instead of looking after the deal. The offer was sent out,  with the following line  applied by Mary;


  • Buyer side commission US$ 10.00 per MT 
  • Sellers side commission US$ 10.00 Per MT 


Where is the other US$ 30.00 per MT? Mary in her wisdom ensured her  $30.00  cut  is also accounted for privately. Why say anything to anyone, is her rational. The offer travels up and down the main SI string and branching strings created therein in where the commission rate is now at US$ 1.00 per side. That’s all it does, the offer travels around the world never able to be closed, because there is nobody controlling the deal, protecting commission nor is able verify if the supplier  is real, even with wrong specification specified on the offer , not one SI has questioned  such matter. Everyone  has a buyer, everyone signs a NCNDA and are seeking commission pay-orders, everyone involved truely believe that they are trading in a wanted commodity when in fact they are simply ‘passing time.’ 4 weeks later some SI’s  cry out ‘circumvention’ until the next dumb deal appears,  and the whole aspect re-commences with a new ‘supplier.’ The above useless string example happens a lot , even today, as new ill formed traders appear every year. The informed  PCT must be able to identify such deals and dismiss them quickly is  an aspect explained intently in the SMICE doctrine which  offer the raw straight-out perspective. 


In Summary

Sometimes a string members in a proper deal, may show  dismay at the low rate they are getting, because many can’t see the bigger picture. In turn the PCT may seem to be offering a very low ‘suspect’ rate to their SI’s. If a person(s) / family unit works at a Job for 20 years, earning an average take home pay of US$ 150,000 per year; the combined  earnings of 3 million dollars would have been generated. After living expenses are deducted, a middle to low income family will have very little saving to show. This is not the same perspective as a PCT P.A closing a deal at 45 years old, in where  the informed PCT earns, over a 3 year period,  for using their ‘brains and not  brawn’ over  4 million dollars  before taxes, on one single deal being closed,  all because  they  had spend 5,6,7 months working on such a single revolving deal,  a few years after completing the study and obtaining experience. So longevity ( to keep on trading) is an important factor.  Our figures are conservatively served. The above transaction taking years to incept could have been closed with i.e: 3 SI’s or by a lone PCT, for much more.  But this potential earning is not guaranteed, but then again, 20 years of continual employment  when commencing such a job, is not an assured aspect either. It’s definitely not assured  if a business idea is incepted i.e; a restaurant.  One other point here is that; even when commission payment are  measured in cents, the final sum earned for the work applied to close on a revolving  commodity deal can only be met with great pleasure, and a sense of achievement and accomplishment for those who  learn their profession intently. The other point; payment of commission and applying  proper procedures therein  are complex matters that should not be taken lightly  and must be addressed professionally. 



 
 
|ABOUT SMICE | |THE PROCESS| |THE END BUYER | |DOCTRINE UPDATE | |SMICE REFERENCE | |PUBLICATIONS | |SMICE IPG| |FLAWED TERMS | |Contact Us| |SMICE Library|