1. Cost Insurance and Freight (CIF):
Cost Insurance and Freight method is the safest shipping method for the buyer. The seller pays the shipping, the Insurance and cost of the product. The Seller will be paid by the Buyer, upon the safe delivery and inspection of the product, plus production of all required documents as specified in the body of the DLC. The discount for this kind of delivery is very small compared to TTT and FOB transactions. The seller or supplier loads the vessel, inspects the product onboard the vessel and deliver the product at a mutually agreed safe port. At the delivery port, the buyer will conduct his own inspection to ascertain the quantity and quality of the product and pay the seller or supplier based on the result of the inspection after the seller or supplier has submitted all relevant documentations as specified in the (SPA Procedure) contract. This is the best and safe way to buy crude oil. We will discuss the commission aspect of a CIF transaction later. There is usually a 2% performance bond involved in this kind of transaction.
2. Freight On Board (FOB):
In FOB transactions, the buyer provides his vessel and a copy of his charter party agreement (CPA) to the seller or the supplier. His vessel sails to the loading destination (port) and his vessel load the cargo. He pays for his vessel charter and all insurance. This method is also good because the buyer pays after his vessel is loaded and inspected to ascertain (Q&Q) Quality and Quantity.
3. Dip & Pay:
Dip & Pay Are the fastest procedure, the Buyer must demonstrate that has tank available to inject the product and once presented the TSR, ATV and RTR, the Seller begins to inject the product into buyer tank and buyer confirm the fuel and Pays against SGS report
4. Tanker-to-Tanker Transfer (TTT)
Tanker-to-Tanker Transfer (TTT) transaction is usually conducted in the International waters. The buyers and sellers’ vessels exchange communication document and commence communication. The seller’s vessel would send a marine document called (NOR) to the buyer’s vessel. NOR stands for Notice of Readiness. This means that the seller’s vessel contacts the buyer’s vessel as a confirmation that he is ready to sail and meet him at an agreed discharge point. The Buyer’s vessel will respond with an “ETA” which stands for “Expected Time of Arrival”. This is the time he expect to arrive at the agreed meeting point for a TTT transaction. TTT is a very risky type of transaction. The ocean could be very cruel. Among the three forms of crude oil delivery to the buyer, CIF is the most recommended. The seller gets paid after the product is trans-shipped into the buyer’s vessel, Q & Q Conducted, and all relevant documents are presented to the buyer’s bank as specified in the contract. However, most sellers will require the buyer to open an irrevocable letter of credit in favor of the seller before trans-shipment takes place. This assures the seller that the buyer will not steal the product and run away.
1) Authority To Board (ATB):
ATB stands for Authority To Board a vessel. This is a marine document issued by the captain of the mother vessel. The mother vessel is the seller’s vessel carrying the cargo to be delivered. The captain issues this document to the buyer, advising him to bring his inspector on board his vessel to conduct a Q&Q inspection. I hope you know what Q & Q means at this point. The captain will give details of his location by exact latitude and longitude. You know that the ocean is very vast. He will also include his e-mail address, phone and Fax numbers for painless contacts. This marine document must originate from the captain of the vessel. If it does not originate from the captain, it might be fake. Please make sure that the ATB is verified by confirmation from the captain of the mother vessel by the captain of the receiving vessel. Some fake sellers will send a fake ATB to buyer just for the purpose of defrauding him. Just to open a DLC so that they can borrow against it.
2. Charter Party Agreement (CPA)
A charter Party Agreement is the copy of a contract signed between the Chatterer and the commercial operators of a vessel. The agreement specifies the total cost for the charter, method of payment and all relevant information about the vessel. Most TTT sellers require that the buyer should provide them with a copy of his charter party agreement. It is risky to provide Nigerian sellers with such documents hence they can easily alter it for fraud related activities. Please be careful while dealing with Nigerian sellers and suppliers.
3. Notice Of Readiness (NOR):
A NOR is a marine document sent from one vessel captain to the other. During a TTT Transaction, the captain of a mother(Supply) vessel sends a notice of readiness (NOR) to the buyer’s vessel to inform him about his readiness to meet him at a point for TTT transaction. He request for the receiving vessel’s location and the expected time of arrival (ETA) at the agreed location. The receiving (buyer’s) vessel responds with his marine document, called ETA. This document outlines his expected time of arrival (ETA) at the location they have mutually agreed upon for a TTT transaction.
4. Expected Time of Arrival (ETA):
ETA (Expected Time of Arrival) is a marine document issued by a vessel captain in response to an NOR he received from a fellow captain. The captain informs the originator of the document the time he is expected to arrive at the mutually agreed location in the ocean for a TTT transaction. See NOR above.