Here is a List of terms and acronyms used in Oil Transactions along with explanations of what these terms mean. You will find that a number of these terms are depreciated and not used in real oil transactions and the reasons why. There are other terms that are only used in the primary oil market (two principal transactions; directly between oil producers and refineries, without using intermediaries). This has been written to inform those that are in the oil and petroleum of the proper procedures, contractual documents and banking instruments that will actually work when there is a principal intermediary serving both sides of the deal by occupying a role as a buyer/seller in the middle
BG means a Bank Guarantee
Bank Guarantee
A banking instrument sent through the
SWIFT system indication that there are a funds that are set aside
(blocked) to make a purchase. A BG is stronger than a bank comfort letter but is
still not an actionable banking instrument, meaning it can not be drawn upon by
the Seller’s bank. it is strong enough to get a vessel loaded but not usually
strong enough to warrant the seller’s bank to issue a performance bond. It can
and is usually used as a place holder until there is a final determination of
the cargo via a
Q&Q test and the delivery documents are presented at the seller’s bank
for payment. Then it is common that payment is made by a standard wire transfer,
an
MT103
ASWP(Any Safe World Port) Not officially an incoterm, but is commonly used in seller’s quotes as, e.g.
“CIF
ASWP“, and is widely accepted. CIF
ASWP in a quote implies that CIF shipment would cost the same for
delivery to any safe port in the world, whatever the distance from source.
If this term is used in a quote the buyer should get clarification. A vessel
chartered to Cotonou, or Ghana costs a lot less than a vessel chartered to
Singapore. This is a critical price consideration and usually indicates an
over-generalization on the seller’s part.
This term may also be a clue to a buyer that they may be able to get a better
price if their
POD is close to the country of origin
ATB means Authority To Board
Used for oil shipments – This is usually a SATCOM message issued by the ship
captain, it provides the authority to enable the buyer to board the vessel to
confirm cargo availability, quantity and quality. It is usually given to a
supercargo team and inspector to do a dip test.
You can not board a cargo or oil vessel without this permission
BCL means a Bank Comfort Letter
Bank Comfort Letter
Also known as a Bank Capability Letter, or Bank Confirmation Letter, this is a
letter from the buyer’s bank, sent through the
SWIFT system indicating the buyer’s capability to purchase by
confirming that there are funds available to make that financial obligation. It
is not guarantee of payment and can not be drawn upon by the seller’s bank.
Therefore it is not an actionable banking instrument and is used in the oil
business only as a proof of funds.
Letter of Intent – A letter of Intent is supposed to inform a supplier of the intent of the buyer, that the buyer really wants to purchase. A letter of Intent is a non binding document issued by the buyer. Often a seller will hope to secure the sale with a letter of intent as it shows the buyer is happy to release his details and provide his requirements on his company letterhead.
Non Circumvention Non Disclosure = The purpose of this document is to protect the agent who wishes to earn a commission for connecting the Buyer and Supplier. Of course if either of these two wish to break this agreement, they can for just about any conceivable miniscule error. It is nearly impossible to prove circumvention since the only way these two principals can know each other is because the agent passed information that he shouldn’t have. The AluminumNow Group does not normal use NCND in Oil Sales as usually this is covered in the SPA.
DLC
A letter of credit is a document, typically from a bank (Issuing Bank), assuring that a seller (Beneficiary) will receive payment up to the amount of the letter of credit, as long as certain documentary delivery conditions have been met. In the event that the buyer (Applicant) is unable to make payment on the purchase, the Beneficiary may make a demand for payment on the bank. The bank will examine the Beneficiary's demand and if it complies with the terms of the letter of credit, will honour the demand.
The bank that writes the letter of credit will act on behalf of the buyer and make sure that all documentary conditions have been met before making the payment to the seller. Most letters of credit are governed by rules promulgated by the International Chamber of Commerce known as Uniform Customs and Practice for Documentary Credits. The current version, UCP600, became effective July 1, 2007. Letters of credit are typically used by importing and exporting companies particularly for large purchases and will often negate the need by the buyer to pay a deposit before delivery is made
DLC is not normally accepted by sellers because it is just like a POF but weaker as it requires the buyers approval in order to be drawn on.
MT199
A Swift Message Type 199 Is A Interbank Message Used Between Two Banks To Transmit The Value Of A Bond Or An Skr Or A Free Format Message Engaging 2 Banks Readiness To Move Forward With A Transaction. Usually A Private One. A Mt199 Swift Message Is Easily Explained As A “Chat” Message.
MT799
MT799 is a simple text message, sent bank to bank. This is used for a bank to bank proof of funds, only. The MT799 is not a form of payment and it is not a bank undertaking or promise to pay. It is simply a bank to bank confirmation of the funds on deposit, nothing more. Blocked Funds.
MT103
The MT103 is a Society for Worldwide Interbank Financial Telecommunication (SWIFT) message format, which is specifically for making payments. International wire transfers, telegraphic transfers, Large Value Transfer System payments in Canada and Single Euro Payments Area payments are all SWIFT MT103 payments.