Specification :

Trading Terms

ASWP – This acronym stands for ‘ Any Safe World Port‘ . It is quite common for sugar sellers to offer delivery to any safe world port of the buyer’ s choice.

BG – An acronym standing for ‘ Bank Guarantee‘ , which is a financial instrument issued by a bank on behalf of their customer for the benefit of another party to whom the bank’ s customer has a contracted financial obligation. In the event that the bank’ s client does not make payment on a contract, the beneficiary of the bank guarantee can draw on the bank guarantee and receive payment.

BG 100% Payable Instrument – This is a type of bank guarantee which meets several conditions. It must be issued or guaranteed by a top 25 world bank, be irrevocable, confirmed, and transferable. It must also cover the entire amount of the contract, and be payable on sight upon presentation of authentic shipping documents.

Bill of Lading ( B/ L) - A bill of lading is a contract which defines the terms of carriage for a shipment. This contract is set out by the carrier and issued to the exporter ( the seller) when the shipment has been received and loaded aboard the vessel. The bill of lading is an essential document, as it proves that sugar was indeed shipped, and that a carrier has taken responsibility for ensuring delivery to the buyer. In order to claim payment for the shipment using a letter of credit, the seller will invariably have to present the bill of lading at either the confirming or issuing bank.

BCL – An acronym standing for ‘ Bank Comfort Letter‘ . A bank comfort letter is a letter issued from the buyer’ s bank to the seller. This letter states that the buyer has sufficient funds to cover the cost of the order. A bank comfort letter is one of the first pieces of documentation that a prospective buyer must provide to a seller in order to negotiate a deal. It is does not, however, constitute an agreement to pay the seller anything, nor does it make the bank liable in any fashion.

CAD – This acronym stands for ‘ Cash Against Documents‘ , and is indicative of a type of sale where title documents are only transferred when payment is made.

CIA – This acronym stands for ‘ Cash In Advance‘ , which is a type of sale in which the full amount of the purchase price of an order must be paid upfront. This is not standard procedure in the sugar trading industry, and it is not advised that any buyer pays upfront for sugar that has not yet been shipped.

CIF – ‘ Cost Insured Freight‘ . Cost insured freight is part of the standard deal for most sugar traders. This means that the seller bears the cost of both shipping and insuring the sugar until it reaches the destination port.

Commodities Exchange – This is an association which governs the rules of trading in a jurisdiction. Being familiar with the guidelines of the commodities exchange in the jurisdictions in which you are doing business is always advised.

Commodity Futures Contract – Often used for sugar futures trading, a commodity futures contract is a contract which details an agreement for the sale of as yet unproduced sugar at a future date. These contracts are very common in the sugar industry, as buyers often need to secure ongoing supplies of sugar for their own production lines. These contracts are also useful for avoiding potential future surges in price, but can be problematic if world sugar prices drop considerably, in which case the buyer may find themselves paying well above market value for sugar.

Confirming Bank – A confirming bank is a bank which agrees to honor a letter of credit issued by another bank.

CPR – Stands for ‘ Cé dula de Produto Rural‘ , which can be translated to ‘ Agricultural Product Certificate.’ These certificates are issued by the Brazilian government and offer discounts on large purchases of sugar. This allows the buyer to secure sugar for a specified period at a low rate, and the Brazilian government to quickly raise capital.

CPR- F – These ‘ Cé dula de Produto Rural’ certificates relate to future sugar which has yet to be produced.

CPR -X – These ‘ Cé dula de Produto Rural’ certificates relate to sugar which has already been produced.

CWO – ‘ Cash With Order‘ . In a cash with order situation, the buyer makes payment at the time of the order, and the seller is legally obligated to fulfill the order. This is not a common payment arrangement in the international sugar trading industry.

DC – ‘ Draft Contract‘ . A draft contract is an initial contract which is drawn up and sent from the seller to the buyer. The buyer has the opportunity to make amendments and send it back to the seller for consideration. This process continues until both parties are satisfied with the terms of the contract.

Deed of Assignment – This is a document relating to of a letter of credit in which the beneficiary may assign all or a portion of the proceeds of the letter of credit to a third party.

FFSBLC – ‘ Fully Funded Standby Letter of Credit‘ . This document is a standby letter of credit which covers the entire amount of the order, is payable on sight if the correct documentation is presented alongside it, and is irrevocable, transferable, confirmed, and issued or guaranteed by a Top 25 world bank.

FFRDLC – ‘ Fully Funded Documentary Letter of Credit‘ . This is a letter of credit which revolves to cover several shipments of sugar. Especially in instances where large amounts of sugar are purchased, it is quite common for the sugar to be shipped in several installments over a period of months. The revolving documentary letter of credit is made out for the full amount of one of these shipments, but can be drawn upon multiple times in accordance with the terms of the contract. These terms will also be stated in the revolving letter of credit. These letters of credit must also be transferable, confirmed, and irrevocable.

FCO – ‘ Full Corporate Offer‘ . Issued by the seller after the preliminary stages of negotiation are complete, such as a letter of intent having been issued by the buyer, and a soft probe having been conducted on their accounts by the seller. A full corporate offer is a document which outlines the conditions of the sale.

FOB – ‘ Free On Board.’ If the terms of a trade are ‘ FOB’ , then the seller is obligated to have the sugar delivered to a port of the buyer’ s choosing on board a ship that is also of the buyer’ s choosing.

Formal Contract – When the negotiation stages of the draft contract are complete and both parties are satisfied, then a formal contract is drawn up and signed by both parties.

ICPO – ‘ Irrevocable Corporate Purchase Order‘ . This is a document drawn up by commercial buyers, and contains the quantities of sugar required, the type of sugar required, and other conditions that the buyer would like the sale to proceed under. Once submitted to the seller, this is deemed to be binding and the corporation is obliged to complete the sale.

ICPO With Banking Coordinates – This is an ICPO which includes the company’ s bank details in order for the seller to conduct a soft probe on their accounts in order for the seller to satisfy himself that there are sufficient funds in place to cover the cost of the sugar..

ICUMSA – ‘ International Commission for Uniform Methods of Sugar Analysis ‘ This is an international body that regulates and standardizes sugar testing processes. It is also used to refer to various grades of sugar, such as ‘ ICUMSA 452 for instance.

ILOC – ‘ Irrevocable Letter of Credit‘ An irrevocable letter of credit is a document issued from the buyer’ s bank to the seller which guarantees payment upon the presentation of stipulated documentation. As an irrevocable document, it cannot be canceled, and the buyer’ s bank is legally obligated to make payment at such time as the beneficiary fulfills the terms set out in the letter of credit.

Irrevocable Confirmed Letter of Credit – An irrevocable confirmed letter of credit which is confirmed by another bank, normally one in the beneficiary’ s jurisdiction. A confirming bank is one which undertakes to make payment on the letter of credit on behalf of the issuing bank at such time as the beneficiary meets the terms and conditions outlined in the letter of credit.

Issuing Bank – The issuing bank is the buyer’ s bank which issues bank guarantees and letters of credit on behalf of their client.

LC/ LOC – ‘ Letter of Credit‘ These acronyms are commonly used when referring to letters of credit. Letters of credit are documents issued from the buyer’ s bank to the seller which guarantee payment to the beneficiary of the letter of credit ( the seller) , as long as the terms and conditions set out in the letter of credit are met. This generally means presenting stipulated documentation to a confirming bank within a set time frame.

LOI – ‘ Letter Of Intent‘ . A letter of intent is a document issued from the buyer to the seller which indicates that the buyer would like to enter into negotiations with the seller in the hope of purchasing sugar. The letter of intent is not legally binding, but it does provide a starting point for negotiations.

MOQ – ‘ Minimum Order Quantity‘ . This is often expressed by sellers who have a minimum amount of sugar that they are prepared to sell in any one shipment. Smaller quantities do not represent sufficient profit margins to be worth the effort that the seller must go to in preparing sugar for shipment.

Ocean Bill of Lading – Another term for bill of lading, referring to transportation which is undertaken via ship. For further information, refer to ‘ Bill of Lading’ .

POF – ‘ Proof of Funds‘ . Usually proof of funds is obtained by conducting a soft probe on the buyer’ s accounts. Proof of funds is normally required by a seller before they will proceed with negotiating a sugar sale.

PB – Performance Bond. This is a type of bank guarantee which is issued from the seller to the buyer. It guarantees that the seller will meet the terms of the contract. Normally issued in the amount of ten to fifteen percent of the total amount of the contract, a performance bond can be drawn upon by the buyer in the event that the seller breaks the contract and fails to provide the sugar which was stipulated in the contract.

Revolving Letter of Credit – A revolving letter of credit is a letter of credit which can be drawn upon multiple times. These financial instruments are often put in place when a seller is to make multiple shipments to a buyer, and allows the seller to claim payment for each shipment without the need for a separate letter of credit being issued for every shipment.

SBLSC – ‘ Standby Letter of Credit‘ . A standby letter of credit is a letter of credit which acts as an assurance from the buyer’ s bank that sufficient funds are in place to cover the entire cost of the shipment. Standby letters of credit are not normally drawn upon. If a seller wishes to have payment guaranteed by the buyer’ s bank then a letter of credit is normally used.

Sight LOC – ‘ Sight Letter of Credit‘ . This is a letter of credit that is payable on the sighting of both the letter of credit, and necessary documentation as stipulated in the letter of credit.

SWIFT – ‘ Society for Worldwide Interbank Financial Telecommunication‘ This is a global service which is responsible for facilitating communication between banks. Most payments are made via SWIFT.

SGS Inspection – Before sugar leaves the port of sale, an inspection is carried out by SGS, the world’ s most respected independent sugar inspection company. SGS inspections provide peace of mind for the buyer who can be assured that the sugar is of a high quality if it is cleared by SGS inspectors.

Transferable Letter of Credit – A transferable letter of credit is a letter of credit which the beneficiary can use to assign some of the funds from the letter of credit to another party. This is common in the case of sellers paying their ultimate suppliers.

RWA – ‘ Ready willing and Able‘ . This is a document which is issued by the buyers bank. The bank confirms that their client has the sufficient funds in their possession and is willing and able to engage in the contract.

Prime Bank – top 25 worlds bank. These are trusted banks which are preferred ( or in most cases even mandatory) in commodity trading.