Value Proposition:
When structuring an international consignment, negotiating price and specifications is the easy part. What distinguishes a professional commodity broker from an ordinary one is a deep understanding of contract formation, financial instruments, and bills of lading—key elements that, while distinct, are interconnected in executing the deal. This expertise makes us more than just matchmakers; we become integral to your supply chain. We recognize the risks and potential consequences if the consignment isn't executed according to the agreed conditions, warranties, and terms. Our goal is simple: to ensure all physical and documentary duties are fulfilled, leading to a successful international settlement.
The following outline briefly describes a few scenarios in which we advise our clients in protecting their interest.
SCENARIO 1:
In uncertain markets, shippers often require a bank-issued financial instrument to be lodged and accepted before fulfilling any physical or documentary duties owed to the consignee. Without this guarantee, there's no assurance the consignee will pay upon delivery, or in an ex-ship scenario at the port of discharge. If the consignee backs out, the shipper may be forced to sell the goods on the spot, potentially incurring significant losses, especially in a declining market. Although the shipper can sue for breach of contract, the immediate financial impact could be devastating. We advise shippers that no physical or documentary duties should be performed without the agreed financial instrument in place.
SCENARIO 2:
Consignees often want to inspect goods before purchase, sometimes arranging a visit to the supplier's facility to inspect the ascertained goods before delivery. However, this can create issues if the consignee later wishes to reject the goods at the port of discharge. Having already inspected and approved the ascertained goods, the consignee may be precluded from rejecting them upon arrival. If payment is secured by a financial instrument, we advise consignees to request a third-party Quality & Quantity Certificate from a reputable inspection agency. This ensures the goods meet the required specifications and protects the consignee's rights in case of defective quality.
SCENARIO 3:
We remind principals that risk of loss and property/title transfer are separate events. Risk of loss typically occurs when goods are delivered to a carrier or agent for transport. Property/title transfer, however, occurs when negotiable documents are physically exchanged against payment. Property/title transfers to the consignee or endorsee upon receipt of the documents, terminating the shipper's rights and granting them to the new holder of the bill of lading. We advise shippers to retain disposal rights if payment isn’t secured by a financial institution. Consignees purchasing outside CIP/CIF terms should ensure proper notice is received to arrange the necessary insurance coverage to protect their interests.
