UNIFORM RULES AND PRACTICE FOR INTERMEDIARIES AND BROKERS
Copyright: FTN Exporting 2009
URPIB encompass a set of rules that are recommended for all commodity export dealers, and specifically designed for private or corporate intermediaries, brokers, agents and those intermediaries who are described as intermediate ‘buyers’ and ‘sellers’ world-wide. URPIB is considered to be the first uniform set of guiding rules of its kind, created by FTN Exporting and specifically for intermediary usage. Ideally such rules are ideally applied once FTN doctrine of trade has been studied.
All intermediaries using these rules in combination with acceptable international laws and rules of trade enhance their trading capability and therefore the likelihood of being able to close an international commodity transaction. When intermediaries agree to be governed by URPIB in their documentation, then URPIB shall be deemed to be the applicable rules among the trading group. All offers of contracts which state that URPIB prevails when used among intermediaries shall carry the following paragraph to reinforce the edict among a trading group:
“We adhere to FTN Exporting ©URPIB Rules of Agency “-
URPIB 2009 (Revision 9)
URPIB Article 1: Definitions and Overall Premise:
1.0: An International Trade intermediary shall be defined as a Sourcing Intermediary, and/ or Intermediate Seller, Intermediate Agent, Intermediate Broker or Intermediate Buyer. An entity working as a ‘Middle Person’ individually or grouped between two other Principal entities shall also be known as the ‘Buyer/Seller’.
1.1: A ‘seller’ is not the same thing as a ‘supplier’ and an ‘end buyer’ is not the same as a ‘buyer’.
1.2: For the purpose of these rules a primary principal is different from the other principal entities, in that the primary principal shall only be able to proceed in a transaction as a person holding and transferring title or leading delivery documents of the goods without ever taking actual or physical ‘possession’ of the goods.
1.3: A ‘sourcing intermediary’ is not a primary principal or a ‘primary intermediary’. Sourcing intermediaries answer directly to the primary intermediary (PI).
1.4: Where the seller/buyer is advising his immediate primary intermediary, the primary intermediary is responsible for advising all other intermediaries on that side of transaction, in particular where language and cultural barriers may need to be addressed in an effort to appease the end buyer of the primary principal’s contracting requirements.
1.5: There will only ever be a maximum of three primary principals involved in any one deal. (1) The supplier. (2) The buyer/seller. (3) The end buyer or end user. All others involved in the same deal are defined as ‘sourcing intermediaries’ in the collective form.
1.6: A ‘string contract’ is where many ‘sourcing intermediaries’ are acting as a collective ‘middle group’ or with a middle entity located between the principals to the particular side of a transaction.
1.7: A ‘buyer/seller is a single entity in a trade, in that both the selling and buying is done by the same entity within a transaction. There cannot be an intermediate ‘buyer’ and another intermediate ‘seller’ acting as the single controlling entity in a string contract.
URPIB Article 2: MANDATED ENTITIES.
2.0: Mandated Entity: A person who holds special permission verifiable by written authority to act on behalf of an end buyer or supplier, and who has offered proof as on request to anyone transacting in a string contract.
2.1: A person holding the position in a string contract next to the end buyer or supplier is not a mandate holder to that end buyer or supplier simply by virtue of the position he holds in the string contract or intermediary chain, unless he holds written documentation which proves his mandate-ship.
2.2: A person who claims to be something that they are not is acting with bad or dishonourable intent and should be avoided at all times.
2.3: Intermediaries must never trade with a person claiming to be a mandate holder who fails to disclose his principal supplier or end buyer by failing to disclose his mandate-ship papers.
URPIB Article 3: OSTENSIBLE AUTHORITY
3.0: A ‘buyer/seller’ or ‘primary principal’ needs only to declare his status on formal stationery/ letterhead to show the intent of the trader’s position.
3.1: When an intermediary acts on behalf of a ‘disclosed principal’, then the intermediary acting as buyer/seller must disclose his full name, address and contact information of the ‘disclosed principal’ on his letterhead under his own title. The ‘disclosed principal’ cannot be another sourcing intermediary or agency principal (i.e. the buyer/seller).
3.2: The buyer/seller is allowed to act on behalf of a disclosed principal or undisclosed principal. This is because the buyer/seller is in direct contact with the end buyer or supplier and not another intermediary such as a seller, buyer or sourcing intermediary.
3.3: Any intermediary not taking up the position of the buyer/seller is defined a being a sourcing intermediary, who may or may not disclose their principal to others unless a ‘guarantee’ has been issued by the buyer/seller looking after and protecting the intermediaries’ interests, unless other arrangements have been made.
URPIB Article 4. Right to Sell
4.0. The ‘principal’ will observe and be governed by the laws of their domiciled country/or the country from which they are trading – whichever is applicable. An intermediary who trades under the premise of ‘acting’ on behalf of an ‘undisclosed principal’ (and where the truth and facts about a particular transaction have been hidden from a ‘principal’) shall bear full consequences of his own doing, and cannot rely as a defence against legal action, that they are ‘ignorant of the law’ as it pertains to agency or the position from which he was attempting to trade.
The seller/buyer shall not intervene in or take over a transaction he was not involved in from the beginning.
URPIB Article 5: STEPPING BACK
5.0. ‘Stepping back’ procedures occur at the point at which the end buyer, buyer/seller and the supplier at any given time will need to deal directly with each other. Both sides are independent of each other: one side of the deal does not become involved with the other side of the deal, as both sides of the deal start and end with the middle controlling buyer/seller.
URPIB Article 6. Chain of Command
6.0. The buyer/seller is the controlling entity of the whole intermediary group. The Primary Intermediary (PI), the immediate associate next to the buyer/seller is second in command.
URPIB Article 7. Commission Payments
7.1. The buyer/seller buys goods from a supplier at one lower price then resells the same goods to the end buyer at a higher price: the difference between the two amounts is defined as ‘commission’. The buyer/seller cannot collect these commissions, paid by the issuance of pay orders, until such time as the goods have been delivered. Accordingly the buyer/seller is only obligated in the first instance to protect intermediaries’ interests in securing and collecting commissions on their behalf.
URPIB Article 8. Commission Pay Order Instrument
8.0. In accordance with UCP600, the buyer/seller shall provide the commission pay orders to each beneficiary as UCP 600 (Pre advised) corporate, irrevocable non transferable (standby letter) documentary letter of credit, with a declaration which states: ‘This corporate credit is issued in accordance with UCP 600 2007.’
Where there are to be monthly commission payments, the credit shall be advised as ‘non cumulative revolving’ whether issued as a standby credit supporting UCP600 or ISP98, or as pre-advised or not.
URPIB Article 9. Acceptable Products
9.0 URPIB intermediary shall not trade in or attempt to trade with the following products or entities in any manner .
(a) An intermediary must offer nor trade in financial instruments . PBG (Prime Bank Guarantees) including Cash and Bank warrants, Pension funds, Bonds Medium term notes (MTN) , SLCs and the like must not be traded by intermediaries.
(b) Any form of Certified Gold Bullion (or other precious metals) held in title via a electronic depository form, shall not be traded upon by intermediaries. Physical trading in gold in any form is allowed where no certificate and current assay is apparent on such gold – This type of gold is defined as "Deep Storage Gold Bullion Bars " and includes Nuggets , Alluvial dust, and non assayed gold material exceeding 975.0 in purity ( 24 Carat -/+)- Gold scrap of 750.0 percent Gold content or less ( 18 Carat -/+) is sold as "Gold Jewellery Scrap". Gold lots exceeding 1 kg in weight shall be sold in weight values defined as Kilos, Tonnes or Grams. Gold lots under 1 kilo in weight shall be measured for weight in Troy ounces or Grams. Intermediaries shall not trade in ancient gold artefacts or current gold currency legal tender. "Arium Utalium" or any reference of such defines a 100th unit of old ancient Rome currency system the "Utala".
(c) Any form of diamonds or precious stones held in electronic depository form is not permitted even after experience in trading procedures has been acquired. Physical trading in any precious stones is not allowed.
(d) Any weapons or material, whether raw or processed, used to make weapons or devices of mass destruction cannot be traded by an intermediary even after experience in trading procedures has been acquired. Legally acquired military equipment and such associated material allowed on behalf of a disclosed principal only.
(e) Any biological material that could be misused to the detriment of humans even after experience in trading procedures has been acquired. Medical equipment and medicines allowed.
(f) Any government, race or country that has a definite ill will against the United States of America or allied countries considered to be allies or amicable with the USA. Intermediaries may trade with countries which have demonstrated past ill will towards the USA but which now are making efforts to unite or reunite with the USA or its allies.
(g) A felon or person who has been incarcerated in a prison for any serious reason involving more that 12 weeks imprisonment, or a person who has been charged with matters of arson, fraud or deception, but who has or has not yet been imprisoned or otherwise sentenced for such an offence.
(h) The intermediary should not trade nor be in possession of any trade secrets, copyright material or matters considered secretive by nature and state.
(i) Intermediaries shall not practice any business that suggests money laundering or any associated criminal activity such as the trafficking of people or prohibited substances.
(j) Any transaction in which the parties are not transacting in the same language.
(k) Any primary crude oil transaction (or fuels in general) even after experience in trading procedures has been acquired.No Aramco or Opec procedural matters of contract is allowed to be traded upon. Secondary crude oil transactions are allowed. A primary contract is defined to be one where a precondition of sale requires the disclosure of a refinery processing agreement or similar.
(l) An undischarged bankrupt may only trade in the position of a sourcing intermediary and may not trade in the position of a primary principal.
(m) A person of diminished mental capacity, or a person who cannot comprehend the language of a deal they are entering into.
(n) The following commodities and quantities are best avoided: Beef/Poultry/Seafood products; Quarantine products; Fumigated products; Lose clothing; Single FCL loads.
(o) Any other commodity traders who ask for SWIFT payments or PBG payments or an active or inactive SLC up front are to be avoided outright even after experience in trading procedures has been acquired
(p) A country noted for or demonstrating blatant human rights violations.
(q) It is preferred that an Intermediary deal in bulk carrier shipments of acceptable goods and avoid dealing in Full container loads in where quantity values of 500 MT or less are apparent .
(r) In General : Any mention of a banks involvement in the matter of the sales contract in contrary of UCP600 Article (4) is rejected by a URPIB intermediary. "In house" issued DLC are allowed to be issued by very experience URPIB Intermediaries. In where a transferable DLC is being used by a URPIB trader, transfer fee's must be secured from the end buyer as a matter of contract before the DLC is issued as "agreed upon" as inferred under Article (38) UCP 600. URPIB Traders shall only trade in FAS , FCA or FOB delivery modes as per incoterms 2000 until such have gained long standing experience to venture into CIF, CFR, CIP delivery applications.
An intermediary must at all times ensure that the product they are dealing with is indeed merchant able, appropriate and readily sourced from reputable suppliers. Further the intermediary must have made reasonable effort to ascertain by whatever means that the product they are dealing with is safe, legal and genuine, and is generally acceptable as a tradable product world-wide.
URPIB Article 10. Honourable Intent
An intermediary shall not transact in bad faith or in a dishonourable manner. Any intermediary who circumvents others or produces offers without ‘ostensible authority’ shall be deemed to be a ‘dishonourable trader’, and shall not be allowed to trade within a string contract.
URPIB Article 11. Intermediary and Goods
An intermediary officially trading under the doctrine of UCP600 Banking rules, INCOTERMS, delivery rules, and English common laws of contract shall at all times trade in ‘documents’ and not the physical goods pertaining to such documents. Only statutory or federal laws in the exporter’s country are capable of overriding these rules and laws. In all cases the private global intermediary must, at least, abide by the implicit and adapted ICC Paris France Incoterms 2000 and UCP 600 Banking Rules and in a manner as provided by these rules and this publication.
URPIB Article 12. Policy Proof of Interest (PPI)
An intermediary officially trading according to UCP600, INCOTERMS, and URPIB shall at all times trade in ‘documents’ and not the physical goods relating to the documents. No ‘proof of product’ documentation or often implied ‘POP.’ will be supplied before the applicable financial instrument to the transaction has been lodged into the account of the intermediary representing the ‘middle person’ in a particular transaction.
URPIB Article 13: Performance Guarantee
Other than that which has been already advised regarding the performance guarantee: under no circumstances shall a performance guarantee be opened as active or inactive in any form whatsoever to favour an end buyer before the financial instrument pertaining to the product being purchased has been lodged and accepted into the account of the ‘buyer/seller’ associated and controlling the trade. Intermediaries shall not transact on any deals in which the transaction calls for the performance guarantee to be lodged prior to the lodgement of an active financial instrument.
URPIB Article 14: Shipment Date
As far as the intermediary is concerned, no transaction shall be allowed to proceed where a ‘shipment date’ is more than twenty days after the issue of the bill of lading.
URPIB Article 15: Pre- Advised credits
As far as the intermediary is concerned a UCP600 Irrevocable Transferable Pre-advised documentary letter of credit (as opposed to normal active documentary credits) is an acceptable instrument to request but only when issued as a UCP600 financial instrument and only if issued as confirmed. This is the preferred instrument for use by the intermediary, until such time as the intermediary gains enough confidence to accept other forms of financial instruments.
URPIB Article 16: Bank Comfort Letter.
Where one of the preconditions to a transaction is the supply of a Bank Comfort Letter (BCL) or similar associated with the issue of an ICPO or LOI (Letter of Intent) etc, these preconditions shall not be entertained under any circumstances.
URPIB Article 17: Corporate Business.
As already described the BCL and LOI are tools of trade used internally by corporate entities. In international trade LOI means ‘Letter of indemnity’ and Bank Comfort Letters are used in circumstances where a corporate entity needs to give financial support to a related associated sub entity, usually to one established in the same country of the issuer.
Intermediaries using URPIB shall not accept nor apply procedures in a trading environment by using an LOI associated with a BCL, other flawed terms such as - ASWP, NCND, ICPO, RWA, FFIDLC, PB, and the likes is a premier application.
There is no protection offered to an intermediary using the virtues of a NCNDA (Non disclose and non circumvention agreement) and as such NCNDA agreements shall be deemed as useless for intermediary purposes.
URPIB Article 18: Contract versus Financial instrument.
No party to a trade will be permitted to present the contract of sale to a financial institution. Banks deal in finance and not contracts. Under URPIB an intermediary shall treat the financial instrument, the sales contract, and the insurance contract as all being individual documents that are separate to each other.
URPIB Article 19: UCP500 Versus UCP600
Unless advised by his bank in relation to an active credit or if permitted by any URPIB updates, an intermediary is not allowed to issue a contract that refers to or relies upon any provisions in UCP500. UCP 600 rules apply at all times.
URPIB Article 20: DLC Transfer Fees
Article 38 of *UCP 600 applies where both parties have contractually agreed that the transfer fees are for the account of the buyer.
*ICC UCP600 Article 38 relates to the issue of a financial instrument for payment of goods by DLC. The transfer fee relating to the issue of this DLC is for the expense of the buyer. Intermediaries must ensure that the contract provides that these fees are for the account of the end buyer. If not, then the intermediary has no deal.
URPIB Article 21: “Sanctuary”
Any Intermediary approaching any “SB” who has declared to also be a URPIB trader infers explicitly that the “SB” shall automatically protect the interests of anyone approaching them in any manner with information, and that should such information prove positive , the “SB” shall collect and protect commission for each said protected entity unconditionally. The “SB” is not allowed to use the information given in where a deal has collapsed in where later the ‘SB” uses such vital information as provided by the intermediary in the past on another deal yet to apply in the future, without first notifying the said intermediary who originally gave such vital information. The said intermediary once notified whether he or she is involved in the deal or not being attempted , the ‘SB” shall apply to include the said intermediary in the commission payment structure. Vital information specifically defines in where information about Supplier and or End buyers are provided regardless if a “IPG” is in place or not. It is a dishonourable act to trade as a seller/buyer and URPIB trader in where others have trusted the “SB” in providing such with valuable information that could be used to close upon a transaction. to which the seller /buyer uses such information on other future deal without involving the original person providing to disclose such original information.Any Intermediary defines to mean anyone trading in commodities whether or not such is informed about URPIB. “Sanctuary “ is an applied mechanism that allows one party to disclose up front vital information in a quick manner for purpose of evaluation without having the deal stall due to matters involved in issuing the “IPG”
URPIB Article 22: Connecting Commission Payments
In where an intermediary or group being protected by the Buyer /seller has provided information to such in the course of a transaction or otherwise, which leads to the discovery of other Principal(s) of industry by default, then the original intermediary group shall be entitled to the payment of commission unconditionally, should the Buyer/seller later contact (or visa versa) such a principal, person or party in where a transaction is closed. The Buyer/seller is fully obligated to contact all person associated in the original party, and pay to each individual, a commission payment at a rate being 40% of the collected rate in where the divisible formulation as per URPIB is applied to pay such said original party a "corresponding/ sourcing" type of commission payment, within 10 days of deal closure . Accordingly, the original party to a deal being headed by a URPIB Buyer/Seller , which later results in the disclosure of any other party of person not originally tied with the said party in where a deal later eventuates with the disclosed newly discovered party, entitles the original party to be defined as a "connecting" party; to which commission from the successful deal is still payable to the original party introducing the newly discovered entity. For clarity of this matter the following base example shall be used to describe the meaning of "corresponding or connecting" party or entity.
©URPIB 2001 FTN exporting ©UCP600/ Incoterms: ICC Paris France.