Commodities 103

If you don’t know how the actual Trading and Financial Instrument operate within the Banking community and how they work you really need to find out what can be done and what cannot, or will not be done.

Let’s look at another stage in the procedures for selling.

Upon signing of contract the Seller Company will sometimes send an Attestation Letter from their Lawyer’s office confirming that POP’s are already at the sellers Bank.

a) POP is a commercial document, not a financial one. Usually banks do not accept any responsibility for commercial documents especially if either the Seller or Buyer bank with a branch of the bank that is not the not headquarters or a “major branch” (head office and/or international trade department of the bank). The Banks cannot check the authenticity of commercial documents and cannot provide Attestation for it. A branch manager can be responsible only for financial documents, not for commercial documents.

b) The concept that the two banks can exchange “simultaneously” (same bank time-windows) is a myth - due time-zone differences and each the fact that each “transaction” has it’s own transmission & confirmation process via international trade departments and correspondence banks.  As well both POP (Proof of Product) and POF (Proof of funds) are normally not in real time, the buyer needs time to verify the POP and the seller needs time to verify the POF. If these documents are send by Swift or full bank supported (this will block buyers funds) then they are more credible.

c) If banks were to proceed with “financial readiness” direct from the POP, then Contract with it’s step-by-step procedures wouldn’t have any practical value. Contracts are legally binding between two involved parties (Seller and Buyer) – the role of the banks is not to control & proceed with their client’s responsibility on behalf of contract, they are only executors of the financial processes as instructed by their clients. However, if certain commercial papers are lodged with the bank, banking officers can (under the instruction of their client) confirm to another bank that papers of that nature are indeed lodged with them on their client’s behalf (but not authenticate the contents). Similarly in a secure senior-banking officer to senior-banking-officer communiqué each client’s bank may inform the other that their client is known to them and is known to engage in the said business and has a credit/transaction history to support such.

note: this will be “advisory only” and the banks will not take any responsibility / liability for this. This is sometimes referred to as a “Soft exchange of POP and POF ”  as it is really only a comfort procedure as it has no true legal standing.