How does a crude oil trading “TTO” procedure work?

Millions of barrels of crude oil are traded every day around the world, which is worth billions of dollars. To manage and standardize this type of business volume, we need very precise and defined procedures and processes that leave very little room for ambiguity. These procedures play a very important role in facilitating the deal and sometimes also help weed out players who are not serious about the deal.

Each provider may establish a different set of terms and conditions that must be carefully studied before moving forward with compliance. Any offer without a 2% performance guarantee should be avoided to be on the safer side. These procedures are generally performed with the goal of

a) remove non-serious or fraudulent players,

b) establish precise conditions of trade that define the stages of change in ownership and the responsibilities of each party involved,

c) help each party to ensure their interest in the deal and

d) Minimize and manage non-compliance.

Later in this article we will briefly discuss the “TTO” procedure and how it works.

Through the transport operator (TTO)

  • A Purchase Agreement (SPC) is signed between the two parties involved with the coordination of the Banks.
  • The buyer’s bank sends a prior LC notice to the seller’s bank.
  • Upon receipt of a notice LC, the seller’s bank activates the performance bond or performance bond according to the agreed SPC.
  • Once the performance bond is active, the buyer can proceed with the establishment of the operational Letter of Credit. Any commission cost to agents or facilitators must be included in this operational letter of credit.
  • Within 72 hours of receipt of said operational LC, the seller issues ATB to independent inspectors designated by the buyer.
  • With ATB, inspectors can get on board and carry out their inspection and present a report on it to the buyer.
  • After receiving a positive quality and quantity (Q & Q) report of the cargo reassignment by the inspector, it is done on behalf of the buyer and all original documents are delivered to the buyer through the banks involved in the next 4 days. From this moment on, the ownership of the cargo is transferred to the buyer.
  • Buyer Supercharge ships within three days of title change.
  • Last but not least, payments are transferred to all parties involved within the next 72 hours.

Hope you found the above informative and helpful.

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