Essential terms and definitions for international commodity trading, Urea 46% specifications, payment instruments, and shipping terminology.
Anti-Money Laundering - Regulations requiring verification of fund sources and customer identity. Mandatory for banks and financial institutions. Heavy penalties for non-compliance.
Investigation and verification of business partner before transaction. Includes company verification, ownership checks, financial capacity assessment, sanctions screening, reputation review.
Know Your Customer - Process of verifying identity and legitimacy of business partners. Required for AML compliance. Includes company registration, passport copies, bank verification, beneficial ownership disclosure.
Document issued by carrier acknowledging receipt of cargo for shipment. Serves as receipt, contract of carriage, and document of title. Required for customs clearance and cargo release. Can be negotiable or non-negotiable.
Document certifying country where goods were manufactured. Required for customs, tariffs, and trade agreements. Can affect duty rates.
Document from seller to buyer detailing goods sold, quantity, price, and terms. Required for customs clearance and payment processing. Must match LC terms exactly.
International Master Fee Protection Agreement - Defines commission structure and protects fee distribution among intermediaries. Ensures all parties are compensated.
Non-Circumvention and Non-Disclosure Agreement - Protects intermediaries from being bypassed and ensures confidentiality of business information. Signed early in transaction process.
Detailed list of cargo contents, packaging type, dimensions, and weight. Used for customs and cargo handling. Must match commercial invoice.
Fee paid to intermediaries facilitating commodity trade. Typically 1-3% of transaction value. Distributed per IMFPA agreement. Paid after successful transaction completion.
Letter of Intent - Non-binding expression of interest to purchase. Can be withdrawn at any time. Not acceptable for serious commodity trading. ICPO required instead.
Metric Ton - 1,000 kilograms or 2,204.62 pounds. Standard unit for commodity trading. Urea typically traded in 12,500 MT lots (one vessel load).
Acceptable deviation from contracted quantity. Typically ±5% for bulk commodities. Final quantity at loading or discharge determines payment amount.
Market for immediate delivery and payment. Contrast with futures/forward contracts. Spot prices reflect current supply-demand. Settlement within days.
Society for Worldwide Interbank Financial Telecommunication - Secure messaging network for banks. SWIFT codes identify banks globally. Used for international payment instructions.
Cost and Freight - Seller pays ocean freight to destination port but risk transfers at loading port. Buyer arranges insurance. Split between cost responsibility and risk.
Cost, Insurance and Freight - Seller pays freight and minimum insurance to destination. Risk still transfers at loading port. Most convenient for buyers. Seller provides minimum coverage only.
Free On Board - Seller delivers goods on vessel at loading port. Buyer pays freight, insurance, and bears all risks from that point. Buyer arranges shipping.
French inspection and certification company, similar to SGS. Widely recognized for commodity inspection. Strong presence in Africa and Middle East.
Certificate of Analysis - Detailed laboratory test results for product sample. Includes all tested parameters, test methods, and lab accreditation. More detailed than COQ.
Certificate of Quantity - Document certifying quantity loaded or discharged. Based on draft survey or weighbridge results. Critical for payment calculation.
Certificate of Quality - Document issued by SGS or similar inspector certifying product meets specified quality standards. Tests nitrogen content, moisture, biuret, etc. for Urea 46%.
Method of determining cargo weight on vessel by measuring water displacement before and after loading. Accuracy ±0.5%. Standard for bulk commodity shipping.
UK-based quality assurance company providing inspection services. Particularly strong in petroleum products. Alternative to SGS.
Société Générale de Surveillance - World's leading inspection, verification, testing, and certification company. Provides independent third-party quality and quantity verification for commodity trades.
Bank Comfort Letter - Letter from buyer's bank confirming account existence, good standing, and sufficient funds for contemplated transaction. Valid 30-90 days. Does not guarantee payment.
Documentary Letter of Credit - Primary payment instrument where buyer's bank commits to pay seller upon presentation of compliant shipping documents. Risk transfers at loading port. Cost typically 0.5-2% of value.
Irrevocable Corporate Purchase Order - A legally binding purchase commitment from a buyer that cannot be cancelled without seller consent. Must be accompanied by Bank Comfort Letter (BCL) and KYC documents.
International Standby Practices - ICC rules specifically for Standby Letters of Credit. Alternative to UCP 600 for SBLC transactions. Published 1998, still widely used.
Letter of Credit - Bank-issued document guaranteeing payment to seller upon meeting specified conditions. Can be revocable or irrevocable. Commodity trading requires irrevocable LC only.
Proof of Funds - Official bank document showing available funds for transaction. Required for high-value deals. Must be bank-issued, signed, and stamped. Screenshots not acceptable.
Ready, Willing, and Able Letter - Bank confirmation that client has funds, willingness, and legal capacity to complete transaction. More detailed than BCL. Valid 30-60 days.
Standby Letter of Credit - A bank guarantee ensuring payment to seller if buyer defaults. Acts as backup payment mechanism governed by ICC rules (ISP98 or UCP 600). Cost typically 1-3% of transaction value annually.
Impurity formed during urea production. Maximum 1.0% in standard urea. High biuret (>1.5%) can damage plants in foliar application. Critical quality parameter.
Urea formed through granulation process. Particle size 2-4mm. Less dusty, better for mechanical spreaders, reduced caking. Preferred for bulk blending and mechanized application.
Percentage of nitrogen in fertilizer. Urea 46% must have minimum 46% nitrogen. Determined by Kjeldahl method or combustion analysis. Basis for pricing.
Nitrogen-Phosphorus-Potassium ratio in fertilizer. Urea 46% is 46-0-0 (46% nitrogen, 0% phosphorus, 0% potassium). Indicates nutrient composition.
Urea formed by prilling (spray cooling). Particle size 1-2mm. Faster dissolution, uniform size, cost-effective. Most common form globally.
Nitrogen fertilizer with 46% minimum nitrogen content. Chemical formula: CO(NH₂)₂. Available in granular (2-4mm) and prilled (1-2mm) forms. Most widely traded nitrogen fertilizer globally.
Penalty charged when vessel loading/unloading exceeds agreed laytime. Calculated per day or per hour. Rates specified in contract (e.g., USD 5,000/day). Significant cost if port operations are slow.
Bonus paid to charterer when loading/unloading completes faster than laytime. Usually 50% of demurrage rate. Incentivizes efficient port operations.