understanding payment logic dealing Iran oil products (L/C vs TT)

In D2 (Gas Oil) deals, many feel lot and confused in payment terms.

Don't be guys! this is oil business, you have to be smart and finding your way through difficulties, possibilities and opportunities. understanding the TTO procedure is easy if you try to understand the logic behind. 

Payment methods are a bottle neck for many deals

Why some traders are not accepting LC payments?

there are different possibly right answers for that: 

1. embargoes and sanctions on Iran banking system
2. funding problems for commodities which need the trader to pay in advance to refineries and petrochem complex (suppliers) 
3. extra cost LC puts on supplier and makes the price uncompetitive 

I will write more about TT payments which we use on Bitumen trade. in this post, just going through the TTO procedure (I do not use this payment method in my own company!):

PROCEDURE TTO (only used for D2, LPG and other fuels)

1. Buyer and seller sign and seal contract including banking coordinates and exchange the signed copy by electronic mail. The electronic signed copy by both parties is considered legally binding and enforceable, the executed spa is lodged in their respective banks.

2. Buyer returns the signed spa to the seller, with his ATB and supercargo details to enable seller issue marine ATB

3. Seller shall nominate, load a vessel and forward to buyer verifiable cargo documents including: bill of lading, certificate of quality, certificate of origin, cargo manifest, tanker report, master receipt of cargo.

4. Upon confirmation of documents, buyers bank issues MT760 (blocked fund) of 100% value of total cost of cargo to sellers bank in favor of seller

5. Seller upon confirmation of the confirm-able MT760 (blocked fund), reassigns loaded cargo documents to buyer. the seller get naval/nnpc outward  clearance and board buyer’s inspector and supercargo for the purpose of conducting Q&Q and physical confirmation by issuing matb through vessel captain.

6. the buyer receive the Q&Q report and all relevant cargo documents sent through sellers bank to buyers bank and buyers bank effect full payments within 72hrs by swift KTT transfer to seller nominated bank account and all mandates and facilitator’s accounts as per the spa.

7. The seller confirms payments and clear vessel to sail voyage to buyer’s destination port.

Deal closed with possible roll-over