Now, we try to pre-qualify a Buyer prior to a deal. At this point, we send out the verbiage for BCL/RWA/MT199/MT999, as the case may be. This is important at this stage for two reasons: one, we want a signed contract to be able to close a deal, and two, we want Buyers to keep their integrity.
Here's the truth, most Buyers are intermediaries, which means they are buying to resell. So, when a Buyer like that is looking at 3-4% profit, they can not rent an SBLC/DLC for 5-6%, for instance. Then, the Buyer and his bank start to go back and forth with the banking verbiage to get it approved.
If we're going to allow our vessel and cargo to go half-way around the world with just a notice that the Buyer has money, we want to make sure the money is still there when the vessel arrives. So, we require the Buyer to guarantee payment by putting up SBLC or DLC.
As most Buyers in the market today are actually not end buyers but intermediaries, it means most Buyers do not have money. If they had done their job correctly, they would have done a contract with the end Buyer, but most do not tie up that end first, and therefore can not show the end Buyer's banking strength in their account, and then may have a problem providing a payment guarantee.
That is when they start to hedge. Then they start to squirm and raise the trust issue. They conveniently forget they signed a contract stating that they had the funds. Things get ugly!
These are some of the impediments to transactions that we, at Eastern Union Energy, intend to iron out.
~Eastern Union Energy