Important facts about Holden

Because of the large amount of fraud involving sugar in recent years it is important to stress that our
procedures include a full proof of product and refinery lot allocations, which are provided by our bank (major German bank) to the Buyer before the L/C is opened. A personal inspection or additional quality and quantity inspection (in addition to our standard S.G.S.), although pointless, is always possible. In addition, we are very happy for the final contract, proof of funds and product evidence to be given in our bank with all parties present.

How we work ..

1. Buyer asks for a non-binding price indication, giving company name and address, and bank to be used.



2. Seller issues informal price indication and terms and conditions.



3. Buyer issues full Letter of Intent with details of enquiry, name of bankers and preferably a Bank Letter of Confirmation of funds availability. If preferred, an immediate bank to bank confirmation of funds versus ability to supply product can be made.



4. Seller issues a Full Corporate Offer to Buyer, and text of L/C and Performance Bond.



5. Buyer approves, signs and returns



6. Contract issued for approval and signing



7. Seller provides bank proof of product, refinery allocations and Buyer's bank confirms funds availability



8. Buyer opens a pre-advice L/C



9. Seller posts the operative Performance Bond to activate the L/C.









PAYMENT METHODS



One vessel by documentary credit payable at sight. Several vessels by irrevocable, revolving, confirmed at Seller's bank L/C or confirmed by a Moody's or Standard and Poors AA bank or equivalent.

Confirmation costs to Buyer's account.



(We do NOT ask for or accept payment by "SLC" or "PBG").



We will try to meet the customer's other requirements as best we can.



Performance Bond: We post a cash-backed P/B of normally 3%, a higher P/B rate is given to suit new customers for their first trusted shipment.

How to make out if a deal is fraudulent!!



Prices those are significantly lower than the industry standard.



References to "Grade A" sugar, which does not exist.



References to the colour of the sugar as 'sparkling white', which is not an industry term.



Misspelling of references to ICUMSA, the International Commission for Uniform Methods of Sugar Analysis. This often appears as INCUMSA with an extra 'N'.



Repeated references to 'Top' or 'Prime' world banks - these phrases have no specific meaning.



References to 'ICC Provisions of Non-Circumvention and Non-Disclosure.' ICC has never published rules under this title.



A reference to 'the funds in the buyer's account to be good, clean, cleared, unencumbered and legally earned or obtained and of non-criminal origin' - a phrase no bank would use because it could not validate such a statement.



Many incorrect references to ICC, eg 'the parties do hereby accept the international provision of "Force Majeure" as published by the International Chamber of Commerce, Paris, France, and as defined by ICC Rules Uniform Customs and Practice'. The reference is wrong, because the Uniform Customs and Practice for Documentary Credits, commonly known as UCP 500, governs Letters of Credit and not Force Majeure.

How Frauds happen..

PRICES: Sugar refineries are in business to make money, and do not need to sell their product below the market price. Much sugar is sold world wide through trading companies who buy from refiners and sell through financial markets such as the UK LIFFE and the USA CSCE. These prices are public knowledge and are published in newspapers, on teletext, and on the Internet. To be added to these prices are the distribution, handling, shipping and insurance costs, as well as the profit margins of the parties involved in the whole process. Any of the large, well know refiners, producers or traders such as UK's Tate and Lyle or members of the "RSA" (Refined Sugar Association) will happily quote a price to a buyer who is financially able.
Apart from this visible market, there are also refiners who sell directly to trading companies, who are able to sell at lower prices simply because they have lower overheads, contract to take a large amount in a given period, and work on lower margins than the stock exchange quoted majors. However, the price difference between the two markets ('primary' and 'secondary') is not as large as a casual browser of the Internet BBS sites would think, perhaps 20 -30 USD per tonne at most, depending on the size of the contract and delivery point.
The Standby Letter of Credit - Uses and Abuses
A Standby Letter of Credit is sometimes used in place of a bank guarantee of payment, particularly by American banks, rarely by U.K. banks. The true purpose of this financial instrument is to provide protection for a Seller should the Buyer fail to pay for his goods at the agreed time. If, for example, an exporter of computer monitors agrees to ship every month 10 containers to his customer in Australia, and the Buyer agrees to pay by electronic means on the 10th day of the month following delivery, the Standby L/C is put in place by the Buyer's bank, and would here probably be equal to the amount due by the Buyer in a two month period. The terms of the L/C will permit the Seller to make a statement to his bank confirming that payment has not been received within the agreed time, and the issuing bank must pay the sums due to the Seller.
The security to be provided by the Buyer to his bank is agreed between them, and can be between 2 and 3 months worth of the amount of goods expected to be shipped and purchased.
Banks would only in very very exceptional circumstances ask for a guarantee of payment from their clients covering one full year!!

A more usual payment instrument is the Revolving Letter of Credit. This is used particularly in the sugar business when a Buyer wishes to fix a price valid for say one year, and the Seller makes a commitment to supply at that fixed price. Because the Seller has in turn made a commitment either to his own refineries or to the supplying refineries to purchase for one year, the Buyer has to ask his bank to guarantee that the L/C will in fact revolve every month / shipment until the end of the contract. The costs and the securities required for this commitment by the Buyer's bank are a matter for negotiation for the Buyer and his bank. The guarantee given by the bank is however part of the L/C text, and is NOT A BANK GUARANTEE, i.e. is not a separate negotiable instrument, and cannot be discounted in any way. The Seller is not interested in what this guarantee costs the Buyer, since it has no effect on him whatsoever.
THE CROOKS, 'SLC', 'PBG'......
Scenario (1): Seller offers sugar at USD250 CIF for 100,000 tonnes over 8 months. Seller asks for a 'SLC' or 'PBG' covering the whole amount, claims it has to be that way in case Buyer defaults. Seller offers to post his Performance Bond before the L/C is opened, and it is to become effective after the 'SLC' or 'PBG' has been irrevocably issued. Buyer issues SLC, Seller uses the security of the 'SLC' which is now open in his favour, and does in fact activate the P/B. Buyer goes to shady bank in off-shore haven, and sells (discounts) the SLC for 70% or more of it's value. No sugar is supplied. After eight months bank presents SLC to Buyer's bank and receives payment. Buyer loses his money and tries to find Seller who has long since gone off to the Seychelles or other country with no extradition treaty.

Scenario (2): As above, except Buyer's bank makes payment conditional on sight of Bills of lading, or other documents - Seller produces forged documents and claims for the first vessel, say 25,000 tonnes (USD6,250,000). Buyer has to pay his bank, tries to find seller as above....

Scenario (3): Greed again - the story for the sophisticated Buyer: Seller tells Buyer he will use the SLC to invest in a HIGH YIELD PROGRAMME (sorry, program !), and will make so much money that he can sell the sugar for, yes, special offer, USD 85 per metric tonne CIF ASWP !!
Wow! Who could resist? Yes sir, to any port in the world, from Murmansk to Taipei to Luanda.
The rest of the story as above......
Now of course any half intelligent person who has the money to open an irrevocable bank guarantee with no conditions attached for 8 months will not bother with sugar if he can make so much from a 'program'. If 'programs' exist, why doesn't he pop down to his local bank and ask? Or call up the Federal Reserve and ask them? AH, but it is secret Sir, and you have to be in the sugar business to take part - or some such story. A fool and his money are easy parted, as they say.
So a word for sugar Buyers:
1. NEVER sign a contract where payment is by irrevocable 'SLC' or 'PBG'
2. NEVER put your money down first, i.e. the Seller should put down his P/B first.
3. ALWAYS ask your bank to get confirmation with bank responsibility from the Seller's
bank that the seller is genuine and can supply the sugar.
4. ALWAYS get your lawyer / attorney to check everything before signing.
5. ALWAYS inform yourself as to the real current costs by asking friends or simply contacting us to know the present rates.