How We Work
Understanding our structured approach to international commodity trading
Our Trading Process
At VTK Global Trades, we follow a structured and transparent process to ensure smooth, compliant, and successful international trade transactions. Our methodology adheres to established industry standards and protocols.
- 1
Letter of Intent (LOI)
The process begins when a prospective buyer submits a Letter of Intent (LOI), expressing their interest in purchasing specific commodities or products.
Key Components of an LOI:
- Buyer's company information and registration details
- Product specifications and quantity requirements
- Target price range (if applicable)
- Preferred delivery timeframe and location
- Preferred payment terms
- Validity period of the LOI
The LOI should be on company letterhead, signed, and stamped by an authorized representative. - 2
Soft Corporate Offer (SCO)
Upon receiving a valid LOI, we issue a Soft Corporate Offer (SCO), which provides preliminary product details, pricing, and terms.
SCO Details Include:
- Product specifications and origin
- Indicative pricing structure
- Available quantity and delivery schedule
- General payment terms
- Shipping options
- Validity period of the offer
The SCO is non-binding and subject to change based on market conditions and availability. - 3
Firm Corporate Offer (FCO)
If the buyer expresses continued interest after reviewing the SCO, we proceed to issue a Firm Corporate Offer (FCO) with specific and detailed terms.
FCO Details Include:
- Finalized product specifications with detailed quality parameters
- Fixed pricing structure
- Confirmed quantity and delivery schedule
- Specific payment terms and conditions
- Shipping and insurance details
- Inspection requirements
- Documentation requirements
- Validity period of the offer
The FCO is a formal offer that requires prompt response within the specified validity period. - 4
Irrevocable Corporate Purchase Order (ICPO)
If the buyer accepts the FCO, they issue an Irrevocable Corporate Purchase Order (ICPO), which serves as a formal commitment to purchase under the specified terms.
ICPO Requirements:
- Must be on company letterhead with full contact details
- Must reference the FCO number and date
- Must include complete product specifications as per FCO
- Must specify quantity, price, and payment terms as agreed
- Must be signed and stamped by authorized signatory
- Must include buyer's banking details
The ICPO represents a serious commitment and is a prerequisite for proceeding with the transaction. - 5
Contract and Payment
Upon receipt of a valid ICPO, we prepare and execute a formal contract, followed by payment arrangements according to the agreed terms.
Contract and Payment Process:
- Draft contract is prepared and sent to buyer for review
- Both parties negotiate and finalize contract terms
- Contract is signed by both parties
- Payment instrument is established (LC, SBLC, etc.)
- Initial payment is made according to agreed terms
- Production or allocation of goods begins
- 6
Inspection, Shipping, and Delivery
The final phase involves product inspection, shipping arrangements, and delivery according to the agreed terms.
Final Phase Activities:
- Pre-shipment inspection by designated agency (e.g., SGS)
- Preparation of shipping documents
- Customs clearance at origin
- Loading and transportation
- Tracking and monitoring of shipment
- Arrival notification and delivery coordination
- Customs clearance at destination
- Final delivery and acceptance
- Balance payment processing
- Transaction completion and follow-up
Payment Terms and Methods
International trade transactions typically involve specific payment instruments that provide security and assurance to both parties.
Letter of Credit (LC)
A document issued by a bank that guarantees payment to the seller once specific conditions are met. It's one of the most secure payment methods in international trade, providing protection to both buyer and seller.
- Confirmed vs. Unconfirmed LC
- Irrevocable vs. Revocable LC
- Sight LC vs. Deferred Payment LC
- Transferable vs. Non-transferable LC
Standby Letter of Credit (SBLC)
A guarantee from a bank that a buyer can pay a seller. Unlike a traditional LC, an SBLC is only drawn upon in the event that the buyer fails to make payment through the agreed primary method.
- Performance SBLC
- Financial SBLC
- Direct Pay SBLC
- Commercial SBLC
Documentary Collection
A transaction where the exporter instructs their bank to forward documents related to the export of goods to the importer's bank with a request to present these documents to the buyer for payment.
- Documents Against Payment (D/P)
- Documents Against Acceptance (D/A)
Telegraphic Transfer (T/T)
An electronic method of transferring funds internationally. Typically used with trusted partners or for smaller transactions, often structured as partial payments (e.g., 30% advance, 70% before shipment).
- Advance T/T Payment
- Partial T/T Payment
- T/T Payment After Shipment
Bank Guarantee (BG)
A guarantee issued by a bank on behalf of a client that promises payment to a third party in the event that the client fails to fulfill their contractual obligations.
- Bid Bond
- Performance Guarantee
- Advance Payment Guarantee
- Retention Money Guarantee
Escrow Services
A third party holds and regulates payment of funds required for two parties involved in a transaction, helping make the payment process more secure.
- Full Escrow
- Partial Escrow
- Milestone Escrow
Shipping Terms (Incoterms)
International Commercial Terms (Incoterms) define the responsibilities of buyers and sellers in international transactions, particularly regarding shipping, insurance, and risk transfer.
FOB (Free On Board)
The seller delivers goods on board the vessel nominated by the buyer at the named port of shipment. The seller must clear the goods for export. Risk transfers when the goods are on board the vessel.
CIF (Cost, Insurance, Freight)
The seller delivers the goods on board the vessel and pays for the cost of bringing the goods to the port of destination. The seller also contracts for insurance cover against the buyer's risk of loss or damage during carriage.
CFR (Cost and Freight)
Similar to CIF, but the seller is not required to procure insurance. The seller pays for the cost of bringing the goods to the port of destination, but risk transfers when the goods are loaded on the vessel.
EXW (Ex Works)
The seller makes the goods available at their premises. The buyer bears all costs and risks involved in taking the goods from the seller's premises to the desired destination.
FCA (Free Carrier)
The seller delivers the goods, cleared for export, to the carrier nominated by the buyer at the named place. The risk passes when the goods are handed over to the carrier.
DAP (Delivered At Place)
The seller delivers when the goods are placed at the disposal of the buyer on the arriving means of transport ready for unloading at the named place of destination. The seller bears all risks involved in bringing the goods to the named place.
Inspection and Quality Control
Product inspection is a critical component of international trade to ensure that goods meet the agreed specifications and quality standards.
Inspection Types
Pre-Production Inspection
Conducted before production begins to verify raw materials, components, and production plans meet requirements.
During Production Inspection
Performed during the manufacturing process to identify issues early and ensure production is on track.
Pre-Shipment Inspection
Conducted when production is 80-100% complete and before shipment to verify final product quality and quantity.
Loading Supervision
Ensures proper loading of goods into containers or vessels, verifying quantity and condition before transport.
Inspection Agencies
We work with internationally recognized inspection agencies to ensure impartial quality verification:
- SGS (Société Générale de Surveillance) - World's leading inspection, verification, testing, and certification company
- Bureau Veritas - Global leader in testing, inspection, and certification
- Intertek - Total Quality Assurance provider to industries worldwide
- TÜV - Technical inspection and certification organization
- ALS - Global testing, inspection, and certification company
Inspection reports are crucial documents in international trade and are often required for payment release in letter of credit transactions. We ensure all inspections are conducted according to international standards and specific buyer requirements.
Required Documentation
International trade requires extensive documentation to ensure compliance with regulations, facilitate customs clearance, and enable payment processing.
Commercial Documents
- Commercial Invoice - Details the sale transaction between buyer and seller
- Packing List - Itemizes package contents, dimensions, and weights
- Pro Forma Invoice - Preliminary invoice provided before shipment
- Purchase Order - Buyer's official document requesting goods
- Sales Contract - Legal agreement between buyer and seller
Transport Documents
- Bill of Lading (B/L) - Receipt of goods shipped by sea
- Air Waybill (AWB) - Receipt for goods shipped by air
- Sea Waybill - Non-negotiable transport document for sea freight
- Multimodal Transport Document - For shipments using multiple transport modes
- Forwarder's Cargo Receipt - Acknowledgment of goods receipt by freight forwarder
Regulatory Documents
- Certificate of Origin - Certifies the country where goods were manufactured
- Inspection Certificate - Confirms goods meet specified standards
- Phytosanitary Certificate - For agricultural products, certifying they're free from pests
- Health Certificate - For food products, certifying they're fit for consumption
- Dangerous Goods Declaration - For hazardous materials
- Export License - Government authorization to export specific goods
- Import License - Government authorization to import specific goods
Financial Documents
- Letter of Credit - Bank payment security instrument
- Bill of Exchange - Written order to pay a specified sum
- Insurance Certificate - Proof of insurance coverage for goods
- Bank Draft - Payment instrument drawn by a bank
- Banker's Acceptance - Time draft drawn on and accepted by a bank
Ready to Start Trading with VTK Global Trades?
Contact our team today to discuss your specific requirements and how we can support your international trade objectives.