Getting an LOI From a Broker

Question:
I have an LOI from another broker. I believe I have a good supplier lined up for his buyer. The rate I got is below his target rate which includes his commission which means there’s room for my commission too.

How does the paperwork flow so the two of us get commission when his buyer works with the supplier? I figure the supplier and I still do a contract but then does the original broker also do a contract with the supplier for his cut?

MP

Answer:
You make an agreement with the other broker. Tell him you will pay him and he will not circumvent you with your supplier.

I have uploaded an agency agreement on the course website.

Amin

Agent Wants to Visit Your Supplier

Question:
I am working with a couple of agents and two of them want to visit the supplier on their client’ s behalf. I am in the process of having them sign the nca agreement, but I honestly don’ t know what to do next.

The reason for them visiting the supplier is to either decide whether or not the supplier is reliable and to make an advance payment, or to issue the lc at sight.

What do I do?
The contract states the agent is not allowed to reach out to my supplier, but it seems they are acting like a company representative.

How do I organise this with my supplier?

One of them will not give me a loi until he has personally checked out the company. Seems sketchy. I don’ t want hand over my supplier like that.

Any advise would be appreciated.

Nat

Answer:

Find out what relationship they have exactly with the buyer.
Is the are in the same location, then that may be understandable.

Ask them if you can talk to their buyer in the same way they want to visit the supplier.
You want to talk to the buyer to ensure that his reps are legit.

On the other hand, it could be simple brokers who just want the contact details of your supplier.

So before you hand that over, you need to find out if they are for real, ideally form their buyer.

Amin

Question:

That’s just it. They are not in the same location and acting as agents. Somehow I hear this often: agents who visit both new buyers and suppliers. They are quite open in communication. Send me pictures of them visiting suppliers. I am not sure how this works, but I can only think they woud visit their own suppliers, not mine.

I don’t like it. This is my biggest supplier who offers a wide range of products and has many joint companies working together in all asia. It’s my personal gold mine. I don’t want to come accross as distrusting, but I also want to stand my ground.

Judging from the conversations I had, they are protective of their buyers. I doubt I will get to talk to them.
Should be an easy call to make if they refuse, however I think this is a new trend we need to consider. Some of my buyers travel around the world too to meet new suppliers. Especially buyers in the middle east.
Personally, I got half a dozen of invitations from suppliers AND buyers as well.

Amin, can you help me find the right words to say to these guys and explain what this new phenomena is/means if you have any kind of experience with it? I have heard about suppliers having a company rep, but buyers? Hope you can shine a light on this.

Answer:
The only time something like this happens is when the agent has a personal relationship with the buyer. They do all the work for the buyer and check out suppliers for him. That is ok.

But if they are not even in the same place, then it’s very suspect.
If they expect you to divulge your source, then they must be prepared to do the same for their buyer with a non-circumvention agreement.

I do suspect in this case that they just want the contact details of the supplier.

What you can do is talk to your supplier and tell him that you will put these two people in touch with him and he has to remember to not let them circumvent you. That’s one way to go.

Explain the situation and clarify the situation with them.
Just say it diplomatically…

——–

As you know, I am a consultant for my supplier, who pays me for the deals I bring him. I usually don’t reveal my source, except to the end buyer under contract. But here, you are asking me to reveal my supplier to yourselves (as agents).
For me to do that, I need to ask you for a couple of things…

How are you related to the buyer?
How long have you known him?
Has he asked you to visit the supplier on his behalf?
Who will be paying for your visit?
What date exactly can you travel?
Are you happy to sign a non-circumvention agreement?

Secondly, since you represent the buyer, I would also need to speak to your buyer to make sure that you do indeed represent him. Sometimes, I receive requests to contact the supplier just for network purposes rather than for serious purchase purposes.
Once he confirms that you represent him, then I can pass you my non-circumvention agreement and we can continue the deal.

Third, I would also need a ICPO from the buyer, on his letterhead to confirm that he is after this product at this time. I would pass this on to the supplier to ensure no circumvention takes place.

Are you happy to go along with this procedure?


 

Conversation with a Trader

Here is a conversation between a member and a trader…

_______

Hey guys and gals,

I just had another conversation with a trader. I know many of you want to know how this goes down or how to handle this. I am not saying I handled this perfectly, but I think I stood my ground and have a lead to work on now. (If I act fast)

This is a perfect example of an amusing conversation with a trader with an ego. Not all traders or brokers are cocky or pretend to know it all. Some are genuine and are looking to build sustainable business relationships with other agents. Some have no experience and need a little bit of guidance and patience.  Anyway, I had fun. Hope you’ll enjoy this too.

I am sharing this with you so you can take what you think will help you in future conversations with traders or other brokers. I am assuming you know the difference between a broker and a trader. If you don’t….tell us and one of us will explain it to you. No worries.

***WARNING***
This is a long post Tongue

here goes:

*Hello Ashish, my name is Natasja. I just read your request on the B2B portal. There’s a large amount of whole black peppers available for supply on a continuous basis at a reasonably low price, quite possibly with a much better deal than you are receiving at the moment.
Are you still looking for this?

***hi
Greetings!
yes we’d like to buy black pepper

*:HI!
Allow me to introduce myself. I am a procurement consultant. I have access to a database of hundreds of suppliers from all over the world, exporting globally. I get my fee from my suppliers, so I can offer my services to you for free. I’d like to contact each one of these suppliers and find the best deal for you. If you are serious about buying.

***sounds good
nice to meet you
which origin you have for black pepper

*I have suppliers exporting from different countries. Do you have a preference?
nice to meet you to!?

***Vietnam

*and what grade are you ,looking for?

***520gl to 560gl

*ok. good. where would you like it delivered?

***trail order 250 ton
CIF jebel ali port dubai

*excellent.
what is your target price per metric ton?

***as per our company policy we don’t disclose target price.. we work with the lowest bidder

*I understand that is a tough question, but I am not the supplier.
I will be contacting hundreds of suppliers for you and each of them will be giving me different prices. I can’t keep running back to you after each price.
So I need to know which ones I can reject straight away according to your maximum target and terms. If I don’t have your absolute maximum target, I will be wasting many many hours which would be counter-productive for us.
So give me your best price and I will try and find you something even lower for you if I can.
***i understand your concern..but that’s how commodity market works
..if you know the market of black pepper..then we will have a fair understanding about the market price
we never give target price
we are an international trading house

*i see. So this inquiry is for a client then?

***we deal in various commodities vertical
yes
we will supply

*I understand
well, in that case you have nothing to worry about since we are in the same line of business.
***even our clients never give target price
We are an leading organisation engaged in the business of international trade.We also offer trade facilitation, representation & liaison services to our clients in India, Hong Kong, China, USA, Canada, UAE, South Africa, Australia, Indonesia, Bangladesh, Nepal . We’re blessed with a reliable network of partners/service providers & team of like-minded business owners across the globe.

We deal in following commodity verticals

1)Farm Inputs Fertilisers & Grains:

Urea N 46 fertiliser, di-ammonium phosphate DAP fertiliser, monoammonium phosphate MAP fertiliser, powdered monoammonium phosphate PMAP fertiliser, MOP, complex fertilisers, npks, Pesticides, insecticides, Plant growth stimulants

Wheat, Maize, Sugar, Spices, Soybean, Rice, Pulses, Dry fruits, Coconut, Sunflower oil, Refined Sunflower oil, Olive oil, Mushrooms, Coriander, Herbs, Coconut oil, Mustard oil

2) Petroleum, oil & Gas :

Bitumen, Lubricants, Petrochemicals, Pet coke, charcoal, coke, Diesel, coal, firewood,LNG,LPG,JP54,D2,D6,Crude oil

3) Ores, Minerals & Metals :

Silica sand, Iron ore, Zinc ore, Quarts products, Gypsum, Nickel ore, Manganese ore, Phosphate, Aluminium foils & products, Brass & Copper products,

4) Building & Construction Materials :

Stone aggregates/stone chips, stone boulders, River sand, Concrete slippers, Bitumen, Blocks, pre-fabricated structures, Marbles, Tiles, Pavers

5) Scientific Instruments, Laboratory scientific equipment:

School scientific laboratory equipment, Civil Engineering Laboratory Equipment

6) Processed Food & Beverages :

Canned food, Coffee beans, processed food, Fruit pulps, Fruit concentrates, Milk powders, Food products, Juices

7) Wood products:

Timber, Veneer, Ply board, MDF board, Plywood

*my clients always give me a target price. And a loi
anyway, I would love to work together on this but not without a target price. I have a good database of reliable suppliers and they don’t like it if I contact them only to shop around for prices. looks like I cant help you

***ok let me give u a target price
3000 to 3200 USD

*that is on the low end

***ok
so what price you can achieve

*let me check with my suppliers. I know the prices usually range between 3500-4100 USD do you have loi from your buyer?

***yes

*and have you ever worked with another agent before?

***Ashish: in black peper

*in any commodity

***here are so many agents, mandates,brokers
Ashish: we work with

*so you have no problem signing a contract with me and splitting the commission 50/50 with me?

***we don’t work that way

*take a %, I suppose?

***you can get a price from your supplier and add you commission on top of that and give us final price

*ok, I have no problem with that
What payment terms is your buyer looking for ?

***we never bypass our partners

*good to know

***we will issue sight LC

*and accept a 30% advance payment as well?

***ha ha
thats laughable
*really? most suppliers ask for 30% by TT and 70% by lc
you must know that
there are only a few suppliers accepting 100% lc and because they do, the rice per metric ton is always higher

***we don’t work with such suppliers…we give 100% irrevocable sight LC of prime bank
***SGS testing is mandatory

*well, it’s good to know
SGS, of course .

***how can we give 30% advance ..who will take the risk of quality

*I only have suppliers in my database that I have personally checked out.
they gave me certain documents I verified to prove to my buyers they are trustworthy
a lot of experienced buyers know that those suppliers ask for an advance payment, because they understand that the buyer is not the lonly one taking the risk.
the suplier is too.

***we work on LC terms only
we might offer advance payment for repeat order
once we have attained confidence
with our suppliers

*that is good to know. Like I said, I only have a handful of suppliers in my database accepting 100% payments by LC, but I will do my best

*** try your luck dear

*I would appreciate it though if you tel me if you have found a supplier yourself in the meantime. Can we agree on keeping each other posted?

***sure

*thanks. I appreciate that.
I will be in touch with you shortly

***you can tell me the commodities in which u r strong
will work on those

*agricultural products
one more thing: are you looking for a CIF or CNF price?

***CIF

*ok Smile

After Making a Deal

Question:
If one has made a deal, what happens when the same buyer orders from this supplier again?

Does he contact us contract mamangers OR…will he go straight to him and order? After all…he knows the supplier and doesn’t need us anymore.

Will the supplier notify us each time an order is made? Do we ask the supplier to do this? How does this work?

Answer:
The fee agreement you signed with the supplier indicates that he must pay you and agree a fee for you if the buyer comes back and orders different products.
So you’re covered, but make sure you remind the supplier if you feel the buyer will order more stuff.

It may be able to hold up in court although it’s unlikely, but the idea is to have something official, playing on the mind of the supplier.

Amin

China Business Check

From Member…

Found a handy website in my supplier verification process. If you ever receive a business registration from a Chinese supplier and want to dig more into it, this website is where you go to do so.

Here is where I found the list of all company search websites:
https://www.chinacheckup.com/blogs/artic…sites-list

Here is the one I used:
http://www.gsxt.gov.cn/index.html

Don’t be intimate if you don’t know Chinese. This guide show you exactly how to do it.
https://www.chinacheckup.com/blogs/artic…ion-number

From the picture on that page, you just find the record number on the business registration you obtained, usually right below the big Chinese letter, and paste it into the search bar at the gsxt site. There you can see if it’s actually registered.

Not sure how helpful this is, but this is an extra step you can take to make sure things are legitimate.

Tactfully Asking for Verification From Supplier

Question:
Hi everyone,

I’m in the process of verifying a supplier, who, after received the LOI from my buyer, reply as below:

“can you accept 40% in advance and balance against copy of BL ” (that’s really is everything in the email)

It sounds reasonable, given that my buyer’s payment term was 40% on loading and 60% on shipping documents (not sure if this is reasonable, I just went with it)

So I’m going to email the supplier back ask for some verifications to make sure they are legitimate.

Would the following be thorough enough? The supplier does have a website, and since they’re a trading company, their address is within the city center, so that kind of checked out.

(I’ve taken the below from Amin’s walkthrough video)

“Hi, in order to assure my buyer, would you mind helping me do some verification before placing the order?

  • Are you able to accept a site visit before any payment?
  • Are you able to show past shipment records?
  • Are you able to show your business registration and tax records?

 

The buyer has expressed his concerns of some companies and that is why he would need to see past shipment records before his visit.Sometimes, fake companies make a standard reply saying that their policy is to not show past shipping records. If this is your concern also, I would recommend you sanitise your documents and hide the sensitive details and show the rest of the document.

This way, you will not be breaching any of your own policies and you can satisfy the buyer’s need for verification. Without these documents, the buyer can’t continue further.And also, do you have a Whatsapp account so we can talk in real time?”

Besides that, what else should I verify on my own? Also, I was going over the walkthrough again to learn how Amin set his price while talking with the supplier. How do you set that rate, to determine the profit you can get from the supplier?

Sorry for a lot of questions. I just didn’t expect everything could be so overwhelming.I know to keep a low expectation. I’m just treating this as a learning experience, so whether this supplier is legitimate or not isn’t really matter, but I want to get the verification process down.

Looking forward to your reply,
Thanks,
David

Answer:
You shouldn’t say everything in one go. Rather have a conversation with the supplier and when he answers one thing, then ask him for another.

You can ask him for all verification elements at the same time though.

The rate that you charge is everything between the buyer’s max price and the supplier’s lowest price.
Nothing special to it.

Amin

Past Shipping Records

Question:
Do you have guys an argument to ask suppliers to send past BL ?

I try to tell them to hide sensitive informations on the documents but no one ever wanted to send it.

Thanks

Answer:
Many suppliers do refuse to send a past Bill of Lading (BL).

Either they really haven’t shipped before or they are scared of sensitive data being stolen.

So I ask them to cover up the sensitive data and show the rest. If they still refuse, and they haven’t given adequate other proof of genuineness, then I tend to forget them. They may really be scammers.

Amin

15 & 30 Day LC Payments

Question:
I hear buyers and suppliers talk about 15 and 30 day LC payments. 
Are there other variations of this payment method and how long does it take for the buyer to open a LC? 

If the buyer opened a LC , why does the supplier need to have an irrevocable LC? Is that because buyers may have opened a LC for a larger amount than the particular order of a certain supplier?

In case of a LC I suppose it is important for us to know if it is a 15 or 30 day LC, so that we know when we get paid…right? 
A broker stays the middleman, while consultants usually take a step back when a buyer is introducd to the supplier. They consult and offer guidance if needed. If that is not needed, how do we stay in the  LC loop?

 

Answer:

15/30 days LC means that the buyer will release his money 15/30 days after shipment. You’ll get paid after the supplier receives that money.
Not many suppliers agree to this on the first shipment.
LC at sight is the normal LC which is paid after the ship is loaded and documents are given to the bank by the supplier. They check it and release the buyer’s LC payment.
Check the payment video in module 5 for a review.

There are two types of LC. Revokable and Irrevovable.
Revokable will allow the buyer to stop proceedings mid way and claw back the LC thus not making payment.
With irrevocable, he cant stop it after he has opened it. That is better for the supplier.

You will stay in the LC by simply continuing to ask the supplier.
Stepping back does not mean that you cant check and push from time to time. It just means that you are mostly hands-off and more professional than a broker.

Amin

Quoting the Buyer

Yes, when you quote the buyer, always include your fee in it.

The Fee Agreement which I have given you states that you will discuss the fee by email or skype or Whatsapp.
That way, you can have different fees for different buyers for the same product under the same agreement.

Before you let them get on with it together, just tell the supplier and clarify your position…

Your price to me is xxx and my price to the buyer is yyy. This makes my commission zzz per ton.
So please remember my commission amount and if you do decide to give him a discount, keep my commission amount intact.

After he agrees…

I will connect you with the buyer now so you can convince him directly.