Standard Operating Procedure (SOP) FOR LPG SHIPMENTS VIA SEA FOB / CFR / CIF Transactions
1. Purpose
This Standard Operating Procedure outlines the structured, transparent, and secure process for executing FOB, CFR, and CIF transactions of Liquefied Petroleum Gas (LPG) and other refined petroleum products via sea transport. It ensures compliance, risk mitigation, and smooth execution between Buyer and Seller.
2. Procedure
1. Buyer Initiates the Process a. The Buyer submits the following documents to the Seller: i. Irrevocable Corporate Purchase Order (ICPO) ii. Proof of Funds (POF) or Ready, Willing and Able (RWA) message via MT799 / MT199 / MT799
2. Signing of Sales and Purchase Agreement (SPA) a. Both Buyer and Seller review, negotiate, and sign the formal Sales and Purchase Agreement (SPA), mutually agreeing on all terms and conditions.
3. Draft Letter of Credit a. The Seller provides the Buyer with a Draft Letter of Credit template, which may include provisions for a Financial Bank Guarantee (BG) or Standby Letter of Credit (SBLC).
4. MT799 Pre-Advice from Buyer’s Bank a. The Buyer’s bank issues an MT799 Pre-Advice to the Seller’s bank (or designated Fiduciary Bank) confirming the Buyer’s financial capacity and commitment.
5. Issuance of Operative Instrument a. The Buyer opens an Operative Standby Letter of Credit (SBLC) or Bank Guarantee (BG) in favour of the Seller.
6. Performance Bank Guarantee a. Within 10 banking days of receipt of the operative SBLC/BG, the Seller issues a 2% Performance Bank Guarantee to the Buyer for the contract shipment(s).
7. Export Arrangement a. Approximately 30 to 45 days after confirmation of the Buyer’s bank instrument, the Seller arranges the availability and loading of the LPG cargo at the designated loading port.
8. Pre-Shipment Inspection a. The Seller engages an independent international inspection company (SGS, Alex Stewart International, or equivalent) to perform Quality and Quantity (Q&Q) inspection. b. The inspection report confirming compliance with SPA specifications is shared with the Buyer.
9. Shipping Documents a. The Seller prepares and provides the Buyer with a full set of original shipping documents for payment negotiation under the SBLC/BG. The documents include:
i. Pro-forma Invoice ii. Certificate of Origin (issued by competent authority of the country of origin) iii. Packing List (with Gross/Net weight and markings, where applicable) iv. Insurance Certificate & Policy (Seller’s responsibility under CIF; Buyer’s under CFR) v. Certificate of Quality and Quantity issued by third-party inspector (SGS / Alex Stewart) vi. Bill of Lading (Full set – Originals) vii. Seller’s Final Commercial Invoice
10. Final Payment a. The Buyer makes final payment via SWIFT MT103 within 72 hours of receipt and verification of the complete set of shipping documents. b. Upon receipt and confirmation of funds, the Seller transfers ownership of the goods to the Buyer. c. The Final Invoice shall be based on the contracted price as per the SPA in force at the time of issuance of Safekeeping Receipts (SKR), if applicable.
3. Important Notes
Standby Letter of Credit (SBLC) A Standby Letter of Credit is a bank-issued financial guarantee that ensures payment to the Seller if the Buyer fails to meet its contractual obligations. SBLCs are widely used in international trade and can be monetised when required.
Safekeeping Receipt (SKR) A Safekeeping Receipt is a document issued by a financial institution confirming that specific assets or commodities are held in safe custody. SKRs serve as proof of ownership and can be used as collateral for financing or monetisation.
This SOP ensures transparency, bank-level security, and international best practices for LPG sea shipments under FOB, CFR, and CIF terms.
Approved for use in all FOB/CFR/CIF LPG transactions.
