TANKER OR TITLE TAKEOVER (TTO) – Oil & Gas

Name: Oil Tanker or Title Takeover (TTO).
What it is: Sale of cargo already on board a named tanker, plus transfer of that tanker’s employment to the buyer (novation of the existing charter or a new charter with the owner).
Incoterms: STO is not an Incoterm. FOB does not describe this deal cleanly. The cargo sale is a sale of goods afloat. The vessel part is a shipping contract.
Place: On the performing vessel, at sea or at an agreed waiting area. Same ship throughout. No daughter vessel.
Quantity: As agreed in the cargo SPA, subject to ROB / ullage on inspection.
Price: Agreed marker related (Platts or other), minus/plus differential, as fixed in the cargo SPA.
Inspection: Independent inspector (SGS / Intertek / Saybolt or equivalent) on the performing vessel — binding for quantity, quality and invoicing.
Payment: Irrevocable documentary letter of credit (MT700), or another instrument agreed in the SPA, payable against cargo documents and evidence that vessel employment can complete. SBLC only if both parties agree.
Offer: Subject to cargo on board and to the owner’s written willingness to novate or re-employ the ship.

This page describes a real STO between principals. It is not a substitute for the cargo SPA or the shipping contract.

What TTO means here

  • Two contracts, not one: (1) cargo SPA for title to the oil; (2) novation or new charter with the shipowner for employment of the tanker.
  • If the owner is not in the deal, it is not an TTO. A cargo paper pack cannot substitute for owner consent.
  • No STS and no offtake vessel. The buyer takes the same ship that already holds the cargo.
  • Risk and title to the cargo pass as the cargo SPA states — typically on payment and endorsement of the bills of lading.
  • Operational control of the vessel passes only when the novation or new charter is effective, and insurance (H&M and P&I), managers and crew are in place.
  • After takeover, bunkers, port charges, hire or freight, and onward voyage costs are for the buyer under the new employment terms.

Procedure

1. Inquiry and firm terms
Buyer states product, volume, and that the intention is to take the loaded vessel and redirect it. Seller states cargo on board, vessel name and status, current employment, and whether the owner will discuss novation or a new charter. No binding deal until both the cargo SPA and the employment path are agreed.

2. Two contracts
Cargo SPA: product, spec, quantity, price, inspection, documents, payment, title and risk.
Vessel employment: novation of the existing charter or a new time/voyage charter with the owner, including hire or freight, bunkers, insurance, managers and delivery point of the ship.
The cargo SPA should say the sale is conditional on owner consent.

3. Payment instrument
Buyer’s bank issues the instrument as per the cargo SPA. Seller’s bank checks it. Inspection and takeover do not start on a defective instrument. Working security is the instrument plus owner documents — not ATSC, ATV, DTA or a “partial POP” pack.

4. Vessel and cargo status
Seller / owner provides: vessel Q88, IMO and flag, current position, last cargoes, latest ROB / ullage, existing analysis if any, and written confirmation from the owner (or disponent owner with power to novate) that employment can be transferred. Original bills of lading stay in banking channels until payment.

5. Inspection on the performing vessel
Independent inspector boards the same ship. Ullage, sampling and analysis are done on board. Fresh Q&Q is binding. There is no STS and no second vessel.

6. Payment, title and employment
If Q&Q is within the SPA and documents comply, the bank pays (or the agreed payment is released). Seller endorses the bills of lading to the buyer. Title to cargo passes as the SPA states. Novation or new charter is completed with the owner. Operational control then passes. The vessel sails on the buyer’s voyage orders.

Typical documents:

  • Full set of original bills of lading, endorsed to the buyer
  • Commercial invoice
  • On-board certificate of quantity and quality (independent inspector)
  • Certificate of origin
  • Ullage / ROB report on the performing vessel
  • Signed novation or new charter party with the owner (or conditions precedent clearly met)

7. Close-out
Onward costs sit with the buyer under the new employment. Any quantity or quality adjustment is settled under the cargo SPA. Charter hire, bunkers remaining on board and delivery bunkers are settled under the shipping contract.

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