FOB Tank to Tank Working Procedure for Secure Oil Transactions

Oil trading involves complex steps to ensure secure and transparent transactions between buyers and sellers. One widely used method in the industry is the FOB (Free on Board) Tank to Tank working procedure. This process protects both parties by clearly defining responsibilities, documentation, and payment terms. Understanding this procedure helps buyers and sellers avoid misunderstandings and ensures smooth delivery of oil products.

Oil storage tanks at port facility, essential for FOB Tank to Tank transactions

Tank to Tank Working Procedure: Step 1: Buyer Issues ICPO with Required Documents

The process starts when the buyer issues an Irrevocable Corporate Purchase Order (ICPO). This document must include the seller's working procedure, banking details, and a scanned copy of the buyer’s passport. Additionally, the buyer provides verifiable Tank Storage Agreement (TSA) documents. These documents allow the seller to perform due diligence and verify the buyer’s capacity to store and handle the product.

This step is crucial because it establishes the buyer’s seriousness and readiness to proceed. The TSA confirms that the buyer has secured storage tanks to receive the product, which reduces risks for the seller.

Step 2: Seller Verifies TSA and Issues Commercial Invoice

Once the seller verifies the buyer’s TSA and other documents, they issue a commercial invoice for the product stored in tanks at the port. This invoice specifies the quantity, quality, and price of the oil product.

The buyer then signs and returns the commercial invoice in PDF format within three days, along with a Tank Storage Receipt (TSR). The TSR confirms the buyer’s storage capacity and readiness to receive the product.

This exchange of documents ensures both parties agree on the transaction details before moving forward.

Step 3: Seller Provides Proof of Product (PPOP)

After receiving the signed commercial invoice, the seller issues several Proof of Product (PPOP) documents to the buyer. These include:

• GPS Coordinates and Tank Storage Receipt (TSR)

• Injection Report Analysis

• Unconditional Dip Test Authorization Letter (DTA)

• Authorization to Sell

• Fresh SGS Report (not older than 48 hours) from the seller’s tank reservoir

• Authorization to Verify the Product in Seller’s Tank (ATV)

  
  

These documents confirm the product’s existence, quality, and location. The SGS report is especially important as it provides an independent quality analysis of the oil product.

Providing PPOP builds trust and transparency, allowing the buyer to verify the product before payment.

Step 4: NCNDA/IMFPA Agreement Signing

To protect all parties involved, the seller issues Non-Circumvention, Non-Disclosure Agreement (NCNDA) and International Master Fee Protection Agreement (IMFPA). These agreements apply to all intermediaries and the buyer.

Signing these agreements ensures confidentiality and protects commissions for brokers or agents involved in the transaction. It also prevents any party from bypassing others to deal directly, which could cause disputes.

Step 5: Buyer Inspects Product and Sends TSR

The buyer arranges an inspection by SGS or another independent inspection company at their own expense. This inspection confirms the product quality and quantity in the seller’s tanks.

After a successful dip test, the buyer sends the updated Tank Storage Receipt (TSR) to the seller. This step verifies that the product meets the agreed specifications and is ready for transfer.

Once confirmed, the product is injected into the buyer’s tanks, marking the physical transfer of the oil.

Oil dip test in storage tank to verify product quality before transfer

Step 6: Buyer Makes Payment and Title Ownership Transfers

The final step involves the buyer making payment for the product via MT-103 TT wire transfer. This method provides a secure and traceable payment channel.

After receiving the payment, the seller transfers the title ownership of the oil product to the buyer. This transfer legally completes the transaction, giving the buyer full rights to the product.

This step ensures that payment and ownership transfer happen simultaneously, protecting both parties from financial risk.

Practical Tips for a Smooth FOB Tank to Tank Transaction

• Verify all documents carefully: Ensure the ICPO, TSA, and PPOP are authentic and complete before proceeding.

• Use trusted inspection companies: SGS is widely recognized for reliable product verification.

• Keep communication clear and documented: Use email or secure messaging to track all exchanges.

• Understand payment terms: MT-103 TT wire transfer is standard for secure payments in oil trading.

• Sign all agreements: NCNDA and IMFPA protect your interests and maintain confidentiality.

  
  

Why This Procedure Matters

The FOB Tank to Tank working procedure reduces risks in oil trading by clearly defining each party’s responsibilities. It ensures the product exists, meets quality standards, and that payment and ownership transfer happen securely. This transparency builds trust and helps avoid costly disputes.

Oil injection from seller’s tank to buyer’s tank during FOB Tank to Tank transfer

Understanding and following this procedure is essential for anyone involved in oil trading. It provides a clear roadmap for secure transactions and helps both buyers and sellers protect their investments.

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If you are entering the oil market or want to improve your trading process, mastering the FOB Tank to Tank procedure is a valuable step. It ensures your deals are transparent, secure, and efficient. Always work with verified partners and trusted intermediaries to maintain smooth operations.