S A M C U T T I N G

THE

COMMODITY
BROKERS
HANDBOOK

www.sam-cutting.com
The Commodity Brokers Handbook
By Sam Cutting

Table of Contents

Introduction
1 - What are commodities
2 - What is a commodity Broker
3 - How is a commodity deal structured
4 - How to source a supplier
5 - How to source a Buyer
6 - How to perform due diligence
7 - How to avoid fake suppliers
8 - How to avoid fake buyers
9 - What is logistics
10 - Commodity scams you should know
11 - How to grow your network
12 - Payment methods
13 - List of documents
14 - Legal and Regulatory Compliance
15 - Ethics and Professionalism
Index - Terminology

1
 Introduction
Welcome to my first book!

I'm Sam Cutting, and for half a decade I've worked

as a commodity broker.

I got into the commodity business in 2018 when I

was living in Shenzhen, China. We were getting
requests to help supply chicken to China from
Brazil. We had meetings in Guangzhou, Hangzhou
and Dalian, but every supplier we sourced turned
out to be a scammer.

At the same time, my main business was a China

visa agency with an office in Tsim Sha Tsui (TST),
Hong Kong. We began doing a few visas in the
beginning, to an average of 20–25 every month.
Our agency expanded quickly, earning 3,500RMB
per visa (about $500 today).

Everything was wonderful until…

The COVID-19 pandemic struck on January 1st,

2020, forcing me to close my business.
But I refused to let that deter me. Since
manufacturers were closed around Chinese New
Year, we were able to swiftly adjust and start
supplying face masks to China at a time when
demand was high.

2
You see, it was a very good contact who
subsequently became my new business partner and
is still working with me today, which allowed us to
gain access to a factory in Ukraine.

After China resumed operations, we switched to plan

B and started sourcing from China, where I focused
on selling KN95 face masks to sheriff departments in
the United States because Ukraine had banned the
export of masks.

Now, we produce sunflower oil, sunflower meal, and

supply grains directly from farmers and elevators,
with our ultimate objective to establish our own
cooperative this year (2023), consolidating grains to
our own storage facilities close to the port of
Odessa.

You will discover everything I wish I had known when

I first started in this industry, with answers I hope to
all of your questions. Giving you a huge advantage
over the competition.

The market for independent commodity brokers is

saturated, I assure you. Every day, someone is
starting on Day 1, there are more and more coming
through.

3
So, use this handbook to get ahead. I'm hoping that
sharing my experience may help other business
owners and entrepreneurs who are dealing with
similar difficulties and seeking strategies to prosper
when faced with sudden change.

Whether you are a novice entering the world of a

commodity broker or a seasoned expert trying to
broaden your knowledge and skill set. You will find all
the information you need in this manual to be
successful in the dynamic and ever-changing world of
commodities.

You'll discover insightful information and helpful tips

on anything from the fundamentals of commodity
brokering to cutting-edge tactics for due diligence
and procurement inside.

A wide range of subjects will be covered, such as

sourcing, process for making educated decisions,
payment options, and much more.

It doesn't matter if you're a commodity broker, trader,

or investor; this manual is required reading for
everyone who wants to be successful in this
fascinating and rewarding industry.

So, let's get started and explore the world of a

commodity broker together!

4
I just want to say thank you for purchasing this
eBook.

Thank you to everyone that has worked with me and

are still with me from the beginning.

This eBook is dedicated to all of the commodity

brokers grinding away every day, stick with it and
stand out!

Keep striving to do better and never stop learning.

Regards

Sam Cutting

5
 1 - What are commodities
Physical goods that can be exchanged for other
items of the same kind are referred to as
commodities. Commodities are traded on markets,
and supply and demand determine their price.

Agricultural products like wheat and corn, metals

like gold and copper, and energy sources like crude
oil and natural gas are a few typical examples of
commodities.

The idea of commodities has its roots in ancient

civilizations where commodities like grain, spices,
and precious metals were exchanged.

With many nations depending on the export of

commodities to fuel their economic growth, the
trade of commodities has grown to play a significant
role in the modern world economy.

The fact that commodities are standardized and

interchangeable is one of their fundamental
characteristics. A bushel of wheat is therefore
equivalent to any other bushel of wheat, regardless
of where it was grown or who produced it.

A one-of-a-kind work of art, for example, cannot be

simply replicated or traded on the market, in
contrast to unique items.

6
Commodity exchanges, which are specialized markets
where buyers and sellers can trade futures contracts
and other derivatives based on the underlying
commodity, are typically where commodities are
exchanged.

An agreement to buy or sell a certain amount of a

commodity at a specific price on a specific date in the
future is known as a futures contract.

Since they are influenced by a number of variables,

such as global demand, weather patterns, political
unpredictability, and economic trends, the prices of
commodities can be very unpredictable.

For instance, big oil-producing nations like Saudi

Arabia can have an impact on the price of oil by their
policies, and conflicts or natural catastrophes can
affect the price of specific commodities by disrupting
supply.

Investors can also trade commodities through

financial products like commodity mutual funds and
commodity exchange-traded funds (ETFs), which
provide them access to the market without requiring
them to buy and sell actual commodities directly.

Agricultural, manufacturing, and energy production

are just a few of the businesses that employ
commodities, which are essential to the world
economy.
7
They are crucial for the production of various goods
and are necessary for the smooth operation of
contemporary society.

In conclusion, commodities are physical items that

may be traded on marketplaces and exchanged for
other items of the same kind. The values of
commodities can be very unstable.

The global economy depends heavily on the use of

commodities, which are utilized by numerous
different businesses.

Meaning of interchangeable: Examples of fungible

goods are commodities, common shares, options,
and money.

Bushel: Approximately 60 lbs. / 27 kg

Market Trends
As a commodity broker, you must stay up to date on
the most recent trends and patterns because the
commodity market is always evolving. The following
are a few current market trends:
Despite yearly averages marginally dropping from
2022 levels, it’s anticipated that commodity
prices will remain high in 2023.
19 (or 73%) of the 26 important commodities
examined in a recent analysis had average annual
price declines.

8
Most significantly, it’s expected that sugar, rice,
cocoa, lead, coking coal, palm oil, lithium, cotton,
iron ore, thermal coal, and coffee are to average
sharply lower.
In 2023, global sales of new cars will remain
unchanged, but sales of electric cars will increase
by 25% to 10.7 million units.
It’s expected that 1.3% more energy will be
consumed globally when the world economy
weakens. Some nations will have to use more coal
or reconsider their plans to phase out nuclear
power as a result of the global energy crisis.

9
2 - What is a commodity Broker
A commodity broker is a specialist who helps
people and companies buy and sell commodities.

Commodity brokers are essential in enabling the

exchange of various products and assisting in
maintaining the effectiveness of the commodity
markets.

They collaborate with clients to comprehend their

unique requirements and preferences before using
their market expertise to assist clients in acquiring
or disposing of commodities at the most
advantageous pricing.

Commodity brokers come in a variety of forms,

such as those who focus on a certain market or
commodity and those that deal with a wide range of
commodities.

While some brokers engage with individual

investors or small firms, others represent major
institutional clients like hedge funds or investment
banks.

Since they must stay current with the most recent

market trends and developments in order to make
judgments on behalf of their clients,

10
commodity brokers often work in a fast-paced and
very competitive environment.

The commodity markets can be unpredictable and

vulnerable to sudden price changes; therefore, they
might also be required to manage huge sums of
money and assume a lot of risk.

Individuals often need to have a good background in

finance or economics as well as knowledge of the
commodity markets in order to become commodity
brokers.

Depending on the unique rules in their country,

certain brokers might also need to receive a license or
certification in order to practice.

These services can assist clients in reducing the risks

connected with commodity investing and helping
them make better investment decisions.

Overall, commodity brokers play a critical role in the

operation of the global economy and the commodity
markets by assisting in the efficient and open
exchange of goods.

11
To find opportunities and negotiate the complicated
and rapidly changing world of commodity trading,
they collaborate closely with clients.

Individuals who work for themselves as independent

commodity brokers help people buy and sell
commodities like metals, energy, and agricultural
goods. They might serve as a go-between,
negotiating deals and facilitating transactions
between buyers and sellers.

Producers, processors, traders, and end consumers

of commodities are just a few of the many types of
clients that independent brokers may engage with.
While some may work with a variety of things, others
may specialize on a specific kind of commodity.

You normally need to have a thorough knowledge of

the commodities markets and the ability to spot
buying and selling opportunities if you want to work
as a freelance commodity broker.

Additionally, you should be adept at both building

and maintaining connections with clients as well as
effective communication and negotiation skills.

Freelance brokers are paid on a commission basis,

either by putting their fee on top or by receiving a
cut of the deal's value, usually between 2-10%.

12
 3 - How is a commodity deal
structured
Introduction
A contract for the exchange of a commodity, such as
agricultural goods, energy supplies, or metals,
between a buyer and a seller is known as a
commodity deal.

Depending on the requirements of the parties

involved and the qualities of the item being
exchanged, these transactions can be set up in a
variety of ways.

This chapter will examine the many components that

generally make up a commodity trade as well as their
structures.

Types of Commodity Deals

We will now go over the various kinds of commodity
trades that can be made, each of which has a unique
set of features and conditions.

Spot Deal:
A spot deal is a transaction involving a commodity in
which the product is delivered, and payment is made
right away.

13
Spot deals are frequently utilised for the quick
purchase or sale of a product, such as when a farmer
sells a crop to a processor on the spot market. These
are one-time deals.

Forward Contracts:
A forward contract is a transaction involving a
commodity in which the product is supplied and
payment is made later.

When a farmer sells a crop to a processor ahead of

harvest, a forward contract is often utilized to fix the
price of the crop for a future delivery.

Payment terms are usually not the same when the

supplier sells to the end buyer. A deposit, LC or
funds deposited into escrow are required on a
monthly basis.

Futures Contracts:
A standardized contract known as a futures contract
is exchanged on a commodities exchange. These
agreements require the buyer to make a set number
of purchases of a commodity at a predetermined
price on a specific date in the future.

Futures contracts are frequently used to protect

against price risk because they let buyers and sellers
lock in a price for a commodity even if they do not
yet own it.

14
Elements of a Commodity Deal
There are specific components that are normally
included in the contract regardless of the sort of
commodity trade being entered into. These
components consist of:

Type and Quantity of Commodity:

The nature and quantity of the exchanged
commodity will be specified in the contract. This
could include specifics regarding the commodity's
grade or quality as well as any other pertinent traits.

Price:
The price at which the commodity is being traded will
be specified in the contract. This price could be fixed
at a pre-set amount or calculated using a formula
dependent on the state of the market at the time of
delivery.

Delivery Date:
The delivery date for the commodity will be outlined
in the contract. For a spot transaction, this might be
an immediate delivery; for a forward or futures
contract, it could be a delivery date in the future.

Payment Terms:
The conditions under which payment is to be made
for the commodity will be outlined in the contract.
This could include information about the payment
method, currency, and any applicable payment
dates.

15
Quality and Grade Standards:
The quality and grade requirements that the
commodity must achieve in order to be deemed
acceptable may be specified in the contract's quality
and grade terms.

Other Requirements:
Other conditions or requirements that must be
satisfied in order for the trade to close are maybe
included in the contract.

A contract for the sale of agricultural goods, for

instance, might specify the product's moisture level,
protein content, and other specifications.

The exchange of commodities between buyers and

sellers all across the world is made possible because
to commodity trades, which constitute a significant
component of the global economy.

Anyone working in the commodities markets has to

have a solid understanding of the many components
of a commodity contract as well as how they are
constructed.

Understanding the conditions of a commodity

contract is essential to making sure that your interests
are safeguarded and that your transactions are
successful, whether you are a producer, processor,
trader, or end-user of commodities.

16
 4 - How to source a supplier
Finding a commodities supplier can be challenging,
particularly if you have little experience with the
procurement process.

However, with careful planning and investigation,

you can choose a dependable and reasonably priced
supplier who can match your requirements.

Here are some actions to take when looking for a

supplier of a commodity:

Define your needs:

It's so important to have a clear grasp of your
requirements prior to looking for a supplier. This
covers the kind and number of the commodities you
require, your financial situation, the delivery
schedule, and any particular standards for quality or
certification.

It will be simpler to focus your search and

communicate with possible suppliers if you have a
clear understanding of what you require.

Research potential suppliers:

Several methods exist for locating possible suppliers
of your goods. Searching internet directories or
marketplaces, such Made In China or Global Sources,

17
which provide a comprehensive list of suppliers from
all around the world, is one alternative.

You can also seek referrals from other brokers or

other industry experts, attend trade exhibitions or
use industry groups to make connections with
possible vendors if possible.

Evaluate potential suppliers:

Once you've compiled a list of potential vendors, it's
critical to carefully assess each one to ascertain
which one best suits your requirements.

Take into account elements like their industry

knowledge, track record, price, delivery schedules,
and capacity to satisfy your quality and certification
criteria. To evaluate and contrast different vendors'
products, it could be useful to ask for quotes or
samples.

Negotiate terms and conditions:

Negotiate the terms and conditions of your
collaboration once you have found a possible
supplier who satisfies your needs.

This comprises the cost of the item, the terms of

payment, the date of delivery, and any other crucial
information. It's important to be upfront and honest
about your expectations, and to have a legal
contract in place to safeguard your rights.

18
Perform due diligence:
It's essential to conduct due diligence on potential
partners before forming a partnership with them to
make sure they are dependable and trustworthy.

This could involve going over their financial records,

checking their credentials, and visiting their
location.

We'll talk more about due diligence later.

Ongoing relationship management:

It's vital to be in regular contact and keep the lines
of communication open once you've built a rapport
with a commodities provider.

This entails periodically evaluating and amending

your contract, resolving any problems that could
occur, and keeping a look out for chances to
strengthen the collaboration.

You may confidently find a trustworthy and

affordable commodity provider that matches your
demands by following these steps.

Finding the appropriate provider can ultimately

save you time and money, so it's crucial to be
thorough and do your homework.

19
Ask questions and engage in negotiation without
fear. Create specific terms and conditions to
safeguard your interests.

There are various websites that can assist you in

finding providers of commodities.

Several possibilities are:

Alibaba:
This well-known e-commerce site links consumers
and vendors of a wide range of goods, including
commodities. However, the site has a lot of
scammers using it. There are superior alternatives
that are accessible.

Global Sources:
This is an additional e-commerce platform that aids
in connecting customers with vendors of other
goods, including commodities.

Thomasnet:
A B2B portal like this one aids in connecting buyers
with providers of industrial goods, including
commodities.

Made In China:
This is a platform that connects buyers with Chinese
suppliers of a wide range of products, including
commodities.

20
Tradekey:
This is an online B2B marketplace that connects
buyers with suppliers of a variety of products,
including commodities.

10Times:
This is the world's largest business event platform,
find all upcoming events, business conferences,
trade shows, global seminars, networking meets and
workshops. You can sign up to join a trade show, and
instantly connect with businesses, without even
attending.

It's important to do your due diligence when sourcing

suppliers, as you want to ensure that you're working
with reputable companies that can provide high-
quality products at a competitive price.

It's also a good idea to compare prices and terms

from multiple suppliers to get the best deal.

21
 5 - How to source a Buyer
Finding a buyer is one of the most crucial steps in the
process of selling a product or service. But where do
you even begin?

In this chapter, we'll look at the several approaches

and techniques you might employ to find a buyer for
your company.

Define your target market!

It's crucial to know exactly who your target market is
before you start seeking buyers. This will enable you
to target your sourcing efforts to the customers who
are most likely to purchase your good or service.

Take into account these inquiries as you determine

your target market:

Who are the most likely customers for your goods

or services?
What answers can you provide a customer?
What are their requirements and problems?
What are their tastes and purchasing behaviours?

Knowing your target market can help you find the

best ways to connect with potential customers and
develop message that speaks to their particular
needs and interests.

22
Identify potential buyers
Finding new customers is the next stage after you
have a firm grasp of your target market. You can
accomplish this in a number of ways:

Research online directories and databases: Online

resources that provide lists of companies in
particular niches or regions. These can serve as a
helpful place to look to find potential purchasers.

Network with industry professionals: Attend

conferences and events in your field, and get in
touch with other brokers and contacts there. They
could be able to connect you with potential
customers or offer insightful information about
the market.

Use social media: Using social media sites like

Twitter and LinkedIn can be a terrific method to
get in touch with prospective customers. Join
industry-specific groups and forums and search
for relevant groups and people using hashtags and
other search tools.

Consider partnerships and collaborations:

Reaching out to new customers through
partnerships with other companies or groups can
be quite effective. Look for chances to work
together on projects or promote one another's
goods and services.

23
Make initial contact!
The next stage is to initiate contact with your
potential customers after compiling a list of them.
Numerous methods, such as email, phone calls, or in-
person meetings, are available for accomplishing this.

Being formal and succinct is important when making

the first contact. Explain how your product or service
may answer the needs of the potential customer while
introducing yourself and your company.

Remember, that the objective at this point is to

connect with the person and start a discussion but
make it memorable.

Follow up and nurture the relationship!

It's vital to follow up and maintain the relationship
with a potential customer after the initial contact.

This can be accomplished by maintaining consistent

contact via phone calls or emails as well as by offering
helpful resources or information that is pertinent to
the needs of the potential customer.

Additionally, it's critical to be accommodating and

open to negotiations, as well as responsive to any
queries or worries the possible buyer may have. Your
chances of closing a deal will rise if you establish a
solid rapport with the prospective customer.

24
Close the deal
It's time to close the transaction once you've built a
relationship with a potential customer and
thoroughly addressed their wants and interests.

Typically, this entails discussing the conditions of the

sale, including the cost, the specifics of the delivery,
and any warranties or guarantees.

Throughout the negotiation process, it's critical to be

open to compromise and to be honest and
straightforward. Your chances of closing a deal will
rise if you work together to identify a win-win
solution.

25
6 - How to perform due diligence
The act of thoroughly reviewing and confirming all
the data and specifics regarding a potential
purchase, investment, or business decision is known
as due diligence.

It is an essential phase in the decision-making

process since it ensures that you are fully aware of
the risks and rewards that go along with the
investment or choice.

We will give an outline of the due diligence procedure

in this chapter, along with important factors to take
into account and actions to take.

What will be the main focus of your due diligence

process?

Establishing the precise parameters of your

investigation is vital before you start the due
diligence process.

Specifying the areas or locations you will be

examining as well as the level of detail you will need
to go into are all part of this.

You might wish to pay particular attention to

financial data, legal concerns, operational specifics,
and the web presence of important people.

26
Gather relevant information and documents.
Gathering all the necessary data and papers for your
assessment is the next phase in the due diligence
procedure.

Financial statements, contracts, legal documents,

and other pertinent documents may be included.

You might need to ask the business or person with

whom you are contemplating investing for this
information, or you might need to do your own
investigation.

Review the financial information.

The financial details of the business or person you
are thinking about investing in or buying from should
be one of the main things you look at during the due
diligence process.

This entails looking over various financial papers,

such as budget predictions and financial projections,
as well as financial statements like the balance sheet,
income statement, and cash flow statement.

In order to make sure that the business or person is

financially secure and able to fulfil its financial
responsibilities, it is crucial to carefully analyse
these documents.

27
Assess the legal and regulatory environment.
Reviewing the legal and regulatory environment in
which the organization or individual works is a crucial
part of the due diligence process.

This entails looking into contracts, licenses, and other

legal records and determining if the business complies
with all applicable laws and regulations.

A corporation or individual must make sure that they

are operating in accordance with all existing laws and
regulations because failing to do so could have
negative financial or legal repercussions.

Review the company's operations and management.

Examining the company's operations and
management is crucial, in addition to analyzing the
financial and legal data.

This entails examining the business model, offerings,

and marketing and sales tactics of the organization.

Along with these factors, you should evaluate the

organizational structure and decision-making
procedures of the company as well as the expertise
and performance of the management team.

28
Assess the company's risk profile.
It's important to evaluate the company's risk profile
and identify any potential dangers or difficulties that
might hinder its capacity to accomplish its
objectives.

This entails assessing the business's operational,

legal, and financial risks as well as any outside
influences, including rivalry or market shifts.

Obtain professional advice and assistance.

Depending on how complicated the investment or
business choice is, you might want to think about
hiring an expert to help you with your due diligence.

This can entail paying a financial advisor, attorney, or

other expert to study and analyse the pertinent data
and documentation.

Perform non-financial due diligence.

There are other approaches besides financial
sleuthing, and I have covered them in my Due
Diligence Bundle Course, a link to which you will find
in the previous picture, and later in this book along
with a unique offer only for you.

The supplied template will come in particularly

handy when you're conducting your own research.

The course dives into due diligence and sourcing in

much more detail.
29
The risks and possible rewards of the investment or
business decision should be crystal clear and
evident to you once the due diligence process is
complete.

You can then decide whether or not to move

forward with the investment, purchase, or choice
based on this information.

Making sure the deal is financially sustainable and

satisfies the needs and objectives of all parties
involved is the aim of due diligence.

This could entail performing market research,

speaking with specialists, and evaluating financial
records, contracts, and other paperwork.

Any commodity trading transaction should include

due diligence since it helps to reduce risk and
ensure that the trade is profitable.

To make sure that the transaction is in the best

interests of all parties involved, it is extremely
important to carefully analyse all relevant issues
and to seek the opinion of professionals as needed.

In conclusion, the act of conducting due diligence is

crucial to the decision-making process since it
ensures that you have a clear understanding with
less risk.

30
7 - How to avoid fake suppliers
A business that falsely represents itself as offering
genuine goods or services but is actually a scam
artist out to con customers can be difficult to dig
out, but there are some red flags to look out for.

False commodities providers can do business in a

number of ways:

Selling fake products:

A fraudulent provider might attempt to pass off
lower quality goods as better, high quality products.
These goods might not perform as promised, and
they will use fake quality certificates.

Misrepresenting the product:

By misrepresenting the goods or its features, a
fraudulent provider might attempt to trick
customers. To persuade customers, they will include
deceptive or fraudulent descriptions, pictures, or
other marketing elements.

Using fake websites:

False websites or online marketplaces are created by
some dishonest commodity sellers to look authentic
but actually serve as fronts for their scams.

31
Disappearing after payment:
Some fictitious suppliers of goods will accept
payments from customers and then vanish before
providing the goods or service that was promised.

Requesting upfront payment:

Before the product or service is provided, a fake
supplier could demand advance payment. This is a
typical fraudster strategy since it makes it harder for
victims of scams to get their money back.

But please remember, real suppliers also request an

upfront fee (deposit) to process the order. Combine
3 or more of these points to come to an informed
decision.

The commodity industry may suffer from fake

providers of goods in a number of ways, such as:

Damage to the industry's reputation:

When fake suppliers market subpar or false goods, it
can harm the standing of the entire sector. Buyer
credibility and confidence may be lost as a result,
and it may be challenging to rebuild.

Decreased sales and profits:

By undercutting their pricing and snatching their
customers, fake suppliers might hurt the industry's
legitimate companies' sales and earnings.

32
Legal and regulatory issues:
Fake commodity suppliers may operate illegally,
which could cause problems with regulations and
have legal repercussions for the sector.

Loss of customer trust:

Customers may stop trusting the industry as a whole
if they are duped by fake vendors. This may result in a
decline in client retention and a general decline in
demand for the goods and services offered by the
sector.

Of course, there are a number of precautions you

may take to stay away from fake commodities sellers.

Research the supplier:

Check online reviews and ratings as well as reviews
left by other customers to determine if there are any
warning signs or concerns about the source.

Verify the supplier's credentials:

Verify the supplier's certificates and registration with
any relevant trade organizations. This can assist in
confirming the legitimacy of the source.

Request references:
Request testimonials from past customers who have
made purchases from the supplier. This can assist
you in gaining an understanding of the supplier's
dependability and the calibre of their offerings.

33
Ask for a sample:
Request a tiny sample of the product from the
provider before placing a major order. This will
enable you to check the product's quality and make
sure it fulfils your criteria. Don't just rely on this; it
can be faked too, and not all suppliers agree to this.

Use a third-party payment method:

Consider using a third-party payment method, such
as an escrow service or a letter of credit, to protect
yourself from fraud. By doing this, you may make sure
that you are safeguarded in the event that the
supplier breaks their word.

Be cautious of deals that seem too good to be true:

A warning indicator can be a provider who offers
prices that are noticeably lower than those of their
rivals.

Be aware of suppliers who make unrealistic delivery

deadline promises or who decline to give you
comprehensive information about their goods or
company.

In general, fake commodities sellers may have

detrimental effects on both the market and its
clients. In order to safeguard themselves and the
industry, it is crucial for companies and buyers to
exercise caution and take measures to confirm the
legitimacy and dependability of suppliers.

34
 8 - How to avoid fake buyers

Someone who purports to be interested in buying a

commodity but does not truly plan to complete the
transaction is known as a fake commodities buyer.

They might employ this strategy to get access to

private information about the product or the seller,
or they might use it to try to get products or services
under dubious circumstances.

Fake commodities buyers may occasionally try to

defraud sellers by stating that they have the
finances necessary to complete the transaction but
failing to make payment after the products are
delivered.

When communicating with potential purchasers, it is

crucial for sellers to exercise caution and to perform
the correct research to prevent becoming a victim of
these scams. I cannot stress the importance of due
diligence enough.

The sector may suffer from fake commodity

purchasers in a number of ways.

First off, they could waste the time and money of

honest sellers who might expend a lot of time and
energy planning and negotiating a deal that doesn't
work out.
35
This could result in a drop in total industry activity
and make it more challenging for real buyers and
sellers to connect and transact business.

Furthermore, fake buyers of commodities may

exploit their assumed identities to acquire private
information about sellers or commodities, which
they can then utilise for evil activities like insider
trading or market manipulation.

As a result, the market may become unstable and

unclear, which could harm both buyers and sellers.

In general, fraudulent commodity purchasers can be

detrimental to the market by interfering with
authorized transactions, tarnishing the industry's
name, and perhaps even engaging in questionable
behaviors that could affect the market.

Sellers can take the following measures to protect

themselves from scammer commodity buyers:

Research the buyer:

Before engaging in any transactions, confirm the
buyer's legitimacy and reputation. Use online
resources that offer commercial data, analytics, and
insights to businesses, such as Dun & Bradstreet.

36
Search online for information on their company and
think about contacting other business people in the
field who may have worked with them in the past.

Require payment upfront:

To reduce the chance of not getting paid, request
payment before delivering the products. Consider
requesting a deposit or using a safe payment
mechanism, such as a letter of credit, if the buyer
won't pay up front.

Use a third party:

To make the purchase easier, think about utilising a
broker or escrow service. By adding an extra layer of
protection and supervision, this can aid in
protecting both the customer and the vendor.

Be cautious of unsolicited offers:

Avoid accepting unsolicited proposals from buyers
you haven't previously done business with. Before
moving forward with the deal, it is crucial to
conduct extensive due diligence on the buyer as
these offers can be fraudulent or scams.

Protect confidential information:

Be cautious when disclosing private information to
buyers, especially if the sale hasn't yet been
finalised. To safeguard your information, you might
want to create confidentiality agreements.

37
By taking these precautions, brokers and sellers can
lessen their chance of falling for fake commodity
buyers and safeguard both their personal
information and their companies.

Because just like fake sellers, fake buyers can be

very well established and can provide the right
documents to appear to be legitimate, even though
they have sinister intentions.

38
 9 - What is logistics
The movement and storage of commodities,
services, and information from the point of origin to
the site of consumption are referred to as logistics
and are subject to planning, execution, and
management.

In order to provide the appropriate items, at the

right time, and in the right location to clients, it
involves coordinating the movement of materials,
information, and financial transactions within a
supply chain.

The logistics sector is essential to the global

economy because it helps companies to efficiently
and affordably deliver goods and services to clients.

Professionals in logistics are in charge of overseeing

the movement, storage, and distribution of
commodities as well as dealing with customs
clearance and other legal obligations.

The logistics process is made up of a number of

essential components, including:

Transportation:
This refers to the transportation of commodities by
air, land, sea, or a combination of these modes from
one place to another.

39
There are several ways to go about this, including
cars, trucks, trains, boats, planes, bicycles, and even
drones.

Warehousing:
This entails the handling and storage of products in a
specific location, like a warehouse, distribution
centre, or storage yard.

Warehousing entails the orderly receipt, storage, and

handling of commodities as well as the control of
inventory levels and the preservation of goods.

Distribution:
This is the procedure for getting products from the
warehouse to the client. It may entail a number of
techniques, including direct delivery, drop shipping,
or working with a third-party logistics provider.

Supply chain management:

In order to provide the appropriate goods to
customers at the appropriate time and location, a
supply chain's movement of materials, information,
and financial transactions must be coordinated.

In addition to coordinating the movement of

commodities and information throughout the supply
chain, it entails managing the connections between
suppliers, manufacturers, distributors, and
customers.

40
Customer service:
This entails maintaining relationships with customers
and making sure that their needs are handled quickly
and effectively.

Responding to client enquiries, handling grievances,

and offering support and assistance as required can
all fall under this category.

The logistics process may be impacted by a number

of factors, including:

Distance:
The cost and effectiveness of logistics operations
can be impacted by the distance between the point
of origin and the point of destination.

Mode of transportation:
The logistics process may be impacted by the cost,
speed, and capacity differences between various
forms of transportation.

Customs regulations:
The logistics process may be impacted by the
various customs laws and procedures in various
nations.

Infrastructure:
The accessibility and condition of transportation
facilities including highways, ports,

41
and airports, can impact the efficiency and cost of
logistics operations.

Natural disasters (force majeure):

Natural catastrophes like hurricanes, earthquakes,
and floods can halt logistical processes, delay
deliveries, or destroy commodities.

Political instability:
Political unrest in a region can have an effect on
logistics since it can cause delays in trade and transit.

A major trend in recent years has been the use of

technology in logistics operations.

This includes utilizing software and online tools to

track and manage shipments, automate logistics
procedures, and boost productivity.

Technology examples for logistics include:

Transportation management systems:

These systems aid logistics specialists in the planning
and optimisation of shipping routes, tracking of
shipments, and cost management of shipping.

Warehouse management systems:

Professionals in logistics can utilise these solutions to
manage warehouse operations,

42
including receiving, storing, and handling goods, as
well as managing inventory levels and tracking
shipments.

Supply chain management systems:

These technologies support logistics specialists in
coordinating information and material flow in a
supply-effective manner.

In addition to helping businesses stand apart from

the competition, this can help them draw in and keep
customers.

It helps businesses manage risk:

The danger of damage, loss, or theft is one that
logistics specialists are in charge of managing when
moving and storing commodities.

Professionals in logistics assist companies in

safeguarding their resources and upholding their
brand by controlling these risks.

It supports economic growth:

The global economy depends heavily on the logistics
sector since it enables firms to transact and
exchange products and services on a worldwide
scale.

This promotes local and international economic

growth and development.

43
By enabling them to swiftly and effectively modify
their supply chain operations, logistics enables firms
to quickly and effectively respond to changing
market demand.

By doing this, firms are better able to satisfy client

wants and adjust to changing market conditions.

In general, logistics is an essential part of any

business that depends on the transportation and
storage of products, services, and data.

It is essential to enabling businesses to function

successfully and efficiently, and it supports global
economic growth and development.

The Incoterms 2020 standards give international

trade a common language and outline the duties and
responsibilities of the buyer and seller with regard to
the transfer of risks, the payment of transportation
expenses, and the delivery of goods.

The Incoterms 2020 guidelines outline the parties'

responsibilities with regard to the delivery of goods
and the payment of transportation charges and are
meant to be used in combination with sales
contracts.

44
Here is a brief overview of the 11 Incoterms 2020
rules:

EXW – Ex-Works or Ex-Warehouse

Ex works is when the seller places the goods at
the disposal of the buyer at the seller’s premises
or at another named place (i.e., works, factory,
warehouse, etc.).

The seller does not need to load the goods on

any collecting vehicle. Nor does it need to clear
them for export, where such clearance is
applicable.

FCA – Free Carrier

The seller delivers the goods to the carrier or
another person nominated by the buyer at the
seller’s premises or another named place.

The parties are well advised to specify as

explicitly as possible the point within the named
place of delivery, as the risk passes to the buyer
at that point.

FAS – Free Alongside Ship

The seller delivers when the goods are placed
alongside the vessel (e.g., on a quay or a barge)
nominated by the buyer at the named port of
shipment.

45
 The risk of loss of or damage to the goods passes
when the products are alongside the ship. The
buyer bears all costs from that moment onwards.

FOB – Free On Board

The seller delivers the goods on board the vessel
nominated by the buyer at the named port of
shipment or procures the goods already so
delivered.

The risk of loss of or damage to the goods passes

when the products are on board the vessel. The
buyer bears all costs from that moment onwards.

CFR – Cost and Freight

The seller delivers the goods on board the vessel
or procures the goods already so delivered.

The risk of loss of or damage to the goods passes

when the products are on board the vessel.

The seller must contract for and pay the costs

and freight necessary to bring the goods to the
named port of destination.

CIF – Cost, Insurance and Freight

The seller delivers the goods on board the vessel
or procures the goods already so delivered. The
risk of loss of or damage to the goods passes
when the products are on the ship.

46
 The seller must contract for and pay the costs
and freight necessary to bring the goods to the
named port of destination.

The seller also contracts for insurance cover

against the buyer’s risk of loss of or damage to
the goods during the carriage.

The buyer should note that under CIF the seller is

required to obtain insurance only on minimum
cover. Should the buyer wish to have more
insurance protection, it will need either to agree
as much expressly with the seller or to make its
own extra insurance arrangements.

CPT – Carriage Paid To

The seller delivers the goods to the carrier or
another person nominated by the seller at an
agreed place (if any such site is agreed between
parties).

The seller must contract for and pay the costs of

carriage necessary to bring the goods to the
named place of destination.

CIP – Carriage And Insurance Paid To

The seller has the same responsibilities as CPT,
but they also contract for insurance cover
against the buyer’s risk of loss of or damage to
the goods during the carriage.

47
 The buyer should note that under CIP the seller is
required to obtain insurance only on minimum
cover. Should the buyer wish to have more
insurance protection, it will need either to agree
as much expressly with the seller or to make its
own extra insurance arrangements.

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.

DPU – Delivered At Place Unloaded (replaces

Incoterm® 2010 DAT)
DPU replaces the former Incoterm® DAT
(Delivered At Terminal). The seller delivers when
the goods, once unloaded are placed at the
disposal of the buyer at a named place of
destination.

The seller bears all risks involved in bringing the

goods to and unloading them at the named place
of destination.

48
DDP – Delivered Duty Paid
The seller delivers the goods when the goods are
placed at the disposal of the buyer, cleared for
import on the arriving means of transport ready
for unloading at the named place of destination.

The seller bears all the costs and risks involved in

bringing the goods to the place of destination.
They must clear the products not only for export
but also for import, to pay any duty for both
export and import and to carry out all customs
formalities.

It is important to note that the Incoterms 2020 rules

are not a substitute for a sales contract, and they do
not cover issues such as the price of the goods,
payment terms, and warranties. These issues must
be addressed in the sales contract.

49
 10 - Commodity scams
you should know!
Scams involving commodities can take many
different forms and focus on a range of
commodities, including agricultural items, energy
products, and precious metals.

These frauds can be challenging to identify,

especially for people who are unfamiliar with the
commodity markets, as they frequently feature
misleading claims of big profits with little to no risk.

Here are nine commodity scams to be aware of:

Precious metals scams:

These frauds frequently involve the sale of
counterfeit or inflated precious metals like gold,
silver, or platinum.

For example, a scammer might promise access to a

big quantity of gold at a reduced price and demand a
down payment to seal the sale.

But the gold never appears, leaving the investor with

nothing. Another typical strategy is to advertise the
rarity or value of gold coins or bars at exorbitant
prices while really undervaluing them.

50
Energy product scams:
The sale of fake or exorbitantly priced oil, natural
gas, or other energy goods may be a component of
these frauds. For instance, a scammer can state that
they can provide a large amount of oil at a reduced
cost and demand a down payment to seal the deal.

But the oil never shows up, leaving the investor with
nothing.

Check out the "on the water" scam video on my

YouTube channel for more details on this.

Agricultural commodity scams:

These frauds may entail the sale of fake or overly
priced produce, livestock, or grain.

For instance, a scammer would promise to offer a

significant quantity of grain at a reduced price in
exchange for an advance payment to seal the sale.

The investor, however, is left empty-handed because

the grain never materializes.

Ponzi schemes:
The rewards promised to previous investors are paid
for through the utilisation of funds from future
participants in these frauds.

Despite the scammers claims to be investing in

commodities, nothing of such actually happens.
51
Eventually, the scheme collapses when there are not
enough new investors to sustain it, and many people
lose their investments.

High-yield investment programs (HYIPs):

These frauds are frequently promoted as
"investment opportunities" in commodities and
promise enormous returns with little to no risk.

Investors will eventually lose their money when the

scam falls because they are basically Ponzi schemes
in disguise.

Advance fee fraud:

These schemes guarantee a sizable pay-out or profit
in return for a down payment. The fraudster may
assert that they are offering a discounted price on a
commodity or that they have access to a huge
supply of a commodity, but in actuality the
commodity is either non-existent or overpriced.

Before concluding that an upfront charge is a fraud,

you should consider other red flags. Many producers
and suppliers demand advanced TT deposits that are
entirely legitimate. Even LC's can be monetised, and
the goods will never arrive.

Boiler room scams:

These frauds use high-pressure sales techniques to
get victims to purchase bogus or expensive goods.

52
The scammer may use fake websites, testimonials, or
other false information to convince potential
investors to buy.

SBLC Scam
Scams involving Standby Letters of Credit (SBLCs)
are deceptive schemes in which a Standby Letter of
Credit (SBLC) is used as security for a loan or
investment.

In this kind of fraud, the scammer may state that

they have an SBLC that may be utilised to obtain
funding for an enterprise or project, but in actuality,
the SBLC is either non-existent or invalid.

In other instances, the offender may demand a

payment up front to smooth the transaction,
offering to provide the SBLC after the money has
been paid.

The victim, however, is left without a loan or

investment and on the hook for the upfront charge
because the SBLC never materializes.

It is crucial to exercise caution when contemplating

any offer that makes use of an SBLC and to
thoroughly investigate the legitimacy of the person
or business making the offer as well as the
authenticity of the SBLC before moving forward with
any transaction.

53
Before making any decisions, it may also be
beneficial to consult with a financial expert or a
lawyer.

When thinking about making an investment,

especially one in the commodity markets, it is
necessary to exercise caution. It is crucial to perform
your due diligence and examine the business or
person offering the investment before you make any.

Before making any decisions, it is also a good idea to

speak with a financial expert or ask the opinion of a
reliable outsider, such as your bank manager.

Bill of lading scam

A bill of lading is a record that contains information
about a shipment of goods being moved by a carrier,
like a shipping line or trucking firm. It functions as
both a contract between the shipper and the carrier
and a receipt for the goods.

A fraudulent technique known as a bill of lading scam

involves a criminal impersonating a legitimate carrier
and providing a shipper with a bogus bill of lading in
order to collect payment for a cargo that never
actually occurs.

In order to deceive the shipper, the scammer may

also change the provisions of the bill of lading, such
as by altering the destination or the nature of the
shipment.
54
There are several ways in which a bill of lading scam
may be carried out:

1. The scammer may create a fake website or email

account and send a fake bill of lading to the shipper,
claiming to be a legitimate carrier.

2. The scammer may intercept a legitimate bill of

lading and alter the details on it, such as the
destination or type of goods being shipped, in order
to deceive the shipper.

3. The scammer may create a fake bill of lading and

present it to the shipper as a legitimate document, in
order to obtain payment for a shipment that never
actually takes place.

To protect against a bill of lading scam, it is

important for shippers to verify the authenticity of
the bill of lading and the carrier before making any
payments.

Shippers should also be cautious of offers that seem

too good to be true, and should carefully review the
terms of the bill of lading before accepting it.

These are just some of the scams that are reported

far to often. There are many more happening, and I
will bring them to your attention through my
YouTube channel.

55
 11 - How to grow your network
Any entrepreneur or small business owner can
benefit from expanding their business network.

A robust network can give you access to fresh

possibilities, priceless assets, and beneficial counsel
and assistance.

The following advice can help you expand your

business network:

Identify your target audience:

With whom do you wish to connect with, and why?
Do you want to get in touch with prospective
customers, business partners, suppliers, or subject
matter experts? Making the most of your networking
opportunities will require you to concentrate your
efforts and identify the people you want to connect
with.

Attend industry events and conferences:

Industry gatherings and conferences are excellent
places to network and meet individuals in your field.
Search for events that fit your company's objectives
and target market and try to strike up conversations
with those you meet.

Join professional associations and organisations:

Joining associations and organisations for-
56
-professionals might provide doors for networking
with other experts in your sector.

Numerous organisations provide opportunities to

engage with members through networking events,
workshops, and other activities.

Social media sites like LinkedIn, Twitter, and

Facebook can be effective tools for networking and
forming connections with possible business
partners. Join appropriate groups, interact with
people in your field, and follow influential people in
your business.

Build relationships through networking events:

Meeting new people and establishing connections
can be made at networking events like local Chamber
of Commerce meetings or networking organisations.
Attend as many as possible, and follow up with
everybody that you meet.

Offer value:
The development of relationships that will benefit
both parties should be a priority when networking.
By sharing your knowledge, resources, or contacts,
you may add value to others.

Follow up and stay in touch:

After meeting someone, make an effort to follow up
and stay in touch.

57
You can do this through email, social media, or by
setting up a coffee or lunch meeting.

Be authentic and genuine:

If others think you are sincere and real, they are
more inclined to want to connect with you. Instead
of just attempting to sell your brand, be yourself and
concentrate on establishing sincere connections.

Be persistent:
Building lasting relationships might take time as
networking is a long-term process. If you don't get
any results right away, don't give up; just keep
networking and putting yourself out there.

Give back to your network:

Make an effort to help people after you have
established a solid network. This might be done by
making introductions, exchanging resources, or just
providing assistance and counsel.

In conclusion, creating a solid business network

requires time and effort, but it can be a very useful
tool for any entrepreneur or small business owner in
the long run.

58
 12 - Payment methods
There are a number of secure payment options
available for purchasing commodities, each with an
own set of advantages and hazards.

We'll look at the four most common and safe ways to

pay for goods in this chapter: cash, check, credit
card, and wire transfer.

Cash:
The most common and conventional method of
payment for purchasing goods is cash. Due to the
absence of computer transactions or third parties, it
is also the safest payment option. Cash payments
are instantaneous, pose no threat of fraud or
identity theft, and are completely secure.

Nevertheless, utilising cash has several

disadvantages.

First off, carrying a lot of cash around can be

awkward, especially if you're buying anything
expensive.

Second, it is challenging to track and record a cash

transaction because cash is not a traceable payment
mechanism. Finally, since cash cannot be readily
reversed, it may be challenging to obtain a refund if
you make a mistake, or the item is not what you
intended.
59
Check:
A check is a written request for a bank to send a
certain sum of money to a particular person or
company. Checks are a safe and secure way to pay
for goods since they are easily tracked and
documented.

Additionally, since checks are reversible, it is simpler

to receive a refund if there was a mistake with the
transaction.

However, there are several dangers associated with

using checks as a form of payment. First, the clearing
of checks may take several days, delaying the
transaction.

Second, someone else could cash your check if you

misplace it or it is stolen. Finally, since checks can be
altered or faked, there is a chance of fraud or
forgery.

Credit card:
With a credit card, you can borrow money from a
lender to use as payment for goods and services.
Given that they are accepted by the majority of
retailers and can be used online, credit cards are a
practical and extensively utilised mode of payment
for purchasing goods.

Additionally, credit cards provide fraud protection-

60
-and the option to challenge charges if there are any
issues with the transaction.

However, there are some risks to using a credit card

as a payment method. First, if you do not pay off
your balance in full each month, you will incur
interest on the unpaid balance, which can be costly.

Second, if your credit card is lost or stolen, it can be

used by someone else to make unauthorised
purchases. Finally, there is a risk of identity theft if
your credit card information is compromised.

Wire transfer:
A wire transfer (sometimes known as a telegraphic
transfer, or TT) is an electronic money transfer
between two bank accounts.

Since they can be tracked, wire transfers are a

reliable and secure way to pay for goods, but once
they've been made, they can't be undone.
Additionally, wire transfers can be finished swiftly,
frequently in a matter of hours.

However, there are significant dangers associated

with using a wire transfer as a form of payment. First,
wire transfers have fees, which can be expensive if
you are making a big transaction.

Second, it can be challenging to obtain a refund if

there was-
61
-a problem with the transaction because wire
transfers are not easily reversible. Finally, if your
bank account information is hacked, you run the
danger of fraud or identity theft.

Escrow Services:
Escrow is a financial arrangement in which a third
party controls the holding and disbursement of the
money needed by two parties to complete a
transaction.

Using an escrow in commodities transactions can

provide a number of advantages, including improved
security and lowered fraud risk.

You do, however, have some degree of control.

Letter of Credit:
In international trade, a letter of credit (LC) is a
financial tool that offers a financial institution's
assurance that, when a set of criteria are complete, a
seller will be paid by a buyer.

The buyer's bank issues the letter of credit, which is

addressed to the seller's bank.

However, letters of credit come with a number of

hazards, such as:

62
Credit Risk: Credit risk is the possibility that, even if
the conditions of the letter of credit are satisfied, the
issuing bank will be unable to pay the recipient.

Fraud risk: The documents submitted as part of a

letter of credit run the danger of being falsified or
altered, which could result in a false claim.

Documentary risk: This refers to the risk that the

documents presented under the letter of credit may
not be in compliance with the terms of the credit,
which could lead to a rejection of the claim.

Political risk: There is a risk that the government of

the country where the issuing bank is located may
impose restrictions on the payment of the letter of
credit, or that the government of the country where
the beneficiary is located may seize the funds.

Exchange rate risk: There is a risk that changes in

exchange rates could affect the value of the letter of
credit.

Time risk: This refers to the risk that the letter of

credit may expire before the goods are shipped or
the services are performed, which could lead to a
breach of contract.

63
It is important for parties involved in a transaction
using a letter of credit to carefully consider these
risks and take steps to mitigate them.

I go back to the importance of due diligence here,

because if you skip this stage, you could end up
paying an elaborate scammer a lot of your client's
money, and your reputation takes a beating.

64
 13 - List of documents
Non-Circumvention, Non-Disclosure Agreement
(NCNDA):
This is a legally enforceable contract that is
frequently used in cross-border business deals to
safeguard sensitive information and stop one party
from working around the other to close a deal
without their participation.

Best to be in the same country as the signees.

Letter of Intent (LOI):

A letter of intent is a written statement of a person's
or organization's desire to enter into a formal
contract or agreement with another individual or
group. It is frequently used in talks as a first step
before a more formal agreement is made, and is not
legally binding.

Full Corporate Offer (FCO):

The terms and conditions of a sale or purchase of
goods or services between two parties are set forth
in this legally binding contract.

The description and quantity of the goods or

services being given, the pricing and payment terms,
the plans for delivery and transportation, and any
warranties or guarantees are examples of
information that are frequently included.

65
The names, addresses, and contact information of
the parties to the transaction may also be included
in the FCO.

It's crucial to understand that an FCO differs from a

formal sales contract and that unless a contract is
signed, nothing is legally enforceable.

Irrevocable Corporate Purchase Order (ICPO):

This is a legally binding document that is used in
international trade to confirm the intent of a buyer
to purchase a specific quantity of goods or services
from a seller.

The ICPO typically includes details such as the

description and quantity of the goods or services
being purchased, the agreed upon price, the
payment terms, and the delivery and transportation
arrangements.

Commission Agreement:
In international trade, this legally-binding document
is used to indicate a buyer's intention to acquire a
certain amount of goods or services from a seller.

The ICPO normally contains information about the

products or services being purchased, their
description and quantity, their agreed-upon price,
their terms of payment, and their delivery and
transportation arrangements.

66
In addition to any other commission-related terms
and conditions, such as the duration of the
agreement, the categories of sales that qualify for
commission, and any exclusions or restrictions, the
agreement may indicate the percentage that the
agent will get.

Partnership Agreement:
An official contract outlining the terms and
conditions of a collaboration between two or more
people or organisations is known as a partnership
agreement.

The partnership agreement normally contains details

on the partnership's goals and organisational
structure, the partners' duties and rights, as well as
the partnership's management and operations.

A partnership can be formed for a number of

reasons, such as creating a business, investing in a
venture, or working together on a specific project.

The agreement can be altered to satisfy the interests

and objectives of the partners and to accurately
capture the unique characteristics of the
partnership.

67
Sales Purchase Agreement:
A legally enforceable contract that specifies the
terms and circumstances of the sale and purchase of
goods or services between two parties is known as a
sales purchase agreement, or SPA.

The SPA normally contains information about the

goods or services being sold, their description and
quantity, their agreed-upon price, their payment
terms, and their delivery and transportation
arrangements.

When one party (the seller) offers to sell a particular

good or service to another party, an SPA is often
utilised (the buyer). It can be applied in a number of
situations, such as the selling of a firm, the sale of
real estate, or the sale of products or services in a
business deal.

The Sale and Purchase Agreement (SPA) is a crucial

agreement that aids in defining the conditions of the
sale and purchase and safeguarding the rights and
interests of both parties.

Before signing, it is vital for both the buyer and the

seller to properly read and comprehend the
conditions of the SPA because they may have a big
legal and financial impact on both parties.

Proforma Invoice:
A proforma invoice is a document that a seller
sends- 68
-to a buyer in advance of a sale or delivery.
It is similar to a standard invoice, but it is not a
legally binding document and does not indicate that
a sale has been completed.

Instead, it is used to provide the buyer with an

estimate of the cost of the goods or services that
they are considering purchasing, and to confirm the
terms of the sale.

A proforma invoice typically includes details such as

the description and quantity of the goods or services
being offered, the agreed upon price, and any
applicable taxes or fees.

It may also include information about the payment

terms, the delivery and transportation
arrangements, and any warranties or guarantees.

Proforma invoices are often used in international

trade, where the buyer and seller may be located in
different countries.

They can be helpful for both parties in establishing

the terms of the sale and for obtaining the necessary
approvals or financing for the transaction.

Draft Letter of Credit:

A draft letter of credit (LC) is a document that
outlines the terms and conditions of a financial
agreement between a buyer and a seller.
69
It is typically used in international trade transactions
as a way to guarantee payment to the seller.

The draft LC is prepared by the buyer's bank and

sent to the seller's bank for review and acceptance.

Once the draft LC has been reviewed and accepted

by the seller's bank, it becomes a "confirmed" LC,
which means that the buyer's bank has agreed to
honour the terms of the LC and to make payment to
the seller according to the terms of the LC.

The draft LC typically includes details about the

goods or services being purchased, the terms of
payment, the timeframe for delivery, and any other
relevant terms and conditions.

It is important for both the buyer and the seller to

carefully review the draft LC to ensure that it
accurately reflects the terms of their agreement.

Once the draft LC has been accepted and becomes a

confirmed LC, it is typically used as a financial
guarantee for the seller, who can then proceed with
the sale knowing that they will receive payment once
the terms of the LC have been met.

However, don't be surprised when a seller issues a

draft LC template for the buyer to follow. This is to
ensure the buyer follows the sellers procedure.

70
 14 - Legal and Regulatory
Compliance
A comprehensive range of laws and regulations that
are designed to safeguard investors and uphold
market integrity apply to the commodity market. To
minimise dangers on the legal and financial fronts,
commodity dealers must be aware of and adhere to
these laws and regulations.

This chapter will give a general overview of the legal

and regulatory framework that governs commodity
trading and offer helpful advice on how to adhere to
it.

Commodity Exchange Act

In the UK, the Financial Conduct Authority (FCA) is

primarily responsible for regulating the commodity
markets. The FCA is in charge of ensuring that the
commodity markets function in a fair, open, and
consumer-friendly manner.

The FCA monitors the operations of commodity

brokers, exchanges, and other market participants,
and it enforces compliance with pertinent laws and
rules such the Financial Markets and Insolvency
(Settlement Finality) Regulations 1999 and the
Market Abuse Regulation (MAR).

71
To ensure that the UK's commodity markets adhere
to EU legislation, the FCA also collaborates closely
with international authorities including the European
Securities and Markets Authority (ESMA) and the
European Commission.

The main federal statute regulating commodities

trading in the US is the Commodity Exchange Act
(CEA). The Commodity Futures Trading Commission
(CFTC), which is in charge of overseeing the markets
for commodity futures and options, is in charge of
administering the CEA.

The CEA mandates that commodities brokers

register with the CFTC and adhere to a number of
rules and regulations, including those that ban fraud
and manipulation, demand the keeping of records,
and impose position limitations.

Dodd-Frank Wall Street Reform and Consumer

Protection Act

Dodd-Frank Act In reaction to the financial crisis of

2008, the Wall Street Reform and Consumer
Protection Act (Dodd-Frank Act) was passed into law
on the federal level in 2010. The Dodd-Frank Act
aims to tighten oversight of the financial sector,
which includes commodity trading.

72
The Act imposes a number of laws and restrictions
on commodities brokers, including additional
reporting and recordkeeping requirements as well as
the installation of margin requirements.

Additional Laws and Regulations

Commodity brokers must abide by additional laws

and rules in addition to the CEA and the Dodd-Frank
Act, such as the Foreign Corrupt Practices Act
(FCPA), which forbids paying bribes to foreign
officials, and the Anti-Money Laundering (AML) laws,
which are designed to stop money laundering and
the financing of terrorism.

Practical Compliance Guidance

Commodity brokers should, in order to adhere to the

legal and regulatory standards that are relevant to
commodity trading.

Become a member of the CFTC and any other

pertinent regulatory organisations.
Make sure that their policies and procedures are
in accordance with the rules and regulations that
are relevant to their industry.
Create efficient internal controls and compliance
mechanisms, as well as guidelines and practises
for identifying and stopping manipulation, fraud,
and other illegal acts.

73
 Employees should be instructed about the laws
and rules that govern commodity trading to
ensure that they are aware of and abide by them.
It’s rules and procedures on a regular basis to
make sure they are up to date and efficient.
To make sure they are in conformity with all
relevant rules and regulations, they should get
legal and compliance counsel as needed.

A comprehensive range of laws and rules that are

designed to safeguard investors and uphold market
integrity apply to the commodity market.

To minimise dangers on the legal and financial

fronts, commodity dealers must be aware of and
adhere to these laws and regulations.

This chapter gave a general overview of the legal and

regulatory framework that governs commodity
trading and offered helpful advice on how to adhere
to it.

Commodity brokers must be aware of any

modifications or updates to laws and regulations and
must get legal counsel as necessary.

74
15 - Ethics and Professionalism

The integrity and reputation of the commodity

market depend on commodity brokers upholding
high standards of ethics and professionalism.

Commodity brokers have a duty to operate in their

clients' best interests and to run their operations
honestly, fairly, and openly.

Commodity brokers are expected to conform to

certain ethical and professional standards. This
chapter will also cover industry rules of conduct and
best practices.

Ethical Standards
It is the duty of commodity brokers to conduct
themselves ethically at all times.

This includes:

Conflicts of interest: Commodity brokers must

stay away from circumstances where their own
interests might conflict with those of their
clients.
Acting in their clients' best interests: Commodity
brokers are required to always act in their clients'
best interests and give them accurate
information.

75
 Confidentiality: Commodity brokers are required
to maintain the privacy of customer information
and refrain from disclosing it without the client's
permission.
Avoiding insider trading requires commodity
brokers to refrain from using or disclosing non-
public information when buying, selling, or
trading commodities.
Avoiding fraud and manipulation: Commodity
brokers must refrain from any actions that could
endanger their clients or jeopardise the fairness
of the commodity market.

Professional Standards

Additionally, commodity brokers are expected to

uphold certain professional standards, such as:

Maintaining knowledge and expertise:

Commodity brokers are required to keep up with
current trends and developments as well as their
knowledge of the commodity market.
Information that is accurate and complete:
Commodity brokers must make sure that their
clients are informed about all of the dangers and
potential rewards associated with any
investments.
Being truthful and open: Commodity brokers are
required to be truthful and open when dealing
with customers and to disclose any potential
conflicts of interest.
76
 Integrity in business: Commodity brokers must
act honourably in all aspects of their operations
and refrain from any actions that might endanger
their clients or jeopardise the integrity of the
commodity market.

Conclusion

The integrity and reputation of the commodity

market depend on commodity brokers upholding
high standards of ethics and professionalism.

Commodity brokers have a duty to operate in their

clients' best interests and to run their operations
honestly, fairly, and openly.

This chapter provides information on industry rules

of conduct and best practices, as well as an outline
of the ethical and professional standards that
commodity brokers are expected to uphold.

Commodity brokers should keep up with any

updates or modifications to the industry rules of
conduct and, if they have any queries or concerns,
seek advice from their firm's compliance
department.

77
 Index - Terminology
There are several terms that are commonly used in
relation to commodities, including:

Spot Price:
The current market price for a commodity.

Futures Contract:
An agreement to buy or sell a specific quantity of a
commodity at a predetermined price on a specific
date in the future.

Basis:
The difference between the spot price of a
commodity and the price of a futures contract for
that commodity.

Contango:
A market condition in which the price of a
commodity for delivery in the future is higher than
the spot price.

Backwardation:
A market condition in which the price of a
commodity for delivery in the future is lower than
the spot price.
.

78
Hedge:
A financial instrument or strategy used to mitigate
the risk of price fluctuations in a commodity

Speculation:
The act of buying and selling commodities in the
hopes of making a profit from price fluctuations.

Arbitrage:
The simultaneous purchase and sale of a commodity
in different markets in order to take advantage of
price differences.

There are several terms that are commonly used in

physical commodity deals, including:

Buyer:
The party that is purchasing the commodity.

Seller:
The party that is selling the commodity.

Offer:
A proposal made by the seller to sell a specific
quantity of a commodity at a specific price.

Counteroffer:
A response made by the buyer to the seller's offer,
typically with a different price or other terms.

79
Acceptance:
The act of agreeing to the terms of an offer or
counteroffer.

Rejection:
The act of declining an offer or counteroffer.

Price:
The amount that the buyer agrees to pay for the
commodity.

Quantity:
The amount of the commodity being traded.

Delivery:
The act of transferring ownership and possession of
the commodity from the seller to the buyer.

Payment:
The act of transferring funds from the buyer to the
seller in exchange for the commodity.

Inspection:
The act of evaluating the quality and quantity of the
commodity to ensure that it meets the terms of the
deal.

Warranties:
Promises made by the seller about the condition and
quality of the commodity.

80
Indemnification:
A provision in which one party agrees to compensate
the other party for any losses or damages that may
arise in connection with the commodity deal.

There are several documents that are commonly

used in physical commodity deals, and each of these
documents may have an abbreviation or acronym.
Here are some examples:

Purchase Order (PO):

A document issued by the buyer that specifies the
terms of the commodity deal, including the quantity
and price of the commodity, the delivery date, and
any other relevant details.

Sales Purchase Agreement (SPA):

A legally binding agreement between the buyer and
seller that outlines the terms of the commodity deal,
including the price, quantity, and delivery date.

Bill of lading (B/L or BL):

A document that serves as a receipt for the
commodity, as well as a contract for the
transportation of the commodity.

Letter of Credit (LC):

A financial instrument issued by a bank that
guarantees payment to the seller once certain
conditions are met, such as the delivery of the
commodity.
81
Certificate of Origin (CO or C/O):
A document that attests to the place of origin of the
commodity.

Quality Assurance (QA) Certificate:

A document that attests to the quality of the
commodity.

Weight and Quality (W&Q) Certificate:

A document that attests to the weight and quality of
the commodity.

Analysis Certificate:
A document that attests to the chemical
composition or other characteristics of the
commodity.

Inspection Certificate:
A document that attests to the quantity and quality
of the commodity as inspected by a third party.

Request For Quote (RFQ):

An RFQ is a solicitation for goods or services in which
a company invites vendors to submit price quotes
and bid on the job.

Ready Willing and Able (RWA):

Is a phrase used in business to indicate that a buyer
or investor has the financial resources, intent, and
capability to complete a transaction.

82
Proof of Product (POP):
This is an essential document in physical
commodities trading negotiation process.

The POP is sent from the seller to the buyer, there

are different options depending on the product.

Proof of Funds (POF):

Is a document that verifies that an individual or
organization has the financial resources to complete
a transaction or investment.

Bank Comfort Letter (BCL):

Is a document issued by a bank on behalf of a buyer,
stating that the bank is willing to provide financial
support for the buyer's purchase.

Eur-1 Certificate:
Is used for trade between the European Union (EU)
and certain other countries, and it is a proof of origin
of the goods that are being exported.

Proforma Invoice (PI) & Commercial Invoice (CI):

A proforma invoice is a preliminary invoice that is
issued by the seller to the buyer before the goods
are shipped.

A commercial invoice, on the other hand, is a legally

binding document that is issued by the seller to the
buyer after the goods have been shipped.

83
T2L Certificate:
Is a certificate that verifies that goods being
imported from one country to another have been
transported through an intermediate country.

Transhipment:
Is the process of transferring goods from one mode
of transportation to another during the course of the
journey.

Force Majeure:
Is a legal term that refers to an event or
circumstance that is beyond the control of the
parties involved and which prevents them from
fulfilling their obligations.

Performance Bond:
Is a type of surety bond that guarantees the
performance of a contractor or other obligor in
accordance with the terms of a contract.

SWIFT Message:
Is a message format and communication protocol
used by banks and financial institutions to securely
exchange electronic messages and financial
transactions.

Example: MT-799 is a free format message that is

used to confirm the availability of funds in a buyer's
account.

84
Phytosanitary Certificate:
Is a document that certifies that a shipment of plants
or plant products has been inspected and found to
be free of pests and diseases.

GMO & Non-GMO:

GMO & Non-GMO refers to genetically modified
organisms (GMOs) and organisms that have not been
genetically modified (Non-GMO's), respectively.

Packing List:
Is a document that lists the contents of a shipment
of goods, including the quantity and type of each
item.

Soft Corporate Offer (SCO):

Is a non-binding offer made by a company to sell a
product or service at a specified price and under
certain terms and conditions.

85
Thank you again so much for purchasing this eBook!

I hope you have enjoyed reading it as much as I

enjoyed writing it, and that you use it to the best of
your ability.

If you liked the book, please consider subscribing to

my YouTube channel for more great content:
https://youtube.com/@sam_cutting

Don't forget to check out the commodity courses I

have created, which dive deeper into each subject
with added materials.

The 6-Day Commodity Broker Course: https://sam-

cutting.systeme.io/6-day_broker_course-purchase

The Due Diligence Bundle Course: https://sam-

cutting.systeme.io/due_diligence_bundle

Make sure you connect with me on LinkedIn also:

Sam Cutting | LinkedIn!

As a token of appreciation for purchasing this eBook,

I am offering a 20% discount on both courses using
the code EBOOK20.

Thank you again for your support and I hope you

continue to learn and grow with me.

86
With the help of this extensive guide, discover the
secrets of what it takes to become a commodity
broker.

Inside, you'll discover the knowledge, viewpoints,

and useful tips for navigating the intricate and
volatile world of commodity markets.

This handbook will provide you with the resources

you need to be a successful commodity broker,
from sourcing and verifying, to risk management
and trade execution.

This handbook is an indispensable tool for anyone

wishing to obtain a competitive edge in commodity
trading, regardless of your level of experience or
whether you're a newcomer to the industry.

"A very informative and straight to the point

encyclopaedia for anyone involved within the
commodity industry."
-Sam Cutting