In physical oil, payment is made against documents rather than against the cargo itself. Which documents, presented by whom and when, is the substance of the deal.
Documentary credit (L/C)
An issuing bank’s undertaking to pay against a compliant presentation of documents, governed internationally by ICC UCP 600. Banks examine documents, not cargo — so a single wording discrepancy can hold up payment.
Standby L/C (SBLC)
A credit used as security against non-performance rather than as the primary payment route; it is not drawn if the contract performs. Frequently requested as a performance guarantee on term deals with new counterparties.
TT / CAD
TT is a bank wire; CAD releases documents against payment. Both are cheaper and faster than a credit but carry no bank undertaking, so they are used where the counterparty’s standing is already established.
Bill of Lading (B/L)
The central document — evidence of the carriage contract, receipt for the cargo and document of title. Three originals are usually issued; where originals do not reach the discharge port in time, cargo is released against a letter of indemnity, a practice that carries risk and should be addressed in the contract.
Quality & Quantity inspection
An independent surveyor certifies quality and quantity at loading and discharge. Which certificate is final and binding — load port or discharge port — is the crux of most disputes and must be fixed in the contract.
Laytime & demurrage
Laytime is the time allowed for loading and discharge; exceeding it incurs demurrage. Time normally counts from tender of Notice of Readiness, with the Statement of Facts as the basis for settlement — a line item that quietly erodes physical trading margins.
This reference explains published industry norms and standards. It does not replace the terms of an individual contract, nor legal or tax advice — and it carries no prices; the price board does that.