Incinerators to IRAQ
31st July 2015
Exportaid worked with the UK’s best manufacturer of incinerators for several years from 2005 helping to develop their international. Together, we experienced some interesting challenges in that time!
In 2005, the company received a large enquiry from a number of different trading companies on behalf of the Ministry of Health in Baghdad, and a Letter of Credit (LC) was very soon placed in the company’s. The order arrived in the early years after the fall of Saddam Hussein’s regime, and the very difficult political and the continuing conflict in the region was reflected in the terms of the LC.
The company was required to ship all 20 incinerators via Aqaba port then overland through a war zone and would be paid 80% of the order amount on their safe arrival in Baghdad, with the final 20% at some indeterminate time in the future following ‘successful performance’.
The LC route was a non-starter because the risk was all on the company. Obviously they were concerned not to lose this very attractive piece of business. The only solution was to pick up the phone to the intermediary in Baghdad, explain the problem, and suggest an alternative schedule of payment, and that is what we did.
The resulting agreement was that we would divide the 20 incinerators into three shipments, the first with four units then each of the second and third with 8, subject to payment conformance. 50% of the value of each shipment was to be paid by bank transfer prior to shipment, with the second 50% payable when the goods arrived CIF Aqaba port.
We did not accept any responsibility for insuring the overland shipment from Aqaba to Baghdad. Under this payment structure, 100% of the payment was received once all three shipments had docked in Aqaba. How? Because the joy of LCs is that they constitute a binding agreement between the seller’s bank and the buyer’s bank, so the suppliers are always paid out on production of the documentation stipulated in the body of the LC.
Let’s reserve high praise for the intermediary who was as good as his word. The order was fulfilled during 2006, and each tranche of payment arrived right on schedule. The successful delivery of that order led to many more in subsequent years. In truth, they would not have found incinerators of that quality at that price anywhere else. And the UK manufacturer still makes the best incinerators in the world!