Proof of Product
A Proof of Product (‘POP’) is often requested by customers or agents who believe it will give them some guarantee of the existence of the product and ability of the supplier to deliver. In practice many POPs are produced which are false. In practice it offers no proof at all, because once a POP has been drafted it is automatically out of date – the product could have been sold to another buyer and therefore no longer exists. Nevertheless, a POP is still occasionally requested as apparent proof that a seller/broker has the product, which is possibly not the case.
A POP for large quantities is often not genuine as it is unlikely that a manufacturer has stockpiled possibly millions of tonnes of a product. Large quantities of a products are made to order to match the terms of a specific contract, in this case a proof of allocation would be more relevant. A POP without a contract reference is also worthless, a POP with a contract reference can and will only be issued once a financial instrument has been put in place, so is therefore superfluous.
A POP is realistically provided only when the buyer’s bank issue a Bank Confirmation Letter (BCL) to the seller’s bank via SWIFT. Then the seller’s bank can check the availability of funds in the buyer’s bank and issue a POP to the buyer’s bank within an agreed time period (e.g. 5 days). In reality, the best and only real proof of product is when the seller can demonstrate the products in his possession at the dock side. [1]
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