How to Choose a Reliable Trading Partner

In physical commodity trading the counterparty is the deal. Price, volume and specification matter only if the other side can actually deliver — or actually pay. Many of the losses we hear about in refined products trading are caused not by market moves but by counterparties who were never what they claimed to be. Here is a practical checklist for buyers and suppliers before entering a long-term agreement.

1. Verify the legal entity, not the website

Start with the basics: the exact registered name, the licence number, the issuing authority and the licensed activities. In Dubai, commercial licences are issued by the Department of Economy and Tourism and can be verified with the issuing authority. A genuine trading company will share these details without hesitation, and they should match the name on the draft contract, the invoice and the bank account. Ours are published on our website, together with our D-U-N-S number.

2. Look for an operating history

How long has the company held its licence? Does it have an independent business identifier such as a D-U-N-S number? Can it describe completed transactions — products, routes, inspectors — without breaching confidentiality? A company incorporated last month that offers two million barrels a month should prompt questions.

3. Know who you are really dealing with

Ask for the directors and ultimate beneficial owners, and screen them — together with the company itself — against the major sanctions lists. Be cautious with long chains of intermediaries and "mandates": every extra link adds cost and reduces your view of the actual seller or buyer.

4. Check how they handle documents

Reliable partners work with standard, verifiable documents: a clear sales contract, a commercial invoice, a bill of lading, certificates of quantity and quality from an independent inspector and a certificate of origin. Ask early which documents will be presented, when, and through which banks.

5. Insist on independent inspection

Quality and quantity should be determined by a recognised independent inspection company at the load port, and ideally at discharge as well. Who appoints the inspector and who pays for the inspection belongs in the contract.

6. Agree on secure payment

Documentary and standby letters of credit issued by reputable banks protect both sides. Be wary of any structure that asks you to release funds before you hold title documents, or that routes money through unrelated third parties.

Red flags to watch for

• Prices far below the prevailing market, with "guaranteed" monthly volumes
• Requests for upfront fees, "procedure fees" or non-refundable deposits
• Procedures that require bank details or proof of funds before any product has been identified
• Documents that cannot be verified with their issuer: tank receipts, "proof of product", inspection certificates
• Pressure to sign quickly, or reluctance to meet, speak by phone or disclose ownership

A partnership is built on verification

The best trading relationships begin with both sides checking each other thoroughly — and being comfortable with it. At Harmony General Trading we expect counterparties to verify us, and we verify them in return. That mutual discipline is what makes it possible to trade at scale, cargo after cargo.