What is a provisional payment?
An initial payment, commonly 80–90% of estimated value, released against shipping documents, with the balance settled once final weights and assays are agreed at discharge. Standard practice for concentrates.
Key points
- Concentrates settle twice because they cannot be valued at shipment.
- The percentage advanced reflects uncertainty and trust.
- Final settlement can run back from seller to buyer.
At a glance
| Typical advance | 80–90% of estimated value |
|---|---|
| Released against | Shipping documents |
| Provisional basis | Bill of lading weight, provisional assay and price |
| Final settlement | Final weight, final assay, settled QP, TC/RC and penalties |
| Can be negative | Yes, if prices fell during the QP |
Why concentrates settle twice
A concentrate cargo cannot be valued precisely at shipment. Final weight is established at discharge, final assays require sampling and exchange between buyer and seller, and the price may still be running through a quotational period.
So payment happens in two stages. A provisional payment, typically 80–90% of estimated value, is released against shipping documents, and a final settlement follows once the outstanding variables are fixed.
What the provisional figure is based on
The provisional invoice uses the bill of lading weight, the seller’s assay or a provisional assay, and a provisional price. The discount from full value covers the uncertainty in all three.
The percentage advanced reflects how much uncertainty there is and how much the parties trust each other. A well-known counterparty with a consistent product might see 90%; an unfamiliar one considerably less.
Final settlement
Final settlement reconciles the provisional payment against final weight, final assay after any splitting or umpire procedure, the settled quotational period price, and deductions for treatment and refining charges and any penalty elements.
It can run either way. If prices fell during the QP the final settlement may be a payment from seller back to buyer, which is why the credit standing of both parties matters and not only the buyer’s.
Frequently asked questions
- How much is a provisional payment?
- Typically 80–90% of estimated cargo value, released against shipping documents. The exact percentage depends on the uncertainty in weight, assay and price, and on the counterparty relationship.
- When is final settlement made?
- After final weights and assays are agreed at discharge and the quotational period has run. Deductions for treatment and refining charges and any penalty elements are applied at that point.
- Can a final settlement be negative for the seller?
- Yes. If prices fell during the quotational period or final assays came in below the provisional basis, the seller may owe money back to the buyer.
Related terms
The defined period whose average exchange price sets the contract price — for example the month following shipment. Because prices move during transit, the QP determines who carries that exposure.
The analytical determination of metal content in an ore, concentrate or refined product. Buyer and seller assays commonly differ slightly; contracts usually set a tolerance and appoint an umpire laboratory to settle disputes beyond it.
A bank undertaking to pay the seller once compliant documents are presented. It substitutes the bank’s credit for the buyer’s, which is why it remains the default instrument between counterparties trading together for the first time.
The largest independent inspection, testing and certification company in the world, founded in 1878 and headquartered in Geneva. In commodity trade its certificates of quality and weight are what a buyer, a bank and an insurer all rely on instead of taking the seller’s word.
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