Guide · Trade
Commodity trade documents,explained.
A commodity deal moves through a set sequence of documents: the request and the offer, then the signed contract, then the payment instrument, then the shipping and quality documents that prove the goods were delivered as agreed. This guide explains each one in order: what it is, who issues it and what to check.
The sequence
From the first requestto the last document.
- RequestThe buyer states the product, specification, quantity, destination and Incoterm.
- OfferThe seller answers with the specification, quantity, price basis, delivery terms and validity of the offer.
- ConfidentialityThe parties sign an NCNDA before names and details are disclosed.
- ContractSeller and buyer negotiate and sign the sales and purchase agreement.
- Payment instrumentThe buyer arranges the letter of credit, collection or transfer the contract requires.
- ShipmentThe seller ships and issues the invoice, packing list and certificates; the carrier issues the bill of lading.
- Inspection and releaseIndependent inspection confirms quality and quantity, the documents are checked and payment is released.
Before the contract
LOI, ICPO and FCOare not a contract.
The letter of intent (LOI), the irrevocable corporate purchase order (ICPO) and the full corporate offer (FCO) are common in commodity trade, but they are informal documents. They are not binding unless the signed contract says so, and the word "irrevocable" in an ICPO does not by itself create an obligation. The binding document is the signed contract.
Treat them as statements of interest that help both sides decide whether to negotiate. A chain of LOIs and ICPOs with no verifiable company, no precise specification and no draft contract behind it is a warning sign.
BGI works from a written specification and a signed contract. Before any introduction both sides are screened against international sanctions lists and sign an NDA, and every term is agreed in writing. See how we work.
For the delivery terms written into the contract, see Incoterms 2020 for commodity trade. For the goods we work with, see our products.
Stage one
From requestto signed contract.
| Document | Issued by | What it is | What to check |
|---|---|---|---|
| Request or enquiry | Buyer | The first written request: product, specification, quantity, destination, Incoterm and timing | That the specification is complete enough to answer |
| LOI (letter of intent) | Buyer, sometimes the seller | A letter stating the intention to buy or sell on outline terms | Company name, registration and signatory; treat it as informal |
| ICPO (irrevocable corporate purchase order) | Buyer | A purchase order on company letterhead with product, quantity and outline terms | That it matches the request; it is informal despite its name |
| FCO (full corporate offer) or offer | Seller | The seller's offer: specification, quantity, price basis, Incoterm, payment, inspection and validity | Validity date, specification limits, named place, and that the seller is a real, verifiable company |
| NCNDA | The parties to the deal | Non-circumvention and non-disclosure agreement protecting names and contacts | Parties, scope, duration and governing law |
| Draft contract and SPA (sales and purchase agreement) | Drafted by one party, negotiated by both | The contract that binds both sides once signed | Specification, quantity and tolerance, Incoterm and named place, payment, inspection, document list, delivery period, claims, force majeure, governing law and arbitration |
| Proforma invoice | Seller | A preliminary invoice issued before shipment | That it matches the signed contract; often used to open a letter of credit or apply for an import licence |
Stage two
How the buyer pays.
| Instrument | How it works | Rules | What to check |
|---|---|---|---|
| Letter of credit (LC) | The buyer's bank undertakes to pay the seller against documents that comply with the terms of the credit | UCP 600 | Issuing and confirming bank, expiry date and place, latest shipment date, document list, presentation period, and that the terms match the contract |
| Documentary collection | Banks release the shipping documents to the buyer against payment (D/P) or against acceptance of a bill of exchange (D/A) | URC 522 | The banks give no undertaking to pay; check the release instruction and who holds the bill of lading |
| Telegraphic transfer (TT) | A direct bank transfer, made in advance, against copy documents or after arrival, as the contract sets | The contract and the bank's terms | No bank undertaking; check the beneficiary account against the contract and confirm any change of bank details through a known channel |
Stage three
The shippingand quality documents.
| Document | Issued by | What it is | What to check |
|---|---|---|---|
| Commercial invoice | Seller | The final invoice for the goods shipped | Description, quantity, unit price, total, Incoterm and named place, exactly as in the contract and the LC |
| Packing list | Seller | The packages, weights and marks of the shipment | Net and gross weight, number of packages, container and seal numbers |
| Bill of lading (B/L) | Carrier, master or their agent | Receipt for the goods, evidence of the contract of carriage and, when issued to order, the document of title | Shipper, consignee, notify party, ports, on-board date, clean notation, number of originals, and freight prepaid or collect in line with the Incoterm |
| Certificate of origin | Chamber of commerce or another authorised body | States where the goods were produced | Consignee and description match the invoice; the preferential form if a trade agreement applies |
| Certificate of analysis or certificate of quality | Producer's laboratory or an independent laboratory | Measured values of the lot against the specification | Lot or batch number, test methods and standards, and every value within the contract limits |
| Inspection report or certificate | Independent inspection company | Sampling, analysis and quantity checks at loading, sometimes also at discharge | Inspector named in the contract, place and date, quantity method (draft survey, weighing or tally), seal numbers |
| Insurance certificate or policy | Insurer or insurance broker | Proof of cargo insurance, required under CIF and CIP | Insured amount (at least 110% of the contract value under CIF and CIP), clauses, currency, place of claims, endorsement |
Your checklist
Before you signor pay.
- 01The specification is written into the contract, with limits and test methods
- 02The Incoterm and named place are the same in the contract, the LC and the invoice
- 03The document list in the contract and in the LC is identical, with the issuer and number of originals for each
- 04The inspection company, the place of inspection and the quantity method are named
- 05The dates line up: latest shipment date, LC expiry and presentation period
- 06Descriptions match across invoice, packing list, bill of lading and certificates
- 07Bank details are confirmed through a known channel before any transfer
Questions
Common questionsabout trade documents.
Is an ICPO legally binding?
Not on its own. An ICPO is an informal purchase order, and despite the word "irrevocable" it does not bind the parties unless the signed contract says so.
What is the difference between an LOI and an FCO?
The buyer sends an LOI to state an intention to buy; the seller sends an FCO to set out what it offers and on what terms. Both are informal steps toward a contract.
What is an SPA in commodity trade?
The sales and purchase agreement: the signed contract between seller and buyer. It fixes the specification, quantity, Incoterm, payment, inspection, documents, delivery and dispute resolution, and it is the document that binds.
Which documents does a letter of credit usually require?
Typically a commercial invoice, a full set of clean on-board bills of lading, a packing list, a certificate of origin, a certificate of analysis or inspection and, under CIF or CIP, an insurance certificate. The exact list is written in the LC and should match the contract.
Who issues the certificate of analysis?
The producer's laboratory or an independent laboratory, as the contract sets. Many contracts name the independent inspection results at loading as the reference for quality and quantity.
Does BGI work from an LOI or an ICPO?
BGI works from a written specification and a signed contract. An LOI or ICPO can open a conversation, but every deal needs sanctions screening, an NDA and terms agreed in writing.
Please note
Orientation only.
This guide explains documents commonly used in international commodity trade, for orientation. It is not legal advice, an offer or a statement of available goods. Every deal sets its own specification, document list and terms in the written contract.
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