Trade process
From enquiry to discharge
A delivery follows a fixed chain of offer, contract, payment instrument, inspection and documents. Each step has a practical function. Only one of them, the contract, is legally binding.
Short version
Eight stations of a delivery
- 01
RFQ
Enquiry with product, quantity, delivery term and destination port.
- 02
Soft offer / SCO
Offer without obligation, with key data and indicative value.
- 03
LOI / ICPO
The buyer declares binding purchase interest, with bank details.
- 04
FCO
The seller presents the complete, binding offer.
- 05
SPA / contract
Quantity, quality, price, Incoterm and payment route fixed in writing.
- 06
Letter of credit
The bank opens an LC at sight, DLC or SBLC as per the contract.
- 07
Inspection and shipment
Independent inspection, then handover to the carrier.
- 08
Documents
B/L, COA, COO and packing list pass through the bank for release of the goods.
LOI, ICPO, SCO and FCO are industry practice and not a statutory standard. Only the written contract is binding.
Full version
Every step with its function
| No. | Term | Full name | Function |
|---|---|---|---|
| 01 | RFQ | Request for Quote | The buyer asks the seller or an intermediary, without obligation, for price and availability. |
| 02 | Soft offer / SCO | Soft Corporate Offer | The seller presents an offer without obligation, with product, quantity, indicative price and bank details. |
| 03 | LOI | Letter of Intent | The buyer declares serious purchase interest together with its own bank details as a basis for negotiation. |
| 04 | ICPO | Irrevocable Corporate Purchase Order | Binding purchase intent of the buyer with quantity and product details. |
| 05 | FCO | Full Corporate Offer | After vetting the buyer, the seller presents the complete offer with all terms. |
| 06 | SPA / contract | Sales and Purchase Agreement | Legally binding contract: quantity, quality, price, delivery time, payment terms, Incoterm, dispute resolution. |
| 07 | LC at sight | Letter of Credit | Documentary credit of the buyer's bank, payable immediately on presentation of compliant documents. |
| 08 | DLC | Divisible Letter of Credit | Credit that is divisible or transferable for several beneficiaries or partial shipments. |
| 09 | SBLC | Standby Letter of Credit | Bank guarantee drawn only if the buyer fails to perform. It is not a primary means of payment. |
| 10 | Inspection | Independent Inspection | Independent verification of quantity and quality before or during loading by SGS, Intertek, Bureau Veritas or Cotecna. |
| 11 | Shipment | Shipment | Handover of the goods to the carrier under the agreed Incoterm, issue of the bill of lading. |
| 12 | B/L | Bill of Lading | The shipping line's transport document, proof of title to the goods and a condition for release at the destination port. |
| 13 | COA | Certificate of Analysis | Laboratory certificate confirming the specification of the batch actually delivered. |
| 14 | COO | Certificate of Origin | Confirms the country of origin of the goods. Relevant for customs and in some cases for the requirements of a letter of credit. |
| 15 | Packing list | Cargo packing list | List of packing units, weights and dimensions per shipment, the basis for customs clearance. |
Practice is not a standard
The contract is binding, the rest is practice
LOI, ICPO, soft offer and FCO describe how buyers and sellers in this market usually approach each other. The order and exact meaning of these terms are not defined by law and are used differently by some market participants.
The transaction becomes binding only with the SPA or contract, the document that fixes quantity, quality, price, delivery time, payment terms, Incoterm and dispute resolution in writing. Everything exchanged before it prepares this document and cannot replace it.
A delivery based solely on an LOI or an ICPO, with no contract after it, has no enforceable basis, however official the document looks.
Payment instruments
LC at sight, DLC and SBLC
Choice of instrument
Fixed in the contract
The contract sets which of the three instruments is used. One side cannot decide this alone. Both banks confirm the chosen form before the first documents are submitted.
Standard instrument
LC at sight
Payment immediately on presentation of compliant documents to the confirming bank. The usual payment instrument in commodity trading.
Divisible
DLC
Divisible or documentary letter of credit, divisible or transferable for several beneficiaries or partial shipments of a consignment.
Security
SBLC
Standby letter of credit. A bank guarantee in the background, drawn only on non-performance and not used to pay for the regular delivery.
Payment against documents
Settlement runs through a letter of credit instead of prepayment, because a bank checks whether the documents meet the requirements. A personal assurance carries no such check. Payment is released only once the documents pass, which protects the seller as much as the buyer.
Anyone who demands a handling fee, a reservation payment or a commission before the first delivery, without a letter of credit in place, is acting outside market practice. In this trade it is a known sign of fraud and not open to negotiation.
Enquire about the process for an item
Give us the product, quantity, delivery term and destination port. We settle everything else by phone.