LOI, ICPO, FCO, SPA and POP: documents and red flags

Commodity trading uses many abbreviations, and fraudulent offers use them most of all. Here is what each document means, where it belongs in a genuine deal and which warning signs to take seriously.

Last updated: October 20264 min readAndalucia Premium

In brief

Only the signed sales and purchase agreement (SPA) creates binding obligations; LOI, ICPO and FCO prepare it.

Proof of product should be verifiable with the issuer, not just a document sent by email.

Upfront fees, prices far below market and refusal to be verified are the clearest red flags.

What do LOI, ICPO, FCO, SPA and POP mean?

They are documents of the pre-contract and contract phase: LOI and ICPO come from the buyer, the FCO from the seller, the SPA is the contract itself and POP is the seller’s proof of product.

Abbreviation	Meaning	Issued by
LOI	Letter of intent	Usually the buyer
ICPO	Irrevocable corporate purchase order	Buyer
FCO	Full corporate offer	Seller
SPA	Sales and purchase agreement	Both parties
POP	Proof of product	Seller
POF	Proof of funds	Buyer

What is the usual order of documents in a commodity deal?

A common order is: verification, buyer’s LOI or ICPO, seller’s FCO, negotiation and signing of the SPA, payment instrument, then proof of product and inspection. In practice the sequence varies with product and market.

The decisive point is not the exact sequence but that each document comes from a verified party and is backed by real goods or funds. Many established producers and trading houses work with their own contract templates and do not use the LOI-ICPO-FCO chain at all.

Is an ICPO legally binding?

Generally not in the sense of a contract. Despite the word “irrevocable”, an ICPO is a declaration of intent; the binding obligations arise from the signed SPA.

Whether a pre-contract document has legal effects depends on its wording and the applicable law. Anyone signing documents should have them checked by their own legal adviser; we do not provide legal advice.

What is proof of product (POP)?

Proof of product is evidence that the seller owns or controls the goods offered, for example tank storage receipts, warehouse certificates, refinery or mill confirmations or recent inspection reports.

A POP is only useful if it can be verified with the issuer, such as the terminal, warehouse or inspection company, through official channels. Copies sent by email alone prove little. In genuine transactions, proof of product is usually provided under a clear procedure after the contract is signed and the payment instrument is in place.

How do you recognise a fraudulent commodity offer?

Typical warning signs are prices far below market, requests for upfront fees, documents that cannot be verified, time pressure and counterparties that refuse identification.

Price discounts that no producer could sustain
Fees for “registration”, “legalisation”, tank storage or “dip tests” before any verified goods exist
Long chains of intermediaries who cannot name the actual seller
Free email addresses, mobile numbers only, no verifiable office
Procedures that require the buyer to act first without security
Refusal to allow independent inspection or verification of documents

Why are long broker chains a risk?

Because each intermediary adds commission, distance from the real seller and room for misunderstanding. In fraudulent offers, long chains are often used to hide that no real goods exist.

A serious transaction can name the seller or at least verify its existence early, under appropriate confidentiality. If nobody in a chain can bring the buyer into contact with the party that controls the goods, that is a reason to stop.

What should a buyer do before sending documents?

Verify the counterparty first, check company data in official registers, confirm that the offer makes commercial sense and send personal or banking documents only to verified recipients.

Check the company in the official commercial register.
Ask for KYC documents and verify them.
Compare the offer with realistic market conditions.
Verify any POP or certificate directly with the issuer.
Do not pay fees before a contract with real goods is in place.

Last updated: October 2026This page provides general information about trade practice. It is not legal, tax or investment advice.

FAQ

Frequently asked questions

Commodity trading questions, answered

What is an NCNDA?

An NCNDA (non-circumvention, non-disclosure agreement) is meant to protect intermediaries from being bypassed and to keep information confidential. It does not prove that a transaction or goods are genuine.

What is proof of funds (POF)?

Proof of funds is evidence that a buyer can pay, such as a bank comfort letter or a bank statement. Like proof of product, it should be verifiable with the issuing bank.

Is an FCO a binding offer?

It depends on its wording and the applicable law; in practice an FCO is usually the basis for negotiating the SPA rather than a final contract. Obligations should only be relied on once the SPA is signed.

Why do some offers demand payment before inspection?

Genuine sellers protect themselves with bank instruments, not by asking buyers to pay before goods are verified. A demand to pay before any verifiable proof of product is a strong warning sign.

Can a deal start with an ICPO before verification?

Not with us. Every party is verified first; only then do we exchange purchase orders, offers or draft contracts, in the form the parties and their banks require.

What should I do if I suspect fraud?

Stop communication on the deal, do not pay anything and keep all documents. Depending on the case, report it to your bank and the police or the competent authority in your country.

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