For guidance purposes only. Not comprehensive or legal advice.
Designed for business, CRE, AEC, Tech/AI and Natural Resources professionals as part of the earlier Mainframe, Mini/PC, CADD, Web, Mobile/Cloud revolutions.
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Incoterms (“International Commercial Terms”) are a set of import/export shipping terms devised and published by the International Chamber of Commerce (ICC). They define the responsibilities of buyers and sellers for the delivery of goods under sales contracts. Always specify the named port or place, e.g. “CIF Rotterdam” or “FOB Cape Town.” The current edition is Incoterms 2020.
ASWP – Any Safe World Port
Not an official Incoterm, but widely accepted in commodity trading practice. Used in sellers’ quotes (e.g. “CIF ASWP”) to indicate that the CIF price is the same regardless of the destination port anywhere in the world. Convenient shorthand for global commodity offers where the seller is quoting a single delivered price without port-specific freight calculations. 1
CFR – Cost and Freight (also C&F, CNF)
The seller’s price includes the cost of the goods, export loading charges, and ocean freight to the named destination port. Insurance is not included – the buyer bears all risk once goods are loaded on board the vessel. Example: CFR Rotterdam.
Note: C&F and CNF are older terms for the same concept and should no longer be used – CFR is the correct current Incoterm. Risk transfers from seller to buyer when goods pass the ship’s rail at the port of origin. 1,2
CIF – Cost, Insurance and Freight
The seller’s price includes the cost of the goods, export loading, ocean freight, and marine insurance to the named destination port. Example: CIF Conakry.
CIF is one of the most widely used Incoterms in international commodity trading. The seller arranges and pays for insurance, but the minimum coverage required under CIF (Institute Cargo Clauses C) may be insufficient for high-value or fragile cargo – buyers often require broader coverage. Risk transfers to the buyer when goods are loaded on board at origin, even though the seller continues to bear the freight and insurance costs. 1,2
DDP – Delivered Duty Paid
The seller bears all costs and risks of delivering goods to the named destination, including import duties, taxes, and customs clearance at the buyer’s end. The seller is responsible until goods are delivered to the buyer’s premises or a named place. Example: DDP Madrid.
DDP is the maximum obligation for the seller – it is the mirror image of EXW (maximum obligation for the buyer). DDP is common in supply agreements where the seller has established distribution infrastructure in the buyer’s country. 1,2
EXW – Ex-Works
The seller’s only obligation is to make the goods available at their premises (factory, warehouse, etc.). The buyer assumes all costs and risks from that point – loading, inland transport, export customs clearance, ocean freight, import duties, and delivery. Example: EXW Delhi.
EXW is the minimum seller obligation. It is often used in manufacturing supply chains where the buyer has their own freight forwarding infrastructure. Note: under EXW, the buyer is technically responsible for export clearance – which can create complications if the buyer does not have a presence in the seller’s country. FCA is often more practical in these situations. 1,2
FAS – Free Alongside Ship
The seller delivers the goods, cleared for export, alongside the named vessel at the named port of shipment. The buyer then bears all costs and risks from that point. Example: FAS Port Klang.
FAS is used primarily for bulk cargo where goods are loaded by crane or conveyor directly into the vessel – the “alongside” delivery point is where the ship’s tackle can reach the cargo. 1,2
FCA – Free Carrier
The seller delivers the goods, cleared for export, to the carrier nominated by the buyer at a named place. If that place is the seller’s premises, the seller is responsible for loading; if any other named place, the seller is not responsible for unloading from their transport.
FCA is more flexible than FOB for containerized shipments and is recommended by the ICC as the preferred alternative to FOB when containers are involved, because risk transfers at the container terminal rather than at the ship’s rail – a distinction that matters when cargo is damaged in the terminal before loading. 1,2
FCL – Full Container Load
A shipment that fills an entire shipping container – no other buyer’s goods share the container. Standard container sizes are 20-foot (TEU – Twenty-foot Equivalent Unit) and 40-foot (FEU). Many commodity suppliers will only supply in FCL quantities as minimum order.
Contrast with LCL (Less than Container Load): goods that do not fill a full container are consolidated with other shippers’ cargo at a Container Freight Station (CFS), then de-consolidated at the destination CFS. LCL shipments are slower, more handling-intensive, and carry higher per-unit freight costs than FCL – but allow smaller order quantities. 1
FOB – Free on Board
The seller pays all costs to load the goods on board the named vessel at the named port of shipment, including export customs clearance. Risk transfers to the buyer the moment goods pass the ship’s rail. The buyer is responsible for ocean freight, insurance, and all subsequent costs. Example: FOB Cape Town.
FOB is one of the most commonly used and frequently misunderstood Incoterms. The key point: risk and cost transfer at the ship’s rail at the port of origin – not at the destination. FOB is appropriate for bulk and break-bulk cargo; for containerized shipments, FCA is technically more appropriate because risk should transfer when the container is handed to the carrier at the terminal, not when it is lifted over the ship’s rail. 1,2
BCL – Bank Comfort Letter (Bank Capability / Confirmation Letter)
A letter from a buyer’s bank confirming the buyer’s ability to meet specified payment requirements for a transaction. A BCL is a statement of capability – it is not a guarantee of payment and does not create any obligation on the part of the bank to fund the transaction.
BCLs are commonly requested by sellers in commodity transactions as a preliminary financial screening step before committing to due diligence or issuing a Full Corporate Offer (FCO). However, their value is limited: a BCL confirms that funds exist in the account at the time of issuance but does not prevent those funds from being withdrawn or committed elsewhere before the transaction closes. A BCL is a starting point, not a substitute for a Letter of Credit or Bank Guarantee. 1,4
BG – Bank Guarantee
See Bank Guarantee in the Sales & Financial Instruments. In commodity trading specifically, bank guarantees are used as:
Performance bonds – guaranteeing a seller’s ability to deliver contracted goods on time and to specification
Advance payment guarantees – protecting a buyer who has paid a deposit before delivery
Bid bonds – guaranteeing a bidder will execute a contract if awarded
In commodity transactions, a BG from a top-tier bank (rated A or above) is typically required for transactions above $5M. 1
BPU – Bank Payment Undertaking
A bank’s irrevocable, independent undertaking to pay a seller a specified sum on a specified date, contingent on the seller presenting electronic data (not physical documents) that matches the conditions specified in the undertaking. The BPU is the electronic equivalent of a Letter of Credit, developed under the ICC’s Bank Payment Obligation (BPO) framework to support supply chain finance in digitized trade environments.
The BPO/BPU framework allows faster, lower-cost settlement than traditional documentary LCs by replacing paper document presentation with electronic data matching through the SWIFT Trade Services Utility (TSU). Adoption has been gradual but is accelerating as global trade digitization advances. 2,4
L/C – Letter of Credit
A document issued by a bank that guarantees payment of a buyer’s drafts for a specified period and up to a specified amount, provided the seller presents conforming documents as specified in the credit. The LC is the cornerstone of international trade finance – it substitutes the bank’s credit for the buyer’s credit, giving sellers assurance of payment from a creditworthy institution.
Types of Letters of Credit:
CL/C – Confirmed Letter of Credit. A foreign bank’s LC with validity confirmed by a first-class bank (usually US or European). A seller with a CL/C is assured of payment even if the foreign buyer or the foreign bank defaults – the confirming bank adds its independent payment commitment.
DL/C / DLC – Documentary Letter of Credit. The standard LC requiring presentation of specified shipping documents (Bill of Lading, commercial invoice, packing list, certificate of origin, inspection certificate, etc.) before payment is released.
IL/C – Irrevocable Letter of Credit. Cannot be amended or cancelled without the consent of all parties – issuing bank, confirming bank (if any), and beneficiary. Virtually all LCs issued today are irrevocable.
RL/C – Revolving Letter of Credit. The credit amount automatically reinstates after each drawing – the same LC covers multiple shipments without issuing a new LC each time.
RDLC – Revolving Documentary Letter of Credit. Combines the revolving feature with full documentary requirements for each drawing.
SL/C / SBLC – Standby Letter of Credit. A financial guarantee or performance bond – not intended to be drawn in the normal course of a transaction. See full entry in the Sales & Financial Instruments.
All LCs in international trade are governed by UCP 600 (Uniform Customs and Practice for Documentary Credits), the ICC publication that sets the global standard. 1,2
MTN – Medium Term Note
A debt instrument that typically matures in 5–10 years, though MTN programs can range from nine months to 30 years. See full entry in the Sales & Financial Instruments. In commodity trading contexts, MTNs are referenced as collateral instruments in Private Placement Programs (PPPs) and monetization transactions. 1
POF – Proof of Funds
A document from a buyer’s bank to the seller or seller’s bank confirming that sufficient funds are available to complete a proposed transaction. Typically takes the form of a bank statement, BCL, or SWIFT MT799 message from the buyer’s bank.
POF is a standard requirement in large commodity transactions before a seller will commit to due diligence, provide a Full Corporate Offer (FCO), or allocate product. The seller needs to know the buyer is financially capable before investing time and legal costs in a transaction that may not close.
Limitations: POF confirms funds exist at the moment of issuance only – it does not freeze or earmark those funds for the transaction. A POF is not a payment commitment. For payment security, an LC, BG, or SBLC is required. 1,4
PPP – Private Placement Program (also Purchasing Power Parity)
Private Placement Program: A trading program that uses bank instruments (BGs, SBLCs, or MTNs) as a capital base for a series of buy-sell transactions in discounted financial instruments, generating returns shared between the program and the instrument holder. See full entry in the Sales & Financial Instruments.
Purchasing Power Parity (PPP): An economic concept describing a condition between countries where a given amount of money has the same purchasing power in different countries. PPP is used by economists to compare national income and living standards across countries on a like-for-like basis. The IMF, World Bank, and OECD publish PPP-adjusted GDP figures. 1,5
RWA – Ready, Willing and Able
A banking term confirming that a bank is ready, willing, and able to fund a specific transaction on behalf of its client. An RWA letter from a bank is a step above a BCL – it indicates active intent to fund, not merely the existence of funds. However, like a BCL, an RWA is not a payment guarantee or LC – it is a statement of intent.
In commodity and private placement transactions, RWA letters are sometimes requested to confirm that a buyer’s bank is prepared to issue an LC or BG for the transaction amount. The distinction between RWA (intent) and actual LC issuance (commitment) is critical – deals that stall at the RWA stage without progressing to instrument issuance are a red flag. 1,4
SWIFT Code (BIC – Bank Identifier Code)
The standard format for Bank Identifier Codes used when transferring money and messages between banks internationally. All SWIFT codes are administered by the Society for Worldwide Interbank Financial Telecommunication (SWIFT).
Structure of an 8 or 11-character SWIFT/BIC code:
Characters 1–4: Bank code (letters only) – e.g. CHAS for JPMorgan Chase
Characters 5–6: ISO 3166-1 alpha-2 country code – e.g. US for United States
Characters 7–8: Location code – passive participants have “1” as the second character
Example: CHASUS33 = JPMorgan Chase (CHAS) + United States (US) + New York primary office (33). In commodity and trade finance transactions, SWIFT codes are essential for bank-to-bank communication, LC issuance, and instrument delivery via MT760 or MT799 messages. 1,3
Used in oil and liquid commodity shipments. Issued by the seller, an ATB provides the buyer with formal authority to board the vessel to confirm cargo availability, quantity, and quality before taking delivery. The ATB is a key document in the oil trading sequence – without it, the buyer’s representatives or inspectors cannot legally access the vessel. 1
ATL – Authority to Load
Formal authority issued to a buyer’s vessel or agent to load cargo at the seller’s facility or terminal. Distinct from ATB (which permits boarding to inspect) – ATL authorizes the actual loading operation. Common in crude oil, LNG, and bulk commodity transactions where multiple procedural steps precede physical loading. 1
AWB – Air Way Bill
The air freight equivalent of a Bill of Lading – the document issued by an airline or air freight carrier acknowledging receipt of cargo for air transport. Unlike a BOL, an AWB is not a document of title – it cannot be endorsed and transferred to give title to the goods. It is a receipt, a contract of carriage, and a customs declaration, but the consignee named on the AWB is the only party who can claim the goods at destination.
AWBs are used for high-value, time-sensitive, or perishable commodity shipments where speed outweighs the cost premium of air freight. 1
BOL – Bill of Lading
The receipt issued by a shipping company when goods are loaded on board a vessel. The BOL is one of the most important documents in international trade – it simultaneously serves as:
Receipt for goods. Evidence that the carrier has received the cargo in the described condition
Contract of carriage. The terms under which the carrier agrees to transport the goods
Document of title. The holder of an original negotiable BOL has title to the goods – whoever presents the original BOL at the destination port can claim the cargo
Because the BOL conveys title, it is the central document in documentary LC transactions. Types: Straight BOL (non-negotiable); Order BOL (negotiable, endorsed to transfer title); Sea Waybill (non-negotiable, no original required). 1,4
COO / CO / C/O – Certificate of Origin
A documentary statement signed by the exporter and certified by a local Chamber of Commerce, Consulate, or authorized body, attesting to the country of origin of the goods being shipped. Required by:
Customs authorities in the importing country to determine applicable tariff rates and trade agreement eligibility
Buyers who need to verify that goods comply with origin requirements in their purchase contracts
Letters of Credit that specify origin requirements as a condition of payment
Some countries issue multiple types of COOs with different eligibility criteria – preferential COOs qualify for reduced tariff rates under free trade agreements. 1
CPA – Charter Performance Agreement
A contract between the charterer of a vessel and the vessel owner specifying the performance obligations of the vessel – speed, fuel consumption, cargo capacity, and other operational benchmarks. If the vessel underperforms, the charter agreement typically provides for hire rate reductions or off-hire periods as compensation.
CPAs are standard in voyage and time charter agreements for bulk commodity shipments (oil, LNG, grain, minerals). They protect buyers and charterers from delays that could affect LC presentation deadlines and supply chain scheduling. 1,4
E&OE – Errors and Omissions Excepted
A disclaimer commonly found on invoices, quotations, and price lists, indicating that the document’s author does not accept responsibility for errors or missing information. E&OE is a standard protective notation – it does not eliminate legal liability for material misrepresentation, but signals that the document is provided in good faith and should be verified by the recipient.
Documents bearing E&OE should be thoroughly checked against source contracts, purchase orders, and LC terms before any financial commitment is made based on them. 1
FCO – Full Corporate Offer
A formal offer document issued by a seller to a buyer, setting out the full terms and conditions under which the seller is prepared to supply a commodity. An FCO typically includes:
Product specification and quality parameters
Quantity available (per shipment and total contract quantity)
Price and pricing formula (fixed, index-linked, etc.)
Incoterm and named port/delivery point
Payment terms (LC type, currency, maturity)
Inspection and quality certification requirements (e.g. SGS)
An FCO is binding on the seller (subject to its validity period) once accepted by the buyer. Sellers typically require buyers to submit an ICPO and BCL/POF before issuing an FCO. 1,4
ICPO – Irrevocable Corporate Purchase Order
A formal, irrevocable purchase order issued by a buyer to a seller, committing the buyer to purchase a specified quantity of a commodity at agreed terms. The ICPO is the buyer’s counterpart to the seller’s FCO – together they form the basis for the Sale and Purchase Agreement (SPA).
“Irrevocable” means the buyer cannot withdraw the order once submitted without the seller’s consent. ICPOs are typically accompanied by a BCL or POF to demonstrate financial capability. Note: ICPO can also stand for Irrevocable Commission Payment Order or Irrevocable Confirmed Payment Order – context determines the meaning. 1
LOI – Letter of Intent
A document by which a buyer states their intention to enter into a transaction on specified terms, without yet making a binding commitment. An LOI is typically non-binding on the substantive deal terms but may create binding obligations on specific points (confidentiality, exclusivity, cost-sharing for due diligence).
In commodity trading, LOIs are used to initiate negotiations and demonstrate serious buyer interest before committing to the full ICPO/FCO process. A well-drafted LOI from a credible buyer with a BCL attached carries more weight than a bare expression of interest. 1
POP – Proof of Product
A document requested by buyers or their agents to verify the existence of a commodity and the seller’s ability to deliver it. In practice, POPs are heavily caveated:
Many POPs produced in commodity markets are false – this is a known fraud vector, particularly in oil, gold, and bulk mineral trading
A POP is automatically out of date the moment it is issued – the product could have been sold to another buyer in the interim
A POP without a specific contract reference is worthless
Large-quantity POPs are inherently suspect: manufacturers rarely stockpile millions of tonnes
The only genuinely reliable proof of product is physical inspection at the production facility or dockside by an independent qualified inspector (e.g. SGS). 1,4
SGS – SGS Group (Société Générale de Surveillance)
The world’s leading inspection, verification, testing, and certification company, headquartered in Geneva, Switzerland. SGS certificates are internationally accepted as the definitive quality and specification standard for commodity shipments – including crude oil, refined petroleum products, LNG, metals, minerals, agricultural commodities, and manufactured goods.
In commodity trading, an SGS certificate (or equivalent from Bureau Veritas, Intertek, or similar accredited inspectors) is typically a mandatory LC document. SGS at-load certificates are also used to resolve quality disputes and insurance claims after delivery. 1,6
SPA – Sale and Purchase Agreement
The definitive binding contract between a seller and buyer for the purchase and sale of a commodity or asset. The SPA sets out all material terms including quantity, quality specifications, price, payment terms, delivery schedule, inspection and acceptance procedures, force majeure, dispute resolution, and governing law.
In commodity trading, the SPA is typically preceded by an LOI (non-binding) and FCO/ICPO exchange. In real estate and corporate M&A transactions, the SPA (or PSA) performs the same function – it is the contract that closes the deal. 1,4
TTM – Table Top Meeting
A physical meeting required for large or complex commodity transactions where the principals (buyer, seller, and sometimes their bankers and legal counsel) meet face-to-face to exchange documents, verify identities, and finalize transaction terms. TTMs are most common in:
Large crude oil and LNG transactions ($50M+)
Transactions involving sovereign entities or state-owned enterprises
Deals where document authenticity is a critical concern
First-time transactions between parties who have not previously traded together
TTMs remain important for high-value transactions because they allow face-to-face verification of principals, physical inspection of original documents, and real-time resolution of discrepancies. 1
A method of transferring crude oil or petroleum products from one tanker vessel to another while both are at sea or anchored, rather than at a fixed terminal. TTT operations (also called Ship-to-Ship or STS transfers) are used when:
The receiving port cannot accommodate the size of the original tanker (VLCC to Aframax lightering)
Physical blending of different crude grades is required during transfer
Trading strategies require cargo splitting or consolidation mid-voyage
Sanctioned cargo concealment (a known abuse – used to obscure the origin of sanctioned oil)
Legitimate TTT operations are regulated and must be declared to flag state and port state authorities. Due diligence on TTT transactions is essential – unplanned or undisclosed ship-to-ship transfers in sanctioned crude trade are a significant compliance risk for buyers, financiers, and insurers. 1,4
TTO – Tanker Take Over
A method of crude oil or petroleum product consignment in which the buyer takes over an entire tanker vessel and its cargo, rather than receiving delivery at a fixed terminal. TTO transactions are used in large spot market deals where the seller offers the cargo and vessel as a package, or where the buyer requires flexibility in the delivery destination.
TTO differs from TTT in that TTO involves taking possession of the vessel itself (or chartering it on a voyage basis), whereas TTT is a transfer between two vessels. Both methods require careful coordination with shipbrokers, surveyors, and P&I clubs. 1
HNW / UHNW – High Net Worth / Ultra-High Net Worth
Classifications used in private wealth management and investment banking to segment clients by investable assets:
HNW (High Net Worth): Individuals with investable assets of $1M–$5M (definitions vary by institution)
VHNW (Very High Net Worth): $5M–$30M investable assets
UHNW (Ultra-High Net Worth): $30M+ investable assets (some institutions set the threshold at $50M+)
In commodity and private placement markets, HNW and UHNW classification is relevant because certain investment structures are available only to investors who meet specific wealth thresholds. All HNW/UHNW investors in US securities offerings must also qualify as Accredited Investors under SEC rules (see Funding). 1,4
Incoterms 2020 – Official ICC Publication. The authoritative source for all Incoterms rules. The 2020 edition introduced one new term (DPU – Delivered at Place Unloaded, replacing DAT) and updated guidance on security-related costs. International Chamber of Commerce
UCP 600 – Uniform Customs and Practice for Documentary Credits. The ICC ruleset governing Letters of Credit worldwide. Any practitioner involved in commodity trade finance should be familiar with UCP 600 articles governing document presentation, bank examination, discrepancies, and payment. International Chamber of Commerce
SGS Group – Inspection, Verification, Testing & Certification. The world’s leading commodity inspection company. SGS certificates are the global standard for quality verification in crude oil, petroleum products, metals, minerals, and agricultural commodity shipments. SGS Group
SWIFT Standards – MT Message Types. Reference for all SWIFT message types used in commodity trade finance, including MT700 (LC issuance), MT760 (BG/SBLC delivery), MT799 (free format pre-advice), and MT103 (payment). SWIFT.com
Prosper Systems Funding. Capital formation terms for natural resources clients – accredited investor rules, Regulation D, syndication structures, GP/LP mechanics, and SEC exemptions. Prosper Systems
Prosper Systems Sales & Financial Instruments. Detailed entries for Bank Guarantees, SBLCs, MTNs, Safekeeping Receipts, Arbitrage, Monetization, and SWIFT MT760/MT799. Prosper Systems
Oil & Gas – Drilling, reservoir, production, reserves classification, royalties, and working interest terms for the upstream petroleum industry.
Mining – NI 43-101, reserves classification, royalty structures, and junior mining finance terms for resource sector investors.
Sales – Bank Guarantees, SBLCs, MTNs, SWIFT MT760/MT799, and trade finance instruments — the transaction layer for large asset and commodity deals.
Funding – Capital formation, SEC exemptions, accredited investors, GP/LP structures, and syndication mechanics — the financial engine behind every sector.
Real Estate – Cap rates, NOI, pro forma, capital stack, REIT, leasing structures, and investment return metrics that underpin CRE financing decisions.
AI – Terms, tools, and deployment strategies for AI in CRE, AEC, and natural resources practice — the technology layer running across all PS sectors.
Neither Prosper Systems (PS), nor its Founder, Kenton H Johnson, are licensed Real Estate or Lending Brokers, Securities Dealers or Investment Advisers. However, PS has an Attorney on its Team, and works closely with and engages other licensed individuals or firms as needed. PS makes no warranties or representations as to the quality of an opportunity, the integrity of any party, or the value of a given transaction. PS is acting only as Collaborator. All due diligence is the responsibility of Investors, Buyers, Owners and their Collaborators.
The definitions in this Glossary are for guidance and educational purposes only and are not intended to be comprehensive or to constitute legal, financial, or investment advice. The commodity trading and private placement markets described herein contain significant fraud risk – due diligence, independent legal counsel, and verified banking relationships are essential.
Prosper Systems, led by Kenton H Johnson, is a team of Business, Sales and Technical Operations Consultants who have the resources and talents to work with projects and businesses that are or will be worth us$2M to $20M+, to facilitate: Finance as Capital Consultants ala Startup Steps, or Sale as Collaborators ala Sales. Prosper Systems is continuing to Collaborate with more Companies, Collaborators and Capital ala More Resources. Referrers are well compensated.
Commodities Glossary