LOI, ICPO, SCO, FCO and SPA: the documents of an EN590 deal explained

Every physical EN590 diesel deal moves through the same chain of documents. Knowing what each one is, and what it is not, saves weeks of back-and-forth and protects you from the most common traps. Below is the sequence most sellers and buyers use, with the minimum content each document should have.

An LOI is the buyer's first, non-binding statement of interest. It tells the seller that a real company wants a specific product on specific terms. A useful LOI is issued on company letterhead, signed, dated and contains:

• product and specification (for example EN590 10 ppm);
• quantity per shipment and contract length;
• Incoterms and destination port;
• target price basis or price indication;
• preferred payment instrument;
• company registration details and the signatory's name and position.

An LOI is enough to start a conversation, but many sellers will not issue a full offer until they receive an ICPO.

The ICPO is a firmer version of the LOI. The buyer confirms that it is ready to proceed on the stated terms if the seller can supply. Despite the word irrevocable, an ICPO is not a sale contract and does not oblige the buyer to pay anything. What makes an ICPO credible is detail and consistency: the same company name, address and signatory that will later appear in the SPA and in the bank documents.

The seller replies with an offer. An SCO (Soft Corporate Offer) is an indicative offer to see if the buyer is serious; an FCO (Full Corporate Offer) contains the complete terms the seller is prepared to sign:

• product specification, usually with a reference to the standard and a typical analysis;
• origin, quantity, tolerance and contract duration;
• loading port, Incoterms and delivery window;
• price basis (fixed price or a discount to a benchmark such as Platts);
• payment instrument and the step-by-step procedure;
• inspection terms and validity of the offer.

The buyer usually countersigns the FCO to show acceptance, and the parties move to the contract.

Before the buyer and seller are introduced directly, all parties in the chain sign an NCNDA (Non-Circumvention, Non-Disclosure Agreement) and an IMFPA (Irrevocable Master Fee Protection Agreement). The NCNDA stops anyone from bypassing the people who made the introduction; the IMFPA fixes each intermediary's commission and how it is paid. More on NCNDA and IMFPA.

Before anyone signs a contract, each side needs evidence that the other can perform. POP (Proof of Product) can be a tank storage receipt, a product passport or a quality certificate from a recent inspection, ideally verifiable directly with the storage terminal. POF (Proof of Funds) is usually a bank letter confirming that the buyer can open the agreed instrument. Both should be verified through official channels, not through contacts supplied by the counterparty. See how to verify an EN590 seller and how Q&Q inspection works.

The SPA is the only document in the chain that creates binding obligations to deliver and to pay. A solid SPA covers specification and tolerance, quantity, delivery terms, inspection (who inspects, where, and whose results are final), payment instrument and timing, title and risk transfer, penalties, force majeure, governing law and arbitration. Everything you agreed in the FCO should be reflected in the SPA; anything that is not in the SPA should be assumed not to exist. For the payment part, see DLC vs SBLC.

1. Buyer: LOI or ICPO.
2. Seller: SCO or FCO.
3. All parties: NCNDA and IMFPA.
4. Exchange and verification of POP and POF.
5. SPA negotiated and signed.
6. Buyer's bank issues the payment instrument; seller may issue a performance bond.
7. Inspection, loading, shipping documents and payment.

Sellers and buyers sometimes swap steps 4 and 5, but a procedure that asks for money before an SPA and before verifiable proof of product is a warning sign.

Generally no. An ICPO signals serious intent, but binding obligations to deliver and pay are created by the SPA.

An SCO is an indicative offer; an FCO contains the full terms the seller is prepared to sign, including procedure, inspection and payment terms.

In most EN590 deals the buyer starts with an LOI or ICPO, and the seller responds with an offer.