How to Verify a Commodity Supplier: A Checklist

A framework for vetting commodity suppliers — company checks, third-party inspection, letter of credit structure and the red flags that predict a bad trade.

Published: 2026-08-09 · CommoFlow

Most commodity losses are not caused by market moves. They are caused by paying the wrong counterparty. The good news is that supplier verification is a repeatable process, and almost every failed trade shows the same warning signs beforehand.

Layer 1 — Does the company exist as claimed?

• Registration. Company number, jurisdiction, incorporation date. Check it in the local registry yourself. A company incorporated three months ago offering 10,000 MT monthly is a mismatch worth explaining.
• Address. A registered office that is a mail-forwarding service is not disqualifying on its own, but combined with anything else on this list it is.
• Trading history. Ask for two references from counterparties who have actually taken delivery — then contact them using details you find independently.
• Banking. The bank account must be in the contracting company's name, in the country of business. Third-party or personal accounts are a hard stop.
• Sanctions and ownership. Screen the entity and its beneficial owners. This is a legal obligation in most jurisdictions, not a courtesy.

Layer 2 — Do they control the goods?

Ask questions only a real principal can answer: which producer, which plant, which brand or mine, what is the current stock position, when is the next production run. Vague answers ("our supplier confirms availability") mean you are talking to a chain, not a source. That is not automatically fatal — but you should price and structure accordingly.

Layer 3 — Independent inspection

Third-party inspection is the mechanism that converts a claim into a fact. The recognised names are SGS, Bureau Veritas, Intertek and Cotecna.

• Pre-shipment inspection — verifies quality, quantity and packing before loading
• Sampling and assay — for metals and concentrates, with umpire arbitration if buyer and seller assays diverge
• Draft survey — quantity determination for dry bulk
• Ullage and temperature — for liquid cargo such as bitumen or molten sulphur

Book the inspector yourself, or at minimum verify the certificate directly with the inspection company. Certificates are forged routinely, and a PDF proves nothing on its own.

Layer 4 — Structure the payment so documents come first

An irrevocable letter of credit at sight under UCP 600 remains the standard for good reason: the bank pays against compliant documents, not against trust. Points worth insisting on:

• Confirmed LC where the seller's country or bank carries risk
• A document list that includes the inspection certificate — so quality failure blocks payment
• Realistic latest shipment and expiry dates
• Clear tolerance on quantity and amount

Documentary collections (D/P, D/A) are cheaper but weaker. Advance telegraphic transfer to a new counterparty offers no protection at all — once sent, it is gone.

Red flags, ranked by how often they precede a loss

1. Price materially below market with an urgent-sounding reason
2. Pressure to skip inspection or to accept the seller's own certificate
3. Payment demanded to a third-party or personal account
4. Any upfront fee before goods are identified and contracted
5. Refusal to name the producer, brand or mine
6. Documents with inconsistent company names, addresses or dates
7. Communication only via free email domains and messaging apps
8. A counterparty who will not do a video call

A short pre-contract checklist

• Registry check completed and filed
• Beneficial owners screened against sanctions lists
• Two independently verified trade references
• Bank account matches the contracting entity
• Inspection agency appointed and paid by the buyer
• LC terms drafted with the inspection certificate as a required document
• Contract specifies governing law and an arbitration forum

It is also worth knowing which type of counterparty you are dealing with — see commodity brokers vs direct traders.

CommoFlow runs KYC and KYB verification on every counterparty before a cargo moves, with independent inspection built into the contract rather than offered as an option. Talk to our desk about a specific counterparty or trade.