What is an ICPO (irrevocable corporate purchase order)?
ICPO · Irrevocable Corporate Purchase Order
A buyer’s purchase order, issued on company letterhead and described as irrevocable. Despite the name it binds nobody until a seller accepts it, and in physical commodity trading it functions as a more formal-looking letter of intent.
Key points
- "Irrevocable" has no legal effect on an unaccepted order.
- Company registration and signatory authority matter as much as the commercial terms.
- A named payment instrument means nothing until the bank has agreed to issue it.
At a glance
| Issued by | The buyer |
|---|---|
| Binding | No, until accepted by the seller |
| Distinguishes it from an LOI | Presentation, not legal effect |
| Must carry | Full specification, quantity, Incoterm, destination, payment instrument, company details |
| Common failing | Names an LC the buyer has no facility to raise |
The name overstates the document
An ICPO is a purchase order for a commodity cargo, issued on the buyer’s letterhead, signed, and titled irrevocable. The word is doing no legal work. An offer or order that has not been accepted can be withdrawn, and calling it irrevocable does not change that.
What the title signals is intent rather than obligation: the buyer is saying it is not shopping the same enquiry around a dozen sellers this week. Whether that is true is a separate question, and one the document cannot answer.
What belongs in it
The useful contents are the same as any well-drafted enquiry: commodity and full specification with the thresholds that matter, quantity per shipment and total contract quantity, delivery basis under Incoterms 2020, discharge port, delivery schedule, the price or the index and differential it is linked to, the payment instrument, and the inspection regime.
Full company details and the signatory’s authority matter as much as the commercial terms. A seller cannot run KYC on a letterhead. Registration number, address, the name and position of the signatory and a route to verify them are what turn a document into a counterparty.
Where it goes wrong
The recurring problem is the chain. An ICPO that has been forwarded between several intermediaries arrives with a signature from someone who is not the end buyer and often cannot reach them. Sellers respond to these slowly or not at all, because every clarification takes a week to travel each way.
The second problem is banking. An ICPO frequently names a payment instrument the buyer has never raised. A letter of credit requires a facility and, usually, cash cover or a credit line. If that has not been discussed with the bank before the order is issued, the document describes a trade that cannot be paid for.
Frequently asked questions
- Is an ICPO binding on the buyer?
- Not by itself. A purchase order becomes a contract when the seller accepts it, and in commodity trading the parties normally sign a separate sales and purchase agreement instead. The word "irrevocable" in the title does not create an obligation.
- What is the difference between an ICPO and an LOI?
- Very little in substance. Both are buyer-issued, both describe the intended trade, and neither binds anyone. The ICPO is styled as a purchase order and tends to be more complete on specification and banking. Which is asked for is a matter of the seller’s house convention.
- Why do sellers ignore ICPOs?
- Usually because the order shows signs of having travelled through intermediaries, names a price no producer would accept, or specifies a payment instrument the buyer has not arranged. A complete order from a verifiable company with a bank behind it gets answered.
Related terms
A non-binding note from a buyer setting out what it wants to buy and on what terms. It commits nobody to anything, and its real function is to open a conversation in enough detail that the seller can tell whether the enquiry is serious.
A seller’s complete offer to sell a stated cargo on stated terms, valid for a stated period. Unlike a soft offer it is meant to be firm within its validity, and it is the document a buyer can reasonably act on.
The contract itself — the first document in the sequence that actually binds the parties. Everything exchanged beforehand is superseded by it, and any term not carried into it has no effect.
A bank undertaking to pay the seller once compliant documents are presented. It substitutes the bank’s credit for the buyer’s, which is why it remains the default instrument between counterparties trading together for the first time.
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