Trade terms

Coffee Trade Terms

This is the reference page for the language on a green coffee contract. It is deliberately practical: what each term commits you to, and what it leaves open if you do not tighten it.

Last reviewed July 20263 min read

Quick answer

A green coffee contract fixes six things: the goods, the price basis, the delivery term, the quality basis, the payment terms and the shipment period. Most disputes come from one of those six being left implicit — usually the quality basis or the point at which weight and quality are determined.

Price basis: outright and differential

Most Arabica physical contracts are priced against the ICE Arabica futures contract — "the C" — and most Robusta against the London Robusta contract. The physical price is expressed as a differential to that reference: a premium or discount reflecting origin, grade, preparation, certification and availability.

Outright / fixed price: A single agreed price. Simple, and both parties carry futures-market risk until delivery.
Differential (price-to-be-fixed): Differential agreed now, the futures leg fixed later against a nominated contract month.
Nominated month: Which futures contract the differential applies to. Must be stated — differentials are not comparable across months.
Fixation window: The period in which the buyer or seller may fix the futures leg. Needs a deadline and a default.

A differential without a month is not a price

A quoted differential only means something against a specific futures month. Comparing "+45" from one supplier with "+40" from another without knowing both months is comparing two different things.

Ethiopian and some other specialty trades are frequently done outright rather than against the futures reference, particularly where the differential would be so large that the futures leg is not a meaningful component of the price.

Quality basis

This is the clause that decides what happens when the coffee arrives and is not what the buyer expected. There are three common bases and they allocate risk very differently.

Quality bases
Basis	What it means	Risk sits with
Sample approved / as per approved sample	The shipment must conform to a specific retained sample the buyer approved	Balanced, provided the reference sample is retained by both parties
Type sample	The shipment must be of a stated type or better, judged against a reference type	Buyer, unless "or better" and the arbitration route are tight
Description only	Specification stated in words — grade, screen, defects, moisture — with no reference sample	Buyer, on everything the words do not cover — notably the cup

Whatever basis is used, the contract should state where quality is finally determined — at origin on the pre-shipment sample, at load port, or on arrival — and what the consequence of a shortfall is: allowance, rejection, or independent re-determination.

Weight terms

Shipped weight — weight determined at origin governs. The buyer carries transit loss.
Landed / delivered weight — weight at destination governs. The seller carries transit loss.
Franco / net delivered — net weight at destination after any agreed deductions.
Green coffee loses a little weight in transit as it equilibrates. The term chosen decides who pays for that, and it is worth a sentence rather than an assumption.

Shipment period and performance

A shipment period is a window, not a date, and the definition of shipment matters: normally the on-board date on the bill of lading. Related terms worth stating explicitly:

Shipment window: e.g. "September/October shipment" — the months in which the on-board date must fall
Prompt shipment: Coffee already prepared and available; a short defined window
Forward / crop contract: Against a crop not yet harvested — carries production risk
Partial shipment: Whether the seller may ship in instalments
Extension: Whether and on what terms the window may be extended

Payment

Common payment structures
Structure	Mechanics	Notes
Cash against documents (CAD)	Documents released against payment through the banks	Very common in coffee; seller retains control of documents until paid
Documentary letter of credit	Bank undertakes payment against compliant documents	Higher cost and document discipline; useful with new counterparties
Advance payment / deposit	Part payment before shipment	Common on small specialty lots and micro-lots
Open account	Payment at agreed terms after shipment	Established relationships only

Payment structure and Incoterm are separate decisions. FOB does not imply any particular payment mechanism.

The six things every contract must state

1Goods — origin, region, species, process, grade, screen, crop year, packaging.
2Quantity — bags and net weight, with tolerance.
3Price basis — outright, or differential plus nominated month and fixation terms.
4Delivery term — the Incoterm with its version, plus the named port.
5Quality basis — approved sample, type or description; point of determination; consequence of shortfall.
6Shipment and payment — the window, and the payment mechanism.

We will quote against your contract terms

Tell us your preferred Incoterm, quality basis and payment structure with your specification, and we will quote against them rather than against ours.

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Frequently asked questions

What is a coffee differential?

The premium or discount at which a physical lot trades relative to the futures reference — the ICE Arabica contract for Arabica, the London Robusta contract for Robusta. It reflects origin, grade, preparation, certification and availability, and it is only meaningful against a nominated futures month.

What does "price to be fixed" mean?

The differential is agreed at contract time but the futures leg is fixed later, within an agreed window against a nominated contract month. The contract needs to state who may fix, by when, and what happens if nobody does.

What is the difference between shipped weight and landed weight?

Which determination governs the invoice. Under shipped weight the origin figure stands and the buyer carries transit loss; under landed weight the destination figure stands and the seller does. Green coffee loses a little weight in transit, so the choice has a real cost.

Do I need a letter of credit to buy green coffee?

Not necessarily. Cash against documents is very common in coffee and is simpler and cheaper. Letters of credit are more usual with new counterparties or where a bank requires them. It is a separate decision from the Incoterm.

Tell us the coffee you need

Lots can be specified by origin, region, process, grade, screen, moisture, defect tolerance, crop year and packaging. Send what you know and we will confirm what each origin realistically supports.