SGS Inspection Process in Commodity Trading: Complete Guide

In international commodity trading, trust is built on verification. SGS (Société Générale de Surveillance) inspection provides independent, third-party verification that protects both buyers and sellers in high-value transactions.

What is SGS?

Founded in 1878 in Geneva, Switzerland, SGS is the world's leading inspection, verification, testing, and certification company. With operations in over 140 countries and 99,000+ employees, SGS serves as the global standard for quality and integrity.

Why SGS Matters in Commodity Trading

Neutral Third Party: No financial interest in the transaction outcome

Global Recognition: Accepted by banks, customs, and trading partners worldwide

Technical Expertise: Certified inspectors and state-of-the-art laboratories

Legal Standing: SGS reports are admissible in international arbitration

Risk Mitigation: Reduces disputes over quality and quantity

SGS Inspection Types in Fertilizer Trading

1. Pre-Shipment Inspection (PSI)

Conducted before the commodity leaves the origin port.

What's Inspected:

Product quality (nitrogen content, moisture, biuret)

Quantity (weight verification)

Packaging condition

Marking and labeling compliance

Loading supervision

Timeline: 2-3 days from sampling to final report

2. Destination Inspection

Performed when cargo arrives at the discharge port.

What's Inspected:

Quantity verification (weight loss during transit)

Quality comparison with pre-shipment results

Packaging damage assessment

Contamination check

Timeline: 1-2 days upon vessel arrival

3. Draft Survey

Determines the cargo weight loaded onto or discharged from a vessel.

Method:

Vessel displacement measurement before and after loading/unloading

Bunker and ballast water adjustments

Calculation based on vessel's stability data

Accuracy: ±0.5% typical margin

4. Laboratory Analysis

Comprehensive chemical and physical testing in SGS-certified laboratories.

For Urea 46%:

Nitrogen content (Kjeldahl method)

Moisture content (oven drying method)

Biuret analysis (spectrophotometry)

Particle size distribution (sieve analysis)

Crushing strength

Free ammonia and formaldehyde levels

Step-by-Step SGS Inspection Process for Urea 46%

Step 1: Inspection Agreement

Inspection terms specified in the Sales & Purchase Agreement (SPA):

Who appoints SGS (buyer, seller, or jointly)

Inspection location (loading port, discharge port, or both)

Parameters to be tested

Who bears the inspection cost

Acceptance criteria and tolerances

Step 2: Appointment and Notification

The appointing party contacts SGS:

Provides product details and specifications

Specifies required tests and standards

Gives advance notice (typically 48-72 hours before inspection)

Shares loading/discharge schedule

Step 3: Document Review

SGS inspector reviews:

Commercial invoice

Packing list

Product specification sheet

Previous inspection reports (if available)

SPA terms and conditions

Step 4: Visual Inspection

Inspector conducts on-site assessment:

Packaging integrity (bags or bulk)

Color and appearance

Presence of foreign materials

Moisture or caking issues

Storage conditions

Step 5: Sampling

Critical Step: Representative sampling ensures accurate results.

Bulk Urea Sampling:

Multiple samples from different locations in the vessel/warehouse

Minimum 5kg composite sample per 1,000 MT

Samples sealed and labeled with unique identifiers

Chain of custody maintained

Bagged Urea Sampling:

Random selection of bags (square root method: √total bags)

Samples from top, middle, and bottom of selected bags

Minimum 200g per bag, composited for testing

Step 6: Laboratory Testing

Composite samples sent to SGS-accredited laboratory:

Standard Urea 46% Test Panel:

Total Nitrogen Content

- Method: Kjeldahl digestion or combustion analysis

- Specification: 46.0% minimum

- Typical accuracy: ±0.1%

Moisture Content

- Method: Oven drying at 105°C

- Specification: 0.5% maximum

- Typical accuracy: ±0.05%

Biuret Content

- Method: Spectrophotometry

- Specification: 1.0% maximum

- Typical accuracy: ±0.05%

Particle Size Distribution

- Method: Mechanical sieving

- Specification: Per agreed standards (e.g., 90% between 1-4mm)

Free Ammonia

- Method: Titration

- Specification: 200 ppm maximum

Formaldehyde

- Method: Spectrophotometry

- Specification: 100 ppm maximum

Testing Time: 24-48 hours for standard panel

Step 7: Quantity Verification

For bulk shipments, draft survey determines exact weight:

Draft Survey Procedure:

Initial vessel draft reading (6 positions on the hull)

Bunker and ballast measurements

Loading/unloading operation

Final draft reading

Calculation using vessel's hydrostatic tables

Adjustments for water density and temperature

For Bagged Cargo:

Weighbridge verification

Tally counting (number of bags × average weight)

Random bag weight checks

Step 8: Report Preparation

SGS prepares comprehensive inspection certificates:

Certificate of Quality (COQ)

Test results for all parameters

Comparison with specification

Pass/fail statement

Inspector signature and stamp

Laboratory seal

Certificate of Quantity (COQ)

Total weight loaded/discharged

Draft survey calculation details

Tally records (if bagged)

Outturn quantity

Certificate of Analysis (COA)

Detailed laboratory test results

Test methods used

Date and location of sampling

Laboratory accreditation number

Step 9: Certificate Issuance

Original certificates courier to buyer and seller

Digital copies (PDF) emailed immediately

Certificates include unique verification code

Can be authenticated on SGS website

Typical Turnaround: 3-5 days from inspection completion to certificate delivery

Step 10: Document Handover

SGS certificates used for:

Payment release (per LC terms)

Customs clearance

Quality verification

Dispute resolution (if needed)

SGS Inspection Costs

Inspection costs vary based on several factors:

Cost Factors

Cargo Quantity: Larger shipments have economies of scale

Location: Remote ports may incur travel premiums

Scope: Number of parameters tested

Urgency: Rush services cost 20-50% more

Frequency: Regular clients may negotiate better rates

Typical Cost Ranges (2025)

Pre-Shipment Inspection (Urea 46%, 12,500 MT bulk):

Draft Survey: $800 - $1,500

Sampling and Visual Inspection: $500 - $800

Laboratory Analysis (standard panel): $600 - $1,000

Certificate Issuance: $200 - $400

Total: $2,100 - $3,700 (approximately $0.17-0.30 per MT)

Additional Services:

Destination Inspection: $1,800 - $3,200

Loading Supervision: $500 - $1,000 per day

Expedited Service (24-hour turnaround): +30-50%

Who Pays for Inspection?

Per Incoterms and SPA agreement:

FOB Terms: Typically buyer pays for all inspections

CFR/CIF Terms: Seller may pay for loading port inspection; buyer pays for discharge inspection

Custom Arrangements: Can be negotiated in SPA (e.g., costs split 50/50)

SGS vs Other Inspection Companies

While SGS is the industry leader, other reputable inspection companies include:

Bureau Veritas (BV)

French company, similar scope to SGS

Strong presence in Africa and Middle East

Competitive pricing

Intertek

UK-based, extensive global network

Particularly strong in petroleum products

Comparable quality to SGS

CIQ (China Inspection & Quarantine)

Mandatory for imports to China

Government-affiliated

Lower cost but limited international recognition

Key Differences

Global Acceptance: SGS certificates most widely recognized by banks

Accreditation: SGS has ISO 17020 and 17025 accreditations globally

Turnaround Time: SGS typically fastest due to extensive lab network

Pricing: SGS often 10-20% higher than competitors but worth the premium for assurance

Common Issues and Resolutions

Issue 1: Test Results Don't Meet Specification

Example: Nitrogen content 45.8% instead of 46.0% minimum

Resolution Options:

Price adjustment (discount based on actual nitrogen content)

Rejection of cargo (if SPA allows)

Retesting (if results are borderline and seller disputes)

Arbitration (if parties can't agree)

Issue 2: Quantity Shortage

Example: Draft survey shows 12,300 MT instead of 12,500 MT contracted

Resolution:

Apply quantity tolerance (if ±5% tolerance, 12,300 MT is acceptable)

Pro-rata payment adjustment

Seller must provide additional cargo to meet minimum

Issue 3: Sampling Disputes

Example: Buyer claims samples weren't representative

Resolution:

Joint sampling with both parties present

Independent third-party witnessing

Video documentation of sampling process

Retain samples for arbitration

Issue 4: Certificate Delays

Example: SGS report not ready before vessel departure

Resolution:

Provisional certificate issued (subject to final lab results)

LC terms allow grace period for certificate submission

Express testing at premium cost

Best Practices for SGS Inspection

For Sellers:

Prepare in Advance: Ensure product meets specifications before inspection

Proper Storage: Maintain dry, cool conditions to prevent caking

Documentation: Have all quality records and previous inspection reports ready

Transparency: Allow full inspector access to cargo and facilities

Representative Sampling: Ensure good mixing of bulk cargo

For Buyers:

Clear SPA Terms: Specify exact parameters, standards, and acceptance criteria

Appoint Early: Give SGS sufficient notice (72+ hours)

Independent Appointment: Appoint SGS directly, not through seller

Witness Inspection: Send representative to witness critical steps

Retain Samples: Keep counter-samples for verification if disputes arise

For Both Parties:

Agree on Tolerances: Define acceptable ranges for each parameter

Document Everything: Photos, videos, signed tally sheets

Communication: Keep all parties informed throughout inspection

Dispute Protocol: Establish arbitration process in SPA

Payment Linkage: Tie payment release to satisfactory SGS results

SGS in Payment Instruments

Letter of Credit Requirements

Typical LC clause:

"Full set of clean on-board Bills of Lading accompanied by SGS Certificate of Quality and Quantity showing nitrogen content minimum 46.0%, moisture maximum 0.5%, biuret maximum 1.0%, and weight not less than 95% of LC value."

SBLC/DLC Integration

SGS certificates serve as:

Proof of Performance: Seller fulfilled quality obligations

Payment Trigger: Bank releases payment upon receipt

Dispute Resolution: Objective basis for claims

Conclusion

SGS inspection is not just a formality - it's the cornerstone of trust in international commodity trading. For Urea 46% transactions typically worth $4-8 million per shipment, the $2,000-4,000 inspection cost is a small price for peace of mind.

By understanding the SGS process, costs, and best practices, traders can minimize risks, prevent disputes, and build long-term relationships based on verified quality and quantity.

Ready to start trading with full SGS verification? Stratoma Interchange ensures all transactions include comprehensive SGS inspection as standard practice.

---

Keywords: SGS inspection, commodity trading, third-party verification, certificate of quality, certificate of quantity, urea inspection, draft survey, quality control, international trade