Reviewed by Oct 05, 2020| Updated on
A grading certificate is a document issued by the inspectors or an accredited grading panel officially indicating a commodity's quality. The grading certificate is essential because it is necessary to identify a product as an exchange grade for future trading. Exchanges of commodities issue detailed guidelines describing the characteristics, which classify a commodity as exchange-grade.
A wide range of approved inspectors or panels may issue a Certificate of Grading. The most appropriate inspector will be used depending on the product involved. Several government departments or officials undertake such services, but this function can also be fulfilled by enlisting the services of an inspection services company.
These commodity grading certificates serve valuable purposes, which are useful in the futures market for both the buyer and the seller of a commodity. The document gives an official, objective determination of the value, quality, and condition of the product.
It not only sets the status of a sale or exchange but can also serve as valuable documentation required to obtain loans or submit claims in case of a loss.
The specific information outlined in a grading certificate can vary depending on the inspector's assessed materials or items. For example, a cocoa grading certificate will state:
The document will also state whether the cocoa meets the requirements set by the commodity exchange. The certificate shall be valid for some time as determined by the exchange and the product.
The Department of Agriculture may have a division of crop inspection and grading which will carry out voluntary checks for a fixed fee charged by the consumer. The same department may also offer a certificate grading the training and testing program for those who wish to obtain the credentials for evaluation.
When a product tester certificate is issued, continuing education programs or testing must be conducted annually to retain the current status as a licensed inspector.