DEFINITION of 'Grading Certificate'

A document issued by inspectors or an approved grading panel that formally signifies the quality of a commodity. The grading certificate is important because a commodity must be identified as exchange grade to be deliverable. Commodities exchanges issue detailed guidelines describing the characteristics that qualify a commodity as exchange grade.

BREAKING DOWN 'Grading Certificate'

For example, a grading certificate for cocoa would indicate its growth (country of origin), description, condition (hammy or smoky), grade (which indicates the percentage of defective beans in the total) and count (number of beans per kilogram), and state whether the cocoa meets the commodity exchange's standards. The certificate would only be valid for a limited time as determined by the exchange, such as the current delivery month plus one month thereafter.

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