Payment Terms with Chinese Suppliers: A Buyer's Field Guide
Payment terms are where sourcing relationships are won and lost — and where most first-time importers make their most expensive mistakes. Here is how the main terms work and how to structure them.
The main terms at a glance
| Term | How it works | Risk to buyer |
|---|---|---|
| 100% T/T in advance | Full payment before production | High — no leverage at all |
| T/T: deposit + balance | 30–50% deposit, balance before shipment (or after B/L copy) | Moderate — standard for first orders |
| T/T: deposit + balance after B/L | Balance paid against shipping documents | Lower — goods are already on the water |
| Letter of Credit (L/C) | Bank guarantees payment against documents | Low, but costly and paperwork-heavy |
| O/A (open account) | Pay after delivery (e.g. 30/60 days) | Only for trusted, established suppliers |
What is reasonable for a first order
- Industry norm for a first order: 30–50% deposit, balance against B/L copy (or before loading, if the factory insists).
- Be wary of 100% upfront — it removes every incentive the factory has to perform.
- If the factory pushes for higher deposits, ask why and check their references. Sometimes it is legitimate (raw material costs); sometimes it is a risk signal.
- For larger first orders, L/C at sight gives you document control at a bank cost.
Payment traps to avoid
- Paying the deposit to a personal account — a red flag that should end the deal.
- Deposit amounts that don't match the contract entity — always pay the legal entity on the contract.
- Adding "balance before shipment" without defining shipment date — the factory can hold you hostage later.
- Forgetting to link payment milestones to verified progress (inspection passed, loading count) rather than the factory's word.
As trust grows
Repeat orders justify gradually better terms: 20% deposit, then 10%, then net terms for very trusted partners. The trajectory should be earned by performance — on-time, on-spec, on-document — not granted at the start.
Negotiating terms with a factory?
We help buyers structure contracts and payment terms that protect them on first and repeat orders.
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