Payment terms set when your money leaves relative to when goods get made and shipped. Get them wrong on a first order and the cost is usually larger than whatever price discount you negotiated. This note covers the main options, when each one fits, and what to confirm before sending a purchase order.
Common Payment Terms Compared
| Term | Structure | When It Applies | Buyer Risk |
|---|---|---|---|
| T/T 30/70 | 30% deposit + 70% before shipment | Standard for first orders under $15,000 | Medium — goods produced before balance; inspect before paying balance |
| T/T 50/50 | 50% deposit + 50% before shipment | Common for small orders or high-customization OEM | Medium — higher upfront exposure but simpler |
| T/T 100% upfront | Full payment before production | Occasionally offered at a discount | High — avoid on first orders without strong references |
| T/T after shipment (net 30/60) | Full payment 30–60 days after B/L date | Established accounts only; rare for first-time buyers | Low for buyer — supplier carries risk; hard to get initially |
| L/C (Letter of Credit) | Bank-guaranteed payment on document delivery | Orders above $20,000–30,000 per shipment | Low — bank verifies documents before payment; adds $300–800 in bank fees |
What 30/70 Actually Means
The 30% deposit is paid when the purchase order is confirmed. This covers material procurement and starts production. The 70% balance is due before the factory releases goods for shipping — typically after a pre-shipment inspection confirms the order meets spec. Never pay the balance without confirming the shipment is ready and inspection is passed.
When to Use L/C
A letter of credit makes sense once your order value regularly exceeds $20,000–30,000 per shipment, or when you are working with a new supplier on a large first order. The supplier gets paid when they submit compliant documents (packing list, B/L, commercial invoice, inspection certificate). The bank acts as guarantor for both sides. Setup takes 3–5 business days and costs $300–800 in bank fees.
Protecting Yourself on a First Order
- Never pay 100% upfront on a first order with an unfamiliar supplier.
- Arrange a pre-shipment inspection before releasing the 70% balance.
- Confirm the proforma invoice matches the PO exactly before wiring funds.
- Keep payment receipts and all correspondence in writing.
- For orders above $10,000, ask for a supplier bank reference or trade reference.
Wait for the inspection report before paying
Pay the balance once you have inspection results — not when the factory says 'goods are ready.' A 1–2 day wait is normal. Suppliers who have worked with overseas buyers expect this.
Wiring to a personal account
Always pay to a verified company bank account. If a supplier asks you to send money to a personal account or a third-party name, stop and call them before transferring anything. It is rare but it does happen on first contact.
What to remember
- Standard first-order terms: 30% deposit, 70% before shipment (T/T).
- L/C makes sense above $20,000–30,000 per shipment; bank fees run $300–800.
- Never pay the balance before seeing the pre-shipment inspection report.
- Keep payment correspondence by email; always wire to a verified company account.