Safe payment terms when importing from China

A payment term is not a financial detail but a risk-management tool. The right structure balances the factory's need for cash to buy fabric against your need for assurance that what you paid for will arrive to the agreed specification.

The common structure: thirty and seventy

The prevailing norm in garment manufacturing: 30% deposit on order confirmation and 70% against a copy of the bill of lading. The second payment falls due after the goods actually ship and before they arrive, because you cannot collect them from the port without the original bill of lading. The logic is sound: the factory will not ship without assurance of payment, and you do not pay in full before shipment is confirmed.

Why not pay one hundred per cent upfront?

Because you lose every means of leverage. Any serious factory accepts the thirty-seventy structure. A demand for full prepayment on a first order is a signal worth stopping at, and the only acceptable exception is a small sample or an order of trivial value where the arrangement is not worth the complexity.

Where does inspection sit in this?

Here is a point many miss: tie the second payment to passing pre-shipment inspection, not merely to shipment. The practical wording is that inspection takes place before loading, and the balance is paid after a pass and against the bill of lading. Without that link you find yourself paying for goods nobody inspected.

Letters of credit: when are they worth it?

A letter of credit is a bank instrument in which your bank undertakes to pay the factory on presentation of documents matching exactly what you stipulated. Its advantage is that the bank checks the documents on your behalf and the factory is not paid if they do not conform. Its drawbacks are that it is slower, more expensive, and demands great precision in drafting, because a minor documentary discrepancy stalls payment and creates a dispute. The practical rule: worthwhile on high-value orders or with a new supplier whose reliability is untested, and not worthwhile on a small order where the fees consume the saving.

Protecting the transfer itself

The most common fraud in international trade is not a fake factory but intercepted email carrying falsified account details at exactly the right moment. Three rules prevent it:

• The bank beneficiary name must match the company name on the business licence word for word. Any difference means an immediate stop.
• Any change of bank details is confirmed by a voice or video call with someone you know at the company, never by replying to the email itself.
• On a first dealing, start with a small test transfer and confirm it arrived before sending the full deposit.

Currency and transfer cost

Pricing is usually in dollars. Note that transfer and intermediary bank fees can be deducted along the way, so the factory receives less than expected and asks you for the difference. Specify in the contract who bears intermediary charges, so it does not become a discussion at every payment.

What must be written alongside the payment term?

A payment term alone does not protect you. Write with it: the full specification, tolerance on weight and measurements, the acceptable defect rate, the delivery date and the consequence of missing it, the delivery term in Incoterms, and the right to third-party inspection. Staged payment protects you only when it is tied to measurable criteria.

Frequently asked questions

Can I negotiate a smaller deposit? Sometimes with a supplier you have worked with, rarely on a first order, because the factory buys fabric with the deposit.

What if production runs late? Put a late-delivery clause in the contract, even a nominal one; its mere presence changes the factory's behaviour.

Are escrow platforms safe? They protect small orders, but their fees and limits make them impractical at scale.

We work on a payment structure tied to pre-shipment inspection, under a registered company name you can verify in the national register.