General Payment Terms For China Suppliers

Congratulations for successfully establishing a buyer/seller relationship with a Chinese supplier.   As a buyer, your concerns are receiving your products on-time and they are of acceptable quality.   While as a seller, their concerns are receiving the money on-time.   Both parties’ aim is to reduce the risk that they have to bear.   Generally, there are four types of payment terms:  TT, LC, Escrow, and DP.

TT (telegraphic transfer, wire transfer, swift transfer) is the easiest and fastest method of payment.   This means wiring money through your bank into another bank account in a different country.   Buyers typically choose this option when purchasing a small quantity, or when working with a buyer for the first time.   With this method, the risk is allocated to the buyer.  

LC (letter of credit) is the safest method of payment, allocating the risk equally between two parties.   Letter of credit is simply a letter written by your bank to your seller’s bank, verifying that the payment will be guaranteed.   This method requires a longer application time because of the legal documents required.   Please keep in mind that a letter of credit is irrevocable once the buyer has sent them out, unless both parties come to an agreement on altering the document.

An escrow is a legal arrangement where your money is delivered to a third party, and to be held there until the fulfillment of conditions in a contract.   After all the conditions in the contract are fulfilled, the escrow agent will then deliver the payment to the seller.   This is also a safe payment method where risk is shared evenly between both parties, though it is more costly and more time consuming.

This last method is rarely used with Chinese suppliers, where the seller ship out the finished goods first and then claim payment later.   This is uncommon because the seller will not take on all the risk.   This is a tedious process because it requires the coordination of multiple parties and also more costly.

No matter what method you choose to pay your seller, make sure you have minimized your risks.   For more information on payment terms or if you would just like to find out more about sourcing in China, please visit our website at www. csandcm. com .   We are your one stop China sourcing company.


Article Source:China Sourcing Blog

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