Payment Terms with Chinese Suppliers: T/T, L/C, and Open Account

If you're buying from China for the first time, the payment terms on your quote will probably say something like "T/T 30/70" or "L/C at sight," and your supplier will assume you know what that means. Most buyers don't. They nod along, wire the money, and only discover what they agreed to when something goes wrong.

The short version: T/T (a bank wire) with 30% deposit and 70% balance before shipment is the standard structure for most China orders. Letters of credit add a bank's guarantee on both sides but cost real money and suit mainly larger orders. D/P and open account sit between and beyond. This guide explains how each term works in practice, what it costs, where the risks hide, and how to choose based on order size and trust level. Payment terms answer two questions: how you pay (the method) and when you pay (the timing). Together they decide who carries the risk at each stage, and risk is what you're really negotiating.

As a China sourcing agent that has managed payments across thousands of supplier relationships, CN Ally has seen every version of these terms in action, including the mistakes below. They're the ones importers keep making.

T/T wire transfers: the industry standard

T/T stands for Telegraphic Transfer. The name is a relic of the telegraph era; today it just means an international bank wire, usually sent through the SWIFT network. You send money from your bank to the supplier's corporate bank account in China. That's the whole mechanism. No platform in the middle, no buyer protection, no way to reverse it once it clears.

It is the default payment method for China B2B trade. Nearly every factory and trading company accepts it, and most quotes express terms in T/T by default. If a supplier will only work on T/T, that's normal, not a red flag.

In practice: the supplier sends a proforma invoice with their company bank details, you verify them (the fraud section explains why this matters more than any other step), and you submit the wire. International wires typically cost a flat $25–50 per transfer, plus your bank's FX margin. Money routes through intermediary banks and usually arrives within one to three business days.

Nothing about this protects you. A wire transfer is final. If a supplier disappears after the deposit, your bank can't pull the money back. That finality is exactly why suppliers love T/T: faster funds, zero chargeback risk.

The standard structure: 30/70

On a first order, expect 30% deposit by wire to confirm the order, then 70% balance wired before shipment. The deposit funds materials and production setup. The balance is where your leverage lives: you pay it only after production is done, which means you can inspect the goods first.

The structure works because it splits risk. The supplier doesn't front the entire production cost on a stranger's promise, and you don't hand over the full amount before a single unit exists.

T/T variants you'll see on quotes

Term · What it means · Risk level for you

• **T/T 30/70**: 30% deposit, 70% balance before shipment · Standard; moderate
• **T/T 100% in advance**: Full payment before production · High; avoid on first orders
• **T/T at sight**: Balance paid when shipping documents are presented · Moderate; keeps leverage until docs
• **T/T net 30/60**: Full payment 30 or 60 days after shipment · Low; only with trusted suppliers

T/T in advance on the full amount is the riskiest structure in common use. Suppliers sometimes ask for it on small orders where paperwork costs more than profit. For a real production order with a new supplier, push back or walk away. Our guide to negotiating MOQs covers related first-order structures.

Letter of credit: the heavy armor

A letter of credit (L/C) is a promise from your bank to pay the supplier, but only against documents that exactly match what the L/C demands: commercial invoice, packing list, bill of lading, sometimes an inspection certificate. The bank doesn't check the goods. It checks the paperwork, and it checks strictly.

It's the safest payment method for both sides on paper: the supplier gets a bank-backed guarantee instead of your word, and you get assurance that no money moves until documents show shipment happened. Letters of credit operate under the ICC's UCP 600 rules, the global rulebook banks use for these instruments.

Sight, usance, and confirmed: the three flavors that matter

Sight L/C. The supplier gets paid within days of presenting compliant documents. This is the version Chinese exporters prefer and the one that makes most sense for a large first order.

Usance (time) L/C. Payment is deferred: 30, 60, or 90 days after document acceptance. Supplier financing for importers who resell before paying; the supplier usually charges for the wait.

Confirmed L/C. A second bank, usually a major Chinese bank, adds its own guarantee on top of your bank's. Worth it when your bank isn't well known internationally or the exporter worries about your country's risk profile. It costs extra.

What an L/C actually costs

The buyer pays. Issuance fees typically run 0.5–1.5% of the L/C value, plus confirmation charges and document-handling fees at each bank. On a $100,000 order that's $500–1,500 or more before a single product moves.

So L/C makes economic sense only above a certain order value. Below roughly $50,000, fees eat an uncomfortable share of the margin and the paperwork slows everything down. Above that line, on a first order with an untested supplier, the cost buys something real.

The paperwork problem nobody warns you about

Here's the catch: banks reject documents for tiny discrepancies. Industry estimates put the first-presentation rejection rate between 60% and 75%, most of them over a misspelled name, a transposed date, or a missing signature. Payment stalls, fees pile up, and you get a call about "document discrepancies" that sounds alarming but is mostly routine.

That usually means a round of corrections, not a failed deal. But L/C shipments move slower and need someone detail-oriented shepherding the documents. One trade finance analysis notes the problem persists even under UCP 600, partly because banks examine documents differently.

The practical takeaway: an L/C protects against the supplier not shipping. It doesn't protect against the supplier shipping the wrong goods, because banks check documents, not cargo. If quality is your worry, the L/C should require an inspection certificate, and the inspection has to actually happen.

D/P and D/A: the forgotten middle ground

Documentary collections sit between the trust levels of T/T and L/C, and almost nobody explains them.

D/P (Documents against Payment). The supplier ships and sends the documents to a bank in your country. Your bank releases them only when you pay. Since you need the bill of lading to claim the goods, the supplier has real security: you can't take the cargo without paying. Cheaper than an L/C because your bank guarantees nothing; it just handles the documents.

D/A (Documents against Acceptance). Same flow, but you sign a time draft promising to pay later (say 60 days) and receive the documents immediately. You get the goods now, pay later. Riskier for the supplier, since your promise is only as good as your creditworthiness.

Neither is common for first orders. D/P appears in established relationships where both sides want something cheaper than an L/C and safer than open account. A supplier offering D/P is a good sign about how they view you.

Open account: payment after delivery

On open account (O/A), the supplier ships first and you pay later: net 30, net 60, net 90. This is how most domestic B2B trade works in Western markets, and it's the end state every importer wants. All the risk sits with the supplier.

Which is why Chinese suppliers rarely offer it to new buyers. Open account appears after years of clean order history, or when a supplier buys export credit insurance covering your default. China's state-backed insurer Sinosure, for instance, lets exporters extend net-60 or net-90 terms while insuring against non-payment, with premiums typically around 0.5–1.5% of the invoice value absorbed by the supplier or built into pricing. One trade finance analysis compares this route directly against letters of credit for larger programs.

A supplier offering open account terms is a vote of confidence. Say yes, pay on time, and guard the relationship.

All methods compared

Method · Risk to you (buyer) · Risk to supplier · Typical cost · Best for

• **T/T 30/70**: Moderate · Moderate · ~$25–50 wire fee per transfer · Most first orders
• **T/T 100% advance**: High · None · Wire fees only · Small established orders
• **Irrevocable sight L/C**: Low · Low · ~0.5–1.5%+ of order value · Large first orders ($50k+)
• **Usance L/C**: Low · Moderate · Higher than sight L/C · Buyers needing payment deferral
• **D/P**: Low–moderate · Moderate · Low bank collection fees · Established relationships
• **D/A**: Low · Moderate–high · Low bank collection fees · Trusted repeat partners
• **Open account**: Minimal · High · Nothing to the buyer · Long-term partners
• **Third-party platforms**: Low · Low · Lower than bank wires, varies · Small and recurring orders
• **PayPal**: Moderate (disputes possible) · High (freezes, chargebacks) · High per-transaction fees · Samples and tiny orders only

How to choose: order size meets trust level

The right payment terms are a function of two things: how much money is at stake and how much you trust the other side.

First order, under $50,000: T/T 30/70. The deposit is serious money, and the balance holds your leverage until production is verified. Don't let anyone talk you into 100% upfront.

First order, over $50,000: Consider a sight L/C. The fee percentage is tolerable at this size. Or negotiate T/T with the balance tied to a passing inspection report.

Small trial orders and samples: Use a third-party platform or PayPal. Wire fees eat a silly percentage of a $500 order; $25 on a $300 sample order is an 8%+ surcharge for the privilege of paying.

Repeat orders with a proven supplier: Start negotiating. Move toward D/P, then longer net terms on T/T. Each clean order is evidence you can trade for better terms.

Suspiciously generous terms: Ask why. A factory offering net 90 to a stranger is either desperate or recovering the money where you can't see.

Payment terms should improve as orders grow and relationships mature. Still paying 100% upfront on your fifth order means you're negotiating wrong. Our price negotiation guide covers how to reopen terms as the relationship develops.

Negotiating payment terms: what actually moves

Deposit size. First order: 30% is the norm. Later: try 20%, or propose the deposit against materials with the balance after inspection passes. Suppliers resist because the deposit is their production insurance. Your counter: pay the balance within 48 hours of inspection instead of a week.

Balance triggers. The most valuable thing you can negotiate isn't the percentage, it's what releases the balance. "70% before shipment" is vague. "70% within two business days of a passed pre-shipment inspection report" is a contract. Tie the balance to a quality control inspection and you've turned payment terms into enforcement.

Milestone payments. For large orders, split into three: deposit, mid-production payment against photo or video evidence, balance after inspection. Two checkpoints instead of one.

A script for first orders: "Our company policy for new suppliers is 30% deposit by wire, 70% balance within 48 hours of passing pre-shipment inspection. We're fast payers, we just need the inspection gate. Can we work with that?" Framing it as company policy rather than personal suspicion keeps things professional.

Wire fraud: the email that changes the bank account

The most expensive payment mistake in China sourcing isn't a bad term. It's wiring money to a criminal.

The setup: mid-conversation with your supplier, an email arrives that looks exactly like it comes from them, saying the bank account has changed. It might be a reply in the same thread. You wire the deposit to the new account. Your real supplier never sees it. The money is gone, and because wires are final, recovery is effectively impossible.

Protection is procedural:

1. Never change bank details on email instruction alone. No exceptions.
2. Verify by a second channel. Call a phone number you already have, not one from the suspicious email. A two-minute call kills this scam.
3. Pay the company, not a person. The beneficiary name must match the supplier's registered company name. Personal accounts or "partner company" accounts are red flags.
4. Re-verify before every transfer. Scammers insert themselves mid-relationship too.
5. Watch for the setup. Pressure to switch accounts, manufactured urgency, or slightly altered email addresses are the standard tells.

Confirm the factory's identity, business license, and bank details through an independent check before the first wire, and you've closed the hole early.

The modern middle path: third-party payment platforms

Between bank wires and PayPal sits a category that didn't exist a decade ago: cross-border platforms built for trade. XTransfer, PingPong Payments, WorldFirst, and Wise are the names you'll hear most. You pay in your local currency online; the platform converts and settles to the supplier's Chinese business account, usually with lower fees and a better FX spread than most banks.

Six-figure single transfers still belong at a bank, and some suppliers prefer wire formality for big orders because it feeds their export tax paperwork cleanly. For small and recurring orders, these platforms are usually the cheapest and fastest option.

Your payment terms checklist before wiring anything

Payment terms are a risk-allocation contract. Before you accept them, answer four questions: does the structure match your order size, does the deposit reflect the trust level, does something concrete trigger the balance, and have you verified the bank details through a second channel? If any answer is no, renegotiate before wiring, not after.

If you'd rather have experienced negotiators on your side, reach out through our contact page or email hi@cnally.com. Structuring safe payment terms is part of what a sourcing partner is for.

Frequently asked questions

What does T/T mean in payment terms?

T/T stands for Telegraphic Transfer: an international bank wire. "T/T 30/70" means 30% deposit by wire and 70% balance, usually paid before shipment.

What are the safest payment terms for a first order from China?

Under about $50,000: T/T 30/70 with the balance tied to a passed pre-shipment inspection. For larger first orders: an irrevocable sight letter of credit, which adds a bank guarantee on both sides.

How much does a letter of credit cost?

Issuance fees run around 0.5–1.5% of the L/C value, plus confirmation and document-handling charges. On a $100,000 order, budget $500–1,500 or more. That's why L/Cs make sense mainly above roughly $50,000.

Can I negotiate lower deposit percentages with Chinese suppliers?

Yes, especially after the first order. The deposit funds production, so offer something in exchange: faster balance payment, milestone structures, or a usance L/C. Tying the balance to an inspection report often matters more than the percentage itself.

What is the difference between D/P and D/A?

Both are documentary collections. With D/P (documents against payment), your bank releases the shipping documents when you pay. With D/A (documents against acceptance), you sign a promise to pay later and get the documents immediately. D/P is safer for the supplier; D/A gives you deferred payment.

Is PayPal safe for paying Chinese suppliers?

For samples and tiny orders, yes. For bulk production, no: most factories won't accept it at scale, fees are high next to wires, and suppliers face account freeze risks. Use it for $500 sample orders, not $50,000 production runs.