Blog · B2B Sourcing

Payment Terms When Importing: T/T, L/C and More

Payment terms are the risk map of an import order. Before you send any money, the terms answer the real questions: who is exposed while production runs, what triggers each payment, and what leverage remains if quality or schedule slips. This article explains how T/T and L/C actually work in torch sourcing, what other structures exist, and the clauses worth negotiating before the first deposit leaves your account.

About a 7-minute read · English edition

A first-order import is asymmetric by nature: the factory asks for funds before production, the buyer wants proof before payment. Every standard payment term is simply a different answer to that tension - none eliminates risk, they just place it deliberately. Choosing well means understanding where each structure puts the exposure, then negotiating the triggers so neither side carries an unreasonable share.

T/T: the workhorse of China sourcing

T/T (telegraphic transfer) is a direct bank transfer in two or more tranches: a deposit before production starts, and the balance at or around shipment. The deposit funds what production genuinely consumes - raw materials, components, line time - which is why factories ask for it and why it is reasonable. The balance is where the negotiation lives: tying it to a passed pre-shipment inspection or to the presentation of shipping documents keeps the factory's incentive aligned through the last day of production. For most first orders this is the practical structure - simple, low in bank fees, with leverage retained by the buyer until the balance is paid.

L/C: the bank in the middle

A letter of credit substitutes the buyer's bank's payment undertaking for the buyer's own promise: the bank pays the factory when the factory presents documents - bill of lading, invoices, inspection certificates - that exactly match the credit's terms. The buyer's advantage: no payment before the goods are demonstrably on a vessel. The trade-offs: banks charge for the service, the documentary compliance is strict (a discrepancy as small as a typo can stall payment), and the process favors larger orders where the bank fee is proportionally small. Used well, an L/C is a strong framework for the first big order with a new supplier; used carelessly, it generates fee costs and document disputes without adding real safety.

Other structures you may encounter

Documentary collection (D/P, D/A). Banks exchange shipping documents for payment (D/P) or for a signed acceptance to pay later (D/A). Lower cost than L/C, but the bank does not guarantee payment - D/A in particular leaves the buyer holding the goods before paying, which is why factories resist it on early orders.
Open account. Payment after delivery. The factory carries essentially all the risk, so it appears only in mature relationships with history behind it.
Milestone payments. Common on custom projects: a tranche at tooling completion, another at the golden sample approval, the rest on shipment. Aligns cash outflow with visible progress.
Escrow or third-party platforms. Occasionally used for small orders; rarely practical for full container programs.

Payment structures compared - where the risk sits
Structure	How it works	Buyer exposure	Factory exposure	Typical use
T/T deposit + balance	Transfer in tranches; balance at shipment	Deposit at risk until delivery	Balance at risk until received	Most first and repeat orders
L/C	Bank pays against compliant documents	Document discrepancies; bank fees	Strict document compliance required	Larger orders, new relationships
D/P collection	Documents released against payment	Goods possibly shipped before payment decision	Buyer may refuse documents	Established relationships
Open account	Payment after delivery	Minimal	Full - goods shipped unsecured	Long-term partners only
Milestone payments	Tranches at project checkpoints	Checkpoint verification quality	Late tranches	Custom tooling and development projects

Four steps before any money moves

Agree the term before signing, not after. Ask the factory what structure it operates and negotiate from there. Our own practice: T/T and L/C are both workable, and final terms are agreed per order.
Tie the balance to a defined event. "Balance against a passed pre-shipment inspection" or "against presentation of shipping documents" - a trigger that can be evidenced, not a date on a calendar alone.
Verify the beneficiary. The receiving account name should match the producing company on your contract. A mismatch is the classic warning sign of a middleman problem - or worse.
Put fees, currency and timing in the contract. Who carries transfer charges, which currency settles the order, and how many banking days each party has. Ambiguity here turns into disputes later.

How this connects to the rest of the order

Payment terms interlock with everything else you negotiate. The deposit unlocks production; our lead time - 15-20 days - runs from confirmation of that deposit, so payment discipline is schedule discipline. Sample fees are credited against the bulk order once it proceeds, so the sampling stage flows into the same payment plan. And the quality clauses you negotiate are what make a balance-at-inspection structure meaningful: a trigger is only as strong as the inspection it references. The OEM/ODM page sets out the commercial framework, and the contact page sends your specific terms question to the people who can answer it for your order.

One closing caveat: this article is a framework overview, not financial or legal advice - final structures belong in your trade contract, and for large or novel arrangements a trade finance specialist is worth the consultation.

FAQ

Frequently asked questions

What payment terms do Chinese torch factories accept?

T/T - a deposit before production and the balance around shipment - is the most common structure, with L/C used on larger orders. Practices vary by factory: at ZHENTANZHE both T/T and L/C are workable, and the final terms are negotiated per order. Whichever term you agree, get it into the contract with exact triggers.

How large should the deposit be?

There is no universal split - deposits are commonly a minority share of the order value, enough to cover materials and setup, with the balance tied to shipment or a passed inspection. The right size depends on order value, customization depth and the trust between the parties, which is why it is negotiated rather than standardized.

Is L/C safer for the buyer than T/T?

It shifts risk rather than removing it. An L/C puts a bank between the parties and pays against documents, which protects the buyer from paying without shipment - but the protection is only as good as the documents, banks charge for the service, and discrepancies in paperwork can delay or void payment. For many mid-size orders, T/T with the balance tied to a passed inspection achieves a similar balance at lower cost.

Should I ever pay the full amount upfront?

Concentrating all risk on your side of the table is rarely necessary. If you pay before production, you lose your main leverage over quality and schedule. On very small orders the absolute amount at risk may be acceptable; on real volume orders, keep a meaningful balance outstanding until the goods are inspected and ready to ship.

Are sample fees refundable?

Policies vary by factory, so ask before sampling. Our practice: sample fees are credited against the bulk order once it proceeds - the sample stage is an investment in the program, not a sunk cost.

Incoterms for torch buyers

EXW, FOB and CIF compared: who handles what under each term, and where risk transfers on the journey to your port.

Read the Incoterms guide

How to negotiate with factories

Specification sheets, MOQ tiers, sample terms and the clauses that turn a quote into a performable contract.

Read the negotiation guide

Request terms for your order

Send your quantity and market - we confirm the workable payment structures and lead time for your specific program.

Contact the factory

Structuring your first order?

Tell us the program - we confirm payment structures, lead time from deposit, and sample terms in writing before anything moves.

Discuss Your Terms