Payment Terms & Contracts for China Sourcing
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The contract terms that actually protect a China order are the payment terms: Telegraphic Transfer (T/T), Letters of Credit (LC), and escrow each shift risk differently. The common default — 30% deposit by T/T and 70% before shipment — leaves you exposed if the goods are defective, because you pay the balance before independent inspection. We push to tie the balance payment to a passed pre-shipment inspection, and use LC or escrow for first orders with new suppliers where there's no track record.
When you negotiate terms, the bargaining power is in when money moves relative to inspection and shipment — paying 70% before a QC check means the factory holds all the cards. The common pitfall is accepting 100% T/T upfront on a 'discount,' which removes every recourse you have if quality fails.
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FAQ
What payment terms are standard for China sourcing?
The most common is 30% deposit by T/T with the 70% balance before shipment. For first orders with unproven suppliers, Letters of Credit or escrow add protection, and ideally the balance is released only after a passed pre-shipment inspection.
How do I protect myself if the goods are defective?
Tie the final payment to a third-party pre-shipment inspection so you don't release the balance until quality is confirmed. Avoid paying 100% upfront, and for large orders consider an LC, which requires the factory to meet documentary conditions before being paid.
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