The Two Dominant Payment Methods
When importing from China, your payment method affects cash flow, risk exposure, and supplier relationships. T/T (Telegraphic Transfer) and LC (Letter of Credit) dominate China trade. A third option — LC credit sales — is growing rapidly as a hybrid solution.
T/T (Wire Transfer) — Most Common
Typically structured as 30% deposit before production and 70% balance before shipment. Advantages: simple, fast (1-3 days), low fees ($25-50), preferred by suppliers. Disadvantages: buyer has limited recourse if supplier fails to deliver, full payment needed before goods ship, no quality leverage.
LC (Letter of Credit) — Most Secure
Bank-issued guarantee: buyer's bank promises to pay when specified conditions are met. Advantages: maximum security, payment guaranteed upon correct documents, working capital benefit, professional image. Disadvantages: higher cost ($300-1,000 per LC), complex documentation, bank credit limit required.
LC Credit Sales — Best of Both Worlds
CSMG Supply Chain handles the LC process on your behalf. You get LC security with simple credit terms: CSMG establishes LC with your supplier, supplier ships against the LC, you receive goods and pay on agreed terms (30-60 days after arrival). Benefits: no collateral required for smaller limits, deferred payment, simplified documentation, better supplier relationships.
Quick Comparison
T/T: Low buyer security, pay upfront, $25-50 fees, minimal documentation. LC: High security, pay at shipment, $300-1,000 fees, high documentation effort. LC Credit Sales: High security, pay 30-60 days after arrival, fees built into financing, documentation managed by partner.
When to Use Each
T/T: Established relationship, under $5,000, need speed. LC: $10,000+, new supplier, custom/high-value products. LC Credit Sales: Want LC security without bank line, need working capital, scaling multiple suppliers, want single partner for payment logistics.