Paying a Chinese Supplier Safely: T/T, L/C

We run a small machinery factory in China and we load containers every week. The question that keeps first-time importers awake is never about the machine. It is about the money. Wiring a deposit to a factory you have never visited, in a country you have never set foot in, is the part that feels wrong, and it should until you have checked a few things. This guide covers the payment methods used in this trade, and the signs to walk away from.

The three payment methods you will be offered

1. Telegraphic transfer (T/T), the default

Almost every machinery order is settled by bank transfer on a split schedule. The deposit starts production and the balance arrives before we release the container. The two structures we see most are 30% deposit with 70% before shipment, or 50/50 on smaller orders.

The split is not a formality. Your deposit lets us buy engines, steel and hydraulic parts and book the production slot without funding your order from our own cash, which is why the deposit earns you a lower price. The balance stays unpaid until the machines are built and inspected, and that is the thing that keeps your emails answered. A supplier who wants 100% upfront has removed the only hold you had.

Before you send anything, check these:

The account name must match the company you are contracting with. This rule matters more than the rest. If the invoice carries one company name and the beneficiary account carries another, stop and ask why, in writing.
Be suspicious of a last-minute change of bank details. Intercepted email is real and common, and a message saying the account has changed, arriving just as you are about to pay is the classic shape of it. Confirm any change on a second channel: a phone or video call to a number you already had, never a number from the email that brought the news.
Ask for the beneficiary bank’s SWIFT code and check that the country attached to it matches where the supplier says the factory is.

2. Letter of credit (L/C), for large orders

With an L/C your bank pays us only against a defined set of documents, usually the bill of lading, the commercial invoice, the packing list and any certificate of conformity. You get certainty that the goods actually shipped; we get certainty of payment. Both sides give something up, which is why the arrangement holds.

It suits large orders, and it suits a first order with an unknown supplier where the money is significant. It is not free. Banks charge issuance and amendment fees, and the document requirements have to be drafted precisely. A small mismatch between the L/C terms and the documents the factory presents creates a discrepancy, and a discrepancy means the payment sits still while everyone argues. Keep the required document list short and leave nothing ambiguous in it.

3. Escrow and platform protection

Some B2B platforms hold the funds until you confirm receipt. On a first order that is genuinely useful. The cost is real, the release is slower, and on some platforms only part of the order is covered. Treat it as a bridge across your first order, not the way you will buy forever.

What a normal payment schedule looks like

A routine machinery order runs like this:

Before production: a deposit of 30–50%, against a proforma invoice and a signed specification.
During production: nothing.
Before shipment: the balance, released after you have seen inspection photographs or a pre-shipment inspection report.
After arrival: nothing beyond the port and clearance charges you already agreed.

If a supplier wants the balance before showing you the finished machine, or cannot produce photographs of the actual units you ordered, they are asking you to carry all of the risk.

Warning signs worth walking away from

A price far below every other quotation. In a trade this crowded, a quote 30% under the market usually means the specification is different, or the price is bait that climbs later.
Refusal to show the machine. No photographs, no video, no live call from the production floor. You are entitled to see what you are paying for.
Pressure to pay outside normal channels. A personal account, a third-party company, a payment app instead of a business bank transfer.
No company details. A supplier who will not give a registered company name, a business address or a landline is not someone you can hold to a contract.
Documents that do not match. Names, addresses or bank details differing between the quotation, the proforma invoice and the contract is not a clerical slip.
An unwillingness to put the specification in writing. Engine brand, dimensions, hydraulic configuration, that is what you are paying for, and it belongs in the contract.

Practical protections that cost nothing

Insist on a proforma invoice showing the registered company name, the address, the bank details, the exact models and the payment schedule.
Put the specification in the contract and state that the machines must match it, with photographs as evidence before shipment.
Ask for pre-shipment photographs of each unit with its serial number visible, and the container loading documented too.
Request the conformity documents for your market before you release the balance: the EPA certificate of conformity for the United States, or the CE declaration for the European Union.
Start with one container. A first order tests how well the supplier communicates and how clean the paperwork comes back. Scale once it works.

Why factories accept split payments

It is worth seeing our side of it. A deposit lets us buy engines, steel and hydraulics without financing your order from our own cash, and that is exactly why the deposit earns you a lower price. The balance before shipment exists because once the container has sailed, chasing payment across borders is slow and expensive for a manufacturer our size.

That is the shape of the compromise. You accept some risk before shipment and we accept it during production. A supplier who documents every stage is easier to work with than one who insists on the maximum upfront.

Questions we get asked

What deposit is normal for machinery orders?

30–50% before production with the balance due before shipment is the standard structure in this trade. First orders usually sit at the firmer end of that range, because we have no history with you. Larger orders and repeat customers often negotiate something more flexible, sometimes a smaller deposit against a longer production window.

Is a letter of credit worth it?

For a large first order, usually yes. The bank checks the documents on your behalf, and that check is what you are paying the fee for. On small orders the issuance fees and the paperwork tend to cost more than the protection is worth, so compare the bank charge against the value of the order before deciding.

How do I verify a supplier’s bank account?

Check that the beneficiary account name matches the contracting company exactly. Confirm that the country tied to the SWIFT code is where the supplier says the factory sits. If anything changes, especially the account number late in the process, verify it on a separate channel you already trusted, such as a phone number from earlier correspondence.

Should I pay 100% upfront for a discount?

Only with a supplier you have ordered from successfully and whose delivery you can predict. On a first order it hands over your entire hold on the deal at the exact moment you still need it. A discount of a few percent does not cover the cost of an order that never ships.

What documents should I receive before paying the balance?

Photographs of the finished units with their serial numbers visible, the packing list, and the conformity documentation for your market. If the container is already being loaded, ask for loading photographs as well. Those documents let you check quantity, specification and model against the contract while there is still time to correct something.

If you want to see how a first order actually runs, send us your model list. Ask for a proforma invoice and a production schedule and you will see the company details, the specification and every payment stage in writing before any money moves. If you are still working out the total cost, the landed cost guide covers the other half of the arithmetic.

How to Pay a Chinese Machinery Supplier Safely