Importing payment terms

[southseas]

I'm just getting to grips with manufacturing and importing goods from China. I've been negotiating on the price and I requested that we pay 30% deposit, 40% when goods checked & shipped, 30% on receipt of goods. But they have responded with the following:

"Payment: 30% pre-t/t, 70% D/P at sight (After I fax the copy of B/L to you, then you do the rest payment. So I will send all oringal documents to your office by tnt express directly)."

I don't know what pre-t/t, D/P and B/L mean. Rather than appear clueless to them, I thought I'd appear clueless here instead and ask if someone can explain the terms!

 

[SamStones]

Hello,

Welcome to the world of importing...

t/t is Telegraphic Transfer - BACS or CHAPS to you and I. ie a Direct bank to bank transfer

b/l is the bill of lading - this is like the deeds to your house. The shipping company will need the b/l to release the container to you when it arrives. It's usual for the physical bill to be sent to you by courier, but you can arrange to have it "telex released" which is where it's sent to the couriers office in China (or wherever) and they then give the uk office permission to release the container.

d/p - not sure what this is. not come across it before or my brain isn't working correctly today. I suspect they will want it sending by t/t .

What they have specified is pretty usual. I doubt you will find any company that will let you pay the balance AFTER you have received the goods.

Basically, you pay the 30% deposit up front, they make the goods. They load the container and once it's got to the ship they have the b/l which is their protection against getting paid. If you don't pay them the balance then they can sell the goods to someone else, keep your 30% deposit and then send the b/l to the other customer. Does that make sense?

It also gives you the protection that the supplier doesn't run off with all the money and you get nothing.

You haven't mentioned what terms you have agreed for your prices? Are they FOB, CIF etc?

 

[Independent Trader]

I would normally deal with a new supplier using a letter of Credit, I would also request 60 days credit (and go down to 45) from shipping using an L/C.

To a supplier an L/C can be borrowed against, it also means hedoes not get paid until he posts the Original Documnets inc the Bills of Lading to your banks, when the bank has them they then follow how the L/C is laid out.

I only ever pay 30% up front and balance on faxed B/L when I know and trust the supplier, even then I am better off cash flow wise with an L/C

 

[southseas]

Thanks guys.

SamStones - it is an FOB price they've quoted which I gather is the norm (and more cost-effective).

Independent Trader - that's interesting. I've never used a L/C before. Is this basically a document from the bank saying I'm good for the money? And do you generally find suppliers accept L/C and 45-60 days credit?

I'm only doing deals for around 4-5k at the moment - I want to start small in case I get my fingers burnt!

 

[SamStones]

Sorry , yes, didn't mention L/C's as I don't use them - found my bank was being very difficult about issuing these and needing all sorts of security, plus they wanted to take the money out of my account as soon as the L/C is issued... I'd be very interested to hear how your experience of L/C's work , as what my bank was proposing clearly wasn't viable.

FOB is pretty much the norm, and is the only way I have used in the past. Others are of course available.

Have you sorted out shipping prices from somewhere? and someone to do your customs clearance? also, have you thought about how you are sending the money? ie direct from your bank, through an agency or what?

 

[Astaroth]

On the basis it states:

Payment: 30% pre-t/t

I would rather say that t/t is transportation. Whilst TT can stand for an electonic transfer it doesnt make any sense in this context.

 

[southseas]

Thanks. So does anyone know what "D/P at sight" means?

 

[JamesHall174]

Just another thought for you, if you are using your bank for doing the money transfer you will be losing around 2% in the exchange rate they offer and no doubt they are also charging you a fee for transfers and I doubt they are giving you any advice on things like spot trades, limit orders and forward pricing, all of which can save you significant sums of money and safeguard your business from fluctuations in currency prices.

I would be happy to give anyone more information on this if they want to send me a PM

thanks

 

[Amethyst]

D/P is DOCUMENTS AGAINST DOCUMENT, simply, the payment terms in your situation is PREPAYMENT 30% BY TELEGRAPHIC TRANSFER, 70% PAID WHEN YOUR SUPPLIER PROVIDE YOU COPY OF BILL OF LADING. As agreed by others, it is normal business terms.

L/C (LETTER OF CREDIT) might be popular, but I personally think no suppliers would accept other terms except L/C AT SIGHT. L/C might be the best if you are dealing with big amount, but L/C itself costs a lot. A good bank always requires a lot before opening a L/C. Unless you have good money in the bank or you have strong relationship with your bank, it is not easy anyway.

 

[JamesHall174]

Samstones, thanks for the PM, I have PM'd back some details.

 

[Independent Trader]

Someone is right above I operate with a facility so I allocated 45% of that for L/C's the bank do not take the money out of the bank but reduce the L/C facility.

30% Depoist and faxed B/L always makes me nervy, I would certainly up my research on the supplier.

 

[southseas]

Thanks for your responses. I only suggested the 30-40-30 arrangement because it was mentioned in a sticky thread on another forum that you should push for that. But it was dismissed by the supplier and everyone else seems to think it would be unlikely to achieve. Maybe you have to build up a longer relationship with a supplier to get those terms.

SamStones - I haven't sorted out the shipping, customs, etc yet. I'm tackling each stage at a time, so I'm moving on to that now. Any recommendations gratefully received.

JamesHall174 - I've sent you a PM.

 

[JamesHall174]

Hi Southseas, I have replied to your PM

 

[Amethyst]

30-40-30 is not easy to achieve, but sometimes it depends on which fields you are in and how is your relationship with your supplier.

if you might struggle for something like dealing with suppliers or arranging shipment, you can PM me, hopely I can give you some advice as per my experience.

Good luck.

 

[Amethyst]

Sorry, just found a mistake in my first messagre.

D/P means DOCUMENTS AGAINST PAYMENT. It means supplier will only send you documents for collecting those goods after receipt of your payment.

 

[JamesHall174]

Hi Samstones and Southseas. I am not sure if you received the PM's I sent you, if not let me know and I will resend.

Thanks

 

[sunskie2010]

This is a normal payments terms in China. Be careful for the transactions.. Unles you have your trusted agent in China you should avoide any big transactions, also please check the supplier name in the list of black listed companies on various trade sites like alibaba.com

We also offer our services for overseas client. We do inspection of material and shipping on behalf of clients. If you are looking for our service you may write to us.

Ravi Verma