Filed Under (China & Culture) by Mason Pan on September-5-2007

Chinese plywood suppliers usually accept or don’t accept the following payment terms :

1. Irrevocable L/C at sight issued / or confirmed by good bank

Most of plywood businesses are done under Irrevocable L/C at sight . However, if the bank is not a big bank, suppliers usually require the L/C to be confirmed by a good bank .

If the contractual amount is less than 20,000USD, supplier usually doesn’t want to use L/C because of high rate of bank handling charges . However, if the buyer only want to use L/C, L/C is acceptable by the seller, too . If the contractual amount is over 40,000USD , L/C is preferable .

2. T/T (telex transfer)

There are two kinds of T/T, one is T/T in advance (i.e. transfer the payments to supplier before shipment .), the other is T/T after shipment . Usually, seller and buyer accept that 30% payment by T/T in advance and 70% payment by T/T after shipment .

Now, more and more people like using T/T as payment terms . Because: T/T is efficient and simple; the bank handling charges for T/T is small .

3. D/P (documents against payments)

Usually Chinese plywood suppliers don’t like to use D/P , especially don’t use D/P when do business for the first time . I don’t like to use D/P , too . As for us , the bank handling charges(including netotiation fees) for D/P are almost the same to these charges for L/C .

Suppliers only use D/P with whom they have done business for a long time and have good business relationship .

4. The payment terms suppliers usually don’t use

Usually suppliers don’t use Usance L/C and D/A (documents against acceptance) . If they use Usance L/C or D/A, they will have to be subject to financial pressure . Furthermore, the costs for Usance L/C and D/A are very high . But if the L/C Issuing Bank is good or the Usance L/C is confirmed by a good bank, maybe suppliers can accept Usance L/C .

5. Plywood suppliers use different payment terms according to the factors such as contractual amount, quantity, credit of customer/bank and different importing countries’ business culture .

Which payment term(s) do you prefer in plywood trade ?

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(4) Comments    What next?

Comments:
At**** on September 10th, 2007 at 3:01 am #

Dear Mason Pan,
we are interested to learn more about quality assurance of goods.
It happened a several times that we have payed for better quality articles and get worse. Is there a possibility to ensure the validity of material quality we will get after ordering? We can’t be always there to watch over everything.
Is there a possibility to get, in official way, compensation from unwitting company, producer or freighter?
Thank you for your effort and answers,
best regards

Mason Pan on September 11th, 2007 at 7:46 am #

Thank you for your comments !

Regarding to the quality assurance:
I suggest you send a QC (or your Chinese friend as your QC) to inspect the quality before shipment .
Anyhow, you’d better choose a reliable supplier .

Suggestions to the resolutions of quality problems:
1.Find out the reasons for the quality problems,
2.Find out who should undertake the liability, the supplier, carrier/shipping company, issurance company or other parties ;
3. Meanwhile, get more proofs(such as SGS report) of the quality problems
4. Claim to that party who should undertake the liability by showing the proofs

What’s your/others’ opinion on this topic ?

kHA****** on December 14th, 2008 at 3:05 am #

Dear Sir,
Can u please tell me if we done business through 30% advance and balance after shipment. What if buyer will ask to send documents at the time when we ask 70% after making shipment and fax the original copy of B/L as a assurance that shipment has done.
What option we have after that once consignment despatch and documents have with us and waiting for 70% balance payment.

Mason Pan on December 14th, 2008 at 4:36 am #

Reply to kHA******:

(1)
Usually, supplier won’t send the original documents if they have not gotten the balance payment . But if your customers’ credit are very good, I think you can send the original documents to them .

(2)
Just wait for the balance payment . If your customers have paid 30%, usually they will pay the balance .

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