T/T Deposit and Balance
The standard arrangement: a bank transfer (T/T) split into a deposit before production, typically 30%, and the 70% balance after inspection.
When to use: most orders.
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Payment Terms & Incoterms Guide
How you pay a supplier, and which Incoterm you agree, decides how much risk you carry on an order. This guide explains the common ways to pay Chinese suppliers and what EXW, FOB and CIF mean for you.
How to Structure Supplier Payments
Each payment term balances risk between you and the supplier differently.
Letter of Credit (L/C)
Your bank guarantees payment, and releases it only once the agreed shipping documents are presented. It adds bank fees and paperwork.
When to use: larger or first-time orders.
100% Upfront
Full payment before production begins. If something goes wrong, you have already paid.
When to use: only small sample orders, or long-standing, verified suppliers.
The Golden Rule
Never pay a new supplier in full upfront, and never pay into a personal bank account.
Watch Out for Payment Fraud
Be wary of emails that appear to come from a supplier announcing new bank details: fraudsters often pose as suppliers to redirect payments. Before paying, confirm any new payment instructions by phone with a contact you already know. If you're ordering through Penanto, always check with us directly before paying.
Before paying a new supplier, work through the Financial and Transaction Safety checks in our Supplier Vetting Checklist, such as checking that the bank account name matches the company and using PayPal for samples only.
Incoterms Explained
Incoterms set out where the supplier's responsibility ends and yours begins: who arranges freight, insurance and customs clearance. Check the Incoterm when you compare quotes, because the same product can be priced on different terms.
| Incoterm | Supplier handles | Buyer handles |
|---|---|---|
| EXW (Ex Works) | Goods ready at the factory | Export clearance, freight, insurance, import clearance, delivery |
| FOB (Free On Board) | Delivery to port and export clearance | Freight, insurance, import clearance, delivery |
| CIF (Cost, Insurance & Freight) | Shipping and insurance to destination port | Import clearance and delivery from port |
What a Factory Price Usually Leaves Out
Even a genuine factory price is only the starting point. Depending on the Incoterm, it usually leaves out:
- Transport to the port
- Samples and courier fees
- Sea freight
- Export documentation
- Customs duty and VAT on arrival
- Freight forwarder charges
Compare quotes on their full landed cost, not the factory price alone. When we quote, we give you the full landed cost up front, so there are no surprises.
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Frequently Asked Questions
How do I pay a Chinese supplier safely?
Use a bank transfer (T/T) split into a deposit before production, typically 30%, and the 70% balance after inspection, or a letter of credit for larger or first-time orders. Never pay a new supplier in full upfront, never pay into a personal bank account, and confirm any change of bank details by phone before paying. If you're ordering through Penanto, always check with us directly.
Who pays import duties and VAT?
For stocked items, import duty has already been paid by us. For goods imported to order, the client covers import duties and VAT. We'll tell you the expected amount in advance so you can have the funds ready for the customs declaration, and we'll help you with the declaration itself.
What do Incoterms like FOB and CIF mean?
Incoterms are standard trade terms that set out who pays for what, and who carries the risk, at each stage of shipping. Under FOB (Free On Board), the supplier covers costs until the goods are loaded onto the ship in China, and the buyer pays freight and insurance from there. Under CIF (Cost, Insurance and Freight), the supplier also pays freight and insurance to the destination port, although the risk passes to the buyer once the goods are loaded. We can quote whichever suits you: a CIF price landed in Cyprus, a price delivered to your door so you pay one simple price, or an FOB price if you'd rather arrange shipping yourself.
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