A hardware-parts client landed his first US order and called us about vessel space. My first question was not the cargo weight — it was “is the money settled?” He paused: the deposit had not arrived, and the production line was already scheduled. That ordering of events eventually hurts every exporter: logistics can be rescheduled; costs already spent cannot be recalled.
Accept one reality first: small US buyers rarely open L/Cs
Textbooks crown the letter of credit as export payment’s standard answer. The US reality: small and mid-sized American buyers almost never open one. An L/C ties up their bank line, costs issuance fees, and drags through document examination — far more expensive to them than a plain wire. Insist on an L/C and they call the next supplier. Its remaining battlefield on the US lane is large chain-retail purchasing and unusually large project orders.
So for ordinary B2B orders, the real question is never “which payment method” — it is how the T/T deposit ratio gets negotiated.
T/T splits: negotiated, not prescribed
The common opener is 30/70 — 30% down with the order, 70% before shipment or against a bill-of-lading copy (ratios illustrative). But the numbers are pure negotiation:
- New customer, no history: push toward 50/50 or more up front. The principle: the deposit must cover materials and line time, so the worst case is working for nothing — not paying to work
- Established customer, clean record: they will push the deposit down or ask for terms. Trade the concession for something — volume, an annual commitment, an earlier balance date
- The balance timing is the second battlefield: before shipment, against B/L copy, before arrival — each step moves risk onto you. “Against B/L copy” is the common equilibrium: the goods are on the water and unrecallable, but the original bill stays in your hands and the buyer cannot take delivery unpaid
Does D/P still have a place
D/P (documents against payment) rides bank collection: the buyer pays their bank to receive the original B/L. It adds a “no payment, no title” layer over bare T/T balances, cheaper and simpler than an L/C — a fit for mid-sized amounts between half-trusting parties. Two eyes-open items: D/P cannot stop the abandonment play — the buyer simply neither pays nor collects, and port storage plus return freight are yours; and collection lives on document quality — one mismatched field between invoice and B/L stalls everything (the document checklist).
How much collected before you book space
Our house rule: before booking, cash in hand must cover the unrecoverable costs — materials, line time, inland trucking, ocean freight. On a $50,000 order (illustrative), shipping against a 10% deposit means nine-tenths of the order riding on the buyer’s credit; that is not trade, that is lending.
The other half of credit risk is verification: check a new buyer’s incorporation age and physical operating address, call two or three trade references, and weigh export credit insurance on large or long-term orders. Payment terms and trade terms are two faces of one contract — who pays the duty and where risk transfers lives in the DDP article.
Payment and logistics are one decision line
How much collected before booking, when to release the bill — the substrate of both decisions is cash flow. Beyond Taiwan-US B2B logistics, SKYCARGO INC designs collection into the flow — the US-to-Hong-Kong express lane with local banking collection is one worked example. Talk to us about your export lane. (Personal shipments: Shiptw.)
Bank fees follow each bank’s schedule; payment terms and credit checks are case-by-case. General reference only.
