What Payment Terms Are Standard for Chinese Steel Export Orders?
What Payment Terms Are Standard for Chinese Steel Export Orders?
Direct answer: two structures cover most Chinese steel export contracts - T/T, commonly a deposit with the balance against shipping documents, and an irrevocable letter of credit at sight. T/T is cheaper and faster to operate; L/C adds bank security in exchange for fees, a documentation burden and a longer timeline. The exact split and documents are set in the contract for each specific order.
| Term | Typical structure | Buyer protection | Bank cost | Speed |
|---|---|---|---|---|
| T/T | Deposit on order, balance against B/L copy | Medium | Low | Fast |
| L/C at sight | Irrevocable, documents against payment | High | Higher | Slower |
| D/P | Documents released against payment via banks | Low to medium | Medium | Slow |
| D/A | Documents released against acceptance | Low | Medium | Slow |
Why T/T dominates small and mid-size orders
T/T is cheap, fast and administratively light on both sides, which is why it suits trial orders and repeat business between parties who have already traded. The deposit covers raw material commitment; the balance against the bill of lading copy gives the buyer a document check before the goods clear.
The weakness is obvious: the deposit is unsecured if the supplier fails to ship, and the balance can be argued over if the goods do not match. T/T works on relationship and on a supplier you have verified, not on paperwork.
What an L/C actually buys you
An L/C substitutes a bank's credit for the buyer's, so the supplier ships against a payment promise it can trust, and the buyer's money is released only against compliant documents. That is real protection - but only if the documents are exactly right.
Discrepancies are where L/C costs get real: a certificate date, a shipment deadline, a description that does not match the invoice character for character. Every discrepancy is a fee and a delay, and the goods are usually already at sea when it is discovered.
How to keep the four classic traps out of your L/C
Avoid soft clauses that make payment conditional on the buyer's own action - a certificate of acceptance issued by the applicant is not a payment term, it is an option to refuse. Keep the description short and consistent across every document. Give the shipment deadline enough room for the real lead time plus loading. And confirm the document list with the supplier before the L/C is issued, not after.
