L/C vs T/T: The Safest Payment Method When Importing From China
How you pay a Chinese supplier decides how much risk you carry. Here is a plain-English comparison of T/T and L/C, and when to use each.
Payment terms are risk terms
When you import from China, the payment method is not just admin. It decides who carries the risk if something goes wrong. Two methods you may encounter are T/T (telegraphic transfer, a bank wire) and L/C (letter of credit). Here is how they compare.
T/T (Telegraphic Transfer)
A direct bank-to-bank wire. Simple, fast and cheap, which is why most smaller orders use it. The risk sits in the timing.
- Confirm the milestone: R Trucks' standard terms are 30% deposit and 70% before shipment, after review of the finished truck and agreed inspection evidence. Payment against a Bill of Lading is a different milestone and must not be assumed.
- Pros: low bank fees, fast, easy for both sides.
- Cons: the deposit is at risk if the supplier does not perform. Mitigate this by vetting the supplier and using a pre-shipment inspection before you release the balance.
L/C (Letter of Credit)
A bank guarantee. Your bank promises to pay the supplier only when they present shipping documents that exactly match the agreed terms. The risk shifts from you to the banks.
- Purpose: the bank examines documents for compliance with the agreed credit. This does not replace checking the physical truck or agreeing an inspection scope.
- Cons: higher bank fees, more paperwork, and documents must match the L/C exactly or the bank can refuse to pay. Small discrepancies cause delays.
Which should you use?
- Use T/T for smaller orders, trusted or repeat suppliers, and when you want speed and low cost. Protect the deposit with due diligence and inspection.
- Use L/C for large orders, first-time suppliers, or high-value shipments where the extra protection justifies the cost and paperwork.
A practical middle path
Many importers start new relationships with a modest T/T order (with inspection) to build trust, then scale up. For large repeat volume, an L/C formalizes the protection. Whatever you choose, put the terms in the contract: deposit, balance trigger, Incoterm, and what happens if goods fail inspection.
The International Trade Administration's Letter of Credit guide explains the document-checking process, fees and bank review. Consult your bank before agreeing a credit.
R Trucks' standard payment terms are 30% deposit and 70% before shipment. Ask whether any alternative payment arrangement is available and confirm it in the written contract; L/C acceptance is not promised for every order.