A proposed 30% deposit and 70% balance describes payment timing, not an even division of risk. Negotiate the schedule around procurement, verification, inspection and release conditions for the actual order. No percentage split guarantees delivery or quality.
What the deposit buys
Ask what the deposit will fund: materials, tooling, reserved capacity or other agreed costs. Record the production start conditions and schedule rather than assuming that every supplier needs advance payment for the same reason.
Agree the deposit amount using the disclosed work and commercial risk. Define cancellation, refunds and treatment of custom materials in the contract; do not assume a fixed percentage or that cancellation charges override the agreed terms.
The balance, and the leverage inside it
State the exact balance-payment event: a passed inspection, an agreed transport document, shipment handover or another verified milestone. These events occur at different points. Confirm which document will be available, who issues it and how cargo release is controlled.
Two structures worth knowing:
Balance against inspection report. If agreed, release payment only after the named inspection and buyer acceptance conditions are met. Specify the checklist, sampling plan, report, failed-result remedy and reinspection responsibility. An inspection does not guarantee every unit or replace the contract.
Retention. A negotiated amount can be held until a defined release event after arrival or acceptance. Record the amount, deadline, evidence, defect procedure and payment due date. Retention is not a universal percentage or an automatic entitlement.
When a letter of credit makes sense
A letter of credit creates a bank payment undertaking subject to its terms and compliant documents. Review the issuing bank, required documents, presentation deadline and any confirmation with your bank before agreeing the order.
Ask the bank for issuance, advising or confirmation, amendment and discrepancy fees and the preparation work required. Compare these with transaction risk and alternatives. There is no universal USD 50,000 cutoff. The International Trade Administration’s letter-of-credit guide lists bank-fee and document questions to resolve before application.
A bank checks the documents required by the credit; this is not a substitute for product inspection. Define inspection evidence separately and have the proposed document requirements checked before issue. Errors or discrepancies can delay payment and create amendment costs.
Patterns that should stop a deal
- Payment to a personal account when the contract names a company, without independently verified authority for that arrangement. Pause and resolve the beneficiary inconsistency before paying.
- A different beneficiary or banking jurisdiction introduced late without documented authority and independent confirmation. Some export arrangements use another entity, but an explanation alone does not verify it.
- Account details changed by email shortly before payment. Verify any change by voice on a number you already had, never on a number supplied in the same message.
- 100% deposit demanded for a first order from a supplier you have not verified. There are legitimate cases — highly customised goods, very small orders — but it should prompt verification rather than acceptance.
What to settle in writing before the deposit moves
- The exact split and what event triggers each payment.
- Whether the balance is against bill of lading copy, against inspection pass, or both.
- Who pays for a re-inspection if the first one fails.
- What happens to the deposit if the goods fail inspection twice.
- The bank account, confirmed against the company name on the business licence.
The beneficiary should correspond to the contracting entity and transaction documents. Independently verify any other collection arrangement before funds move. Confirm unexpected bank-detail changes through a previously verified contact channel, as described in the FBI’s business email compromise guidance.
To request a payment and verification scope review, send the supplier quotation, proposed payment schedule, inspection requirements and destination through the sourcing enquiry form.