Export payment terms for imported machinery
For an overseas machine purchase the payment terms are a risk tool as much as a financial one. This page covers the T/T, letter of credit and escrow structures KECMT buyers use, and how to keep the deposit safe.
For an overseas machine purchase, the payment terms are as much a risk tool as a financial one. The structure you choose decides who holds the leverage at each stage, and what happens if the machine is not what was promised. Here are the arrangements KECMT's export buyers use most, and the trade-offs.
Telegraphic transfer (T/T)
The most common structure is a deposit (often around 30 percent) to start production, with the balance paid before shipment or against a clean pre-shipment inspection. It is cheap and fast, but the protection comes entirely from the supplier relationship and the inspection — there is no bank standing between you and the seller. Keep the deposit modest and tie the balance to an independent inspection report.
Letter of credit (L/C)
- At sight. The bank pays on presentation of conforming shipping and commercial documents. You know the goods shipped before the money leaves, but you do not know they are correct — that is what the inspection is for.
- Usance (deferred). Payment is deferred, often 30 to 90 days after documents, giving you time to sell or commission the machine before paying. The supplier pays a financing cost, reflected in the price.
Escrow and platform trade assurance
Some buyers route payment through an escrow or a platform trade-assurance scheme where a neutral party holds the funds and releases them when agreed conditions are met. It adds a layer between you and the supplier, at a fee, and is worth considering for a first order with a new supplier.
Keeping the deposit safe
The deposit is the part you are most exposed on. Keep it as low as the supplier will accept to start production, never pay the balance before an independent inspection, and prefer structures where a bank or escrow sits between you and the seller for at least part of the sum. Confirm the supplier's banking details by a second channel before transferring — invoice fraud via swapped account details is a real pattern in this trade.
Questions we get asked
What deposit should I pay on an overseas machine order?
A common and reasonable deposit is around 30 percent to start production, with the balance against a clean pre-shipment inspection. Keep the deposit as low as the supplier will accept and never release the balance before an independent inspection confirms the machine.
Is a letter of credit safer than a bank transfer?
A letter of credit at sight means your bank only pays when conforming shipping and commercial documents are presented, so you know the goods were shipped. It does not guarantee the goods are correct, which is why a pre-shipment inspection still matters. It costs more than a transfer but adds a bank between you and the seller.
What is the difference between L/C at sight and usance?
At sight pays immediately on conforming documents; usance defers payment, often 30 to 90 days, giving you time to commission the machine before paying. The supplier carries the financing cost, which is usually reflected in the price.
How do I avoid payment fraud on a machine order?
Confirm the supplier's bank details by a second channel before transferring, be suspicious of last-minute account changes in an email, and where possible route at least part of the sum through a letter of credit or escrow. Invoice-redirection fraud is common in this trade.
Tell us your preferred payment structure
We work with T/T, letters of credit and escrow-style arrangements, and we issue the commercial and shipping documents your bank or financier requires.