T/T (Telegraphic Transfer) is the most common payment method for exporting hardware structural components—it is fast and cost-effective, though the sequence of “shipping first vs. receiving payment first” determines the level of risk. By mastering the standard operating procedures and two “ironclad rules” (no production without the deposit, and no release of shipping documents without the balance payment), T/T becomes the most cost-efficient payment method.
This article breaks down the entire process step-by-step.
I.
Contract Signing and Payment Details (Step 1)
Clearly specify payment ratios and milestones in the contract or Proforma Invoice (PI)—such as a 30% deposit followed by a 70% balance payment upon presentation of the copy of the Bill of Lading. Provide the client with complete payment details: company name (must match the bank account name), account number, receiving bank name and address, and SWIFT code (which speeds up the transfer).
Incorrect information can lead to returned funds and delays—verify every detail word-for-word before sending.
II.
Receipt and Verification of the Deposit (Step 2)
The client remits funds via SWIFT transfer; cross-border transfers typically take 1–3 business days to arrive. Upon receiving the bank’s credit notification and the remittance advice, verify three items: the amount (must match the contract), the currency, and the remitter (must match the buyer listed in the contract).
Be aware of reporting obligations: for “Class A” enterprises, advance payments received with a duration exceeding 30 days must be reported via the State Administration of Foreign Exchange (SAFE) monitoring system within 30 days of receipt, detailing the expected export date and the advance amount; also, promptly complete the declaration of foreign-related income after the funds arrive.
III. Production and Shipment (Step 3)
Golden Rule 1: Start production only after the deposit is received—This is especially critical for custom hardware (involving molds or specialized materials); if the customer changes their mind, these custom items are difficult to resell, so the deposit serves as insurance for the order’s authenticity.
Once production, packing, and customs declaration are complete, the goods are shipped, and both the original Bill of Lading (B/L) and the copy are obtained.
IV.
Balance Collection and Release of Documents (Step 4)
Immediately after shipment, send the copy of the Bill of Lading to the customer to request the balance payment (Post-shipment T/T); Golden Rule 2: Do not mail the original Bill of Lading or authorize a telex release until the balance is received—The original Bill of Lading is the document of title; releasing the document means releasing the goods.
Once the balance is received and verified, mail the original Bill of Lading or arrange for a telex release to complete the transaction.
Archive the documents (contracts, payment slips, Bills of Lading, customs declarations) for export tax rebates and future reference.
V.
Common Variations and Options
Pre-shipment T/T (100% prepayment or full payment before shipment): Lowest risk for the seller; suitable for first-time orders from new clients or custom orders. 30% deposit + 70% payment against copy of Bill of Lading: The industry standard; balances risk between buyer and seller. 40% deposit + 60% payment against copy of Bill of Lading: A choice for a more conservative risk appetite. Full post-shipment T/T (payment after shipment): Highest risk; recommended only for long-term, trusted clients with good credit records, and ideally combined with credit insurance.
VI. Practical Tips
First, verify payment slips rigorously—some buyers may pass off a “Payment Application Form” as a formal payment slip; rely solely on actual bank credits, and do not proceed with production until the funds have arrived. Second, the authority to release documents is effectively the authority to collect payment—adhere strictly to the “funds received, documents released” rule, even for urgent orders. Third, manage exchange rate risks—for large orders, consider stipulating a locked-in exchange rate or a specific settlement time in the contract. Fourth, retain all documentation—contracts, Proforma Invoices (PI), payment slips, and email correspondence form a complete chain of evidence for protecting your rights in the event of a payment dispute.
Industry experts note that while T/T procedures are not inherently complex, maintaining discipline is the real challenge;
if two “ironclad rules” are upheld, T/T becomes a fast and cost-effective option.
