I. Four Major Domestic Payment Types
There are four main types of domestic payment. Based on industry sales practices, payments for automation components fall into four categories: Spot Settlement (payment upon delivery or pickup; suitable for small amounts and initial transactions); Prepayment (partial payment—typically 30% to 50%—made upon ordering to allow the manufacturer to prepare materials and schedule production; suitable for custom parts);
Monthly Settlement (reconciliation at the end of the month for that month’s purchases, with payment due the following month; variations include Net 30, 60, or 90 days—calculated from the end of the billing month rather than the shipment date; this is the dominant method in domestic B2B business, testing the financial strength and creditworthiness of both parties); and Cash on Delivery (payment in full upon delivery, common for platform-based spot goods). In summary: standard off-the-shelf parts use spot or monthly settlement; custom parts use prepayment; and equipment uses installment plans. One must distinguish the product category before negotiating the payment method.
II. Equipment Installment Plans
Installment payments for equipment.
Industry practice dictates the following structure: 30% Prepayment (upon contract effectiveness, allowing the manufacturer to schedule production and prepare stock);
30% Before Shipment (payment made after confirming production completion via shipment videos or third-party inspection); 30% Upon Acceptance (payment made after successful installation and signing of the acceptance certificate); and a 10% Warranty Retention (paid after 3 to 6 months of operation without major malfunctions). Annual reports from listed companies in the industry reveal a typical breakdown: ~30% prepayment upon contract signing; 20%–50% upon factory acceptance of the complete line; 10%–30% upon mass-production acceptance; and 10%–20% after the warranty period ends. For production consumables, monthly or batch settlement is used, involving the reconciliation of purchase and warehousing records. Ultimately, the payment method is strongly correlated with the complexity of the product category.
III. Payment Terms and Policies
Payment terms and policy boundaries.
Industry policies regulate domestic payment terms: cash payments—specifically bank transfers, wire transfers, or bank acceptance drafts—are encouraged; suppliers must not be forced to accept non-cash instruments like commercial acceptance drafts or supply chain finance notes; for SMEs, full payment via cash or bank acceptance drafts is advocated; regarding payment deadlines, payment within 30 days of delivery is encouraged, with a maximum limit of 60 days; for acceptance drafts, the proportion of non-cash payments should be reasonably controlled, and the allocation of discounting costs must be specified in the contract; regarding the substitution of instruments, some major manufacturers are abandoning proprietary supply chain notes in favor of bank acceptance drafts and cash—policy serves as a safeguard for suppliers facing pressure to extend payment terms.
IV.
Cross-Border Payments
Cross-border payment methods.
Industry practice highlights three primary methods: T/T (Telegraphic Transfer)—the most common method, involving a 30% deposit before production and the remaining 70% before shipment (payable against a copy of the Bill of Lading within 3–7 days); suitable for orders under $50,000, it is fast and cost-effective (bank fees of $25–$50). L/C (Letter of Credit)—payment is made by the bank upon presentation of documents; suitable for large orders exceeding $50,000–$100,000, it offers the strongest buyer protection but entails high bank fees ($500–$2,000), longer processing times (7–14 days), and complex documentation. OA (Open Account)—payment is made 30, 60, or 90 days after shipment; suitable for long-term, trusted clients. 50/50—used for large-scale material procurement. 100% Prepayment—used for small trial orders (under $5,000) or transactions involving high-risk regions; for initial orders, a 30/70 split is the default, with the balance paid after inspection.
V.
Guarantees and Financial Instruments
Platform guarantees and financial instruments.
Industry-standard risk mitigation tools include: platform-guaranteed transactions (such as Alibaba Trade Assurance—where funds are released after inspection for orders under $20,000—Alipay B2B, and 1688 guaranteed transactions, allowing the platform to issue refunds from the supplier’s security deposit in the event of default); Letters of Credit (L/C) at sight; and bank guarantees (including advance payment guarantees—required from suppliers for large prepayments—and quality assurance guarantees—typically 5% of the contract value, valid for two years on an “on-demand” basis and refundable upon expiration). Other methods involve the discounting of acceptance bills (noting that bank acceptance bills offer low discounting costs, whereas commercial acceptance bills carry higher risk, with the party bearing the cost specified in the contract) and staged payments (e.g., 80% upon delivery and inspection; or 95% after equipment installation, commissioning, and on-site acceptance, with the final 5% paid after the warranty period).
Ultimately, the choice of payment method is not simply about delaying payment as long as possible, but rather striking a balance between risk management and cash flow.
Conclusion
Regarding payment methods for automation equipment components, the conclusion is: “Spot goods use immediate or monthly settlement; custom items use prepayments; equipment uses staged payments; and cross-border trade uses T/T and L/C.” Domestic options include immediate settlement, prepayment (30%–50%), monthly settlement (predominantly 30, 60, or 90 days), and payment upon delivery. Equipment payments typically follow a structure of 30% prepayment, 30% before shipment, 30% upon successful acceptance, and a 10% warranty retention. Payment terms generally encourage settlement within 30 days, with a maximum limit of 60 days; SMEs typically settle via cash or bank acceptance bills, without being forced to use commercial acceptance bills. Cross-border options include T/T 30/70 splits (for orders under $50,000), Letters of Credit (for large orders exceeding $50,000–$100,000), Open Account (OA) terms (30/60/90 days), 50/50 splits, and 100% prepayment for trial orders. Supporting tools include platform-guaranteed transactions, bank guarantees, and the discounting of acceptance bills.
In industry practice, the essence of payment terms lies in risk allocation: advance payments give suppliers the confidence to start work, while final payments and retention money grant the buyer leverage during acceptance.
The choice of method depends on the order value, the history of the partnership, and your level of trust in the supplier.
