I. Composition of the Final Payment
The final payment consists of two parts. According to industry practice: Acceptance Payment—paid within 10 working days of successful equipment acceptance (standard contracts often specify 20% payment within 10 days of acceptance); and Warranty Retention—the remaining 5% to 10% is refunded without interest one year after the date of successful acceptance.
Disclosures by listed companies in the industry indicate that 10% of the total contract value is paid after the project warranty period (usually one year) expires. Representative payment models include 2:3:2:2:1 or 3:2:2:2:1 (allocating percentages to advance payment, shipment payment, acceptance payment, stable operation payment, and warranty retention, respectively). Thus, the “final payment” is not a single lump sum but comprises two distinct parts—the acceptance payment and the warranty retention—with completely different timing milestones.
II. Acceptance Milestones
Determining when acceptance is valid. Industry practices typically involve one of three acceptance milestones: Installation and Commissioning Acceptance—the acceptance period is within 3 days of completing installation and commissioning;
acceptance is deemed valid if the equipment passes inspection or if no inspection occurs within the designated period.
Trial Period Acceptance—acceptance takes place one month after the equipment enters service; failure to conduct acceptance within three months of service entry is deemed valid acceptance. Performance Assessment Acceptance—payment is made after the joint trial run is completed and documentation is submitted (common in terms used by listed companies); failure by the client to conduct acceptance on time is treated as valid acceptance. The timing of the final payment depends on when acceptance is completed; a shorter acceptance period leads to a faster final payment.
III.
Warranty Retention Ratio
Common ratios and timeframes for warranty retention.
According to industry data, there are three common tiers for warranty deposits: 5% (most common; payment reaches 95% upon successful acceptance, with the remaining 5% paid within 10 days after one year of normal operation); 10% (standard for non-standard equipment; refunded without interest one year after successful acceptance); and 3% (for large-scale engineering projects; the deposit is returned within 30 working days after the expiration of the 24-month warranty period—which begins upon successful installation and acceptance—provided there are no outstanding issues). Another method is staged annual payment of the 10% deposit (3% in the first year, 3% in the second, and 4% in the third). If quality issues arise during the warranty period, the period is extended by six months.
While the deposit percentage and duration are negotiable, the date of successful acceptance serves as the starting point.
IV.
Time Limits
Time limits for payment. Regulations impose strict constraints on the payment of final balances: for government agencies and public institutions, payment must be made within 30 days of goods delivery (unless the contract specifies otherwise, though the maximum limit is 60 days); for large enterprises, payment is required within 60 days of delivery. Invoicing is a prerequisite: suppliers must issue a special VAT invoice before payment, and the purchasing party has the right to refuse payment if the invoice is not provided. Payment applications must be submitted within 15 working days of successful acceptance. Regulations guaranteeing payment to small and medium-sized enterprises serve as a policy tool against delays;
the final payment cannot be deferred indefinitely, as policies set an upper limit.
V. Rigid Clause Drafting
Draft the final payment clauses in precise, unalterable terms.
Based on standard contractual practice, four mandatory clauses should be incorporated: **staged payment schedule** (30% advance payment within 3 days of signing, 40% before shipment, 25% within 7 working days of on-site acceptance, and the remaining 5% warranty retention released after one year); **deemed acceptance** (failure by Party A to conduct acceptance inspection on time is treated as passing, preventing indefinite delays); **invoice-linked payment** (payment due within a set timeframe after invoicing, with daily penalties for late payment); and **quality objection period** (procedures for written notice of rejection and re-inspection, with the right for Party A to terminate the contract after two consecutive failed inspections)—by fixing all timeframes and percentages rigidly, you prevent the counterparty from stalling via endless internal processes and retain control over the final payment.
Conclusion
Regarding when to pay the balance for non-standard assembly lines, the conclusion is: “Successful acceptance is the watershed moment, while the warranty retention depends on the duration.”
**Acceptance payment:** Paid in full within 10 working days of successful acceptance (7 to 15 working days is common). **Warranty retention:** 5% to 10%, refunded without interest one year after successful acceptance (24 months for large-scale projects, or paid in annual installments of 3%, 3%, and 4%). **Acceptance milestones:** Inspection within 3 days of installation and commissioning; deemed acceptance if not inspected within 3 months of being put into use; deemed acceptance if Party A fails to inspect on time. **Policies:** Government agencies and public institutions must pay within 30 days (max 60 days), and large enterprises within 60 days; the invoice is a prerequisite for payment. **Contracts:** Rigidly define payment stages (30% advance, 40% pre-shipment, 25% within 7 working days of acceptance, 5% warranty retention for 1 year), stipulate that late inspection counts as acceptance, and clearly define the quality objection period.
According to industry practice, the timing of the final payment depends on acceptance efficiency—if acceptance standards are set in advance and deadlines are written into the contract, the final payment can be received on schedule.
