There are five key milestones for balance payments on machinery: ① Payment in full before shipment (safest; standard practice for standard equipment: 30% deposit + 70% before shipping); ② Payment after FAT (Factory Acceptance Test with material trial run; 30/40/30 model for custom equipment); ③ Payment upon presentation of Bill of Lading copy (a compromise between buyer and seller); ④ Payment after inspection upon arrival at port (risk borne by the seller); ⑤ L/C document presentation (bank guarantee)—Balance payment milestones = Risk allocation points (the earlier the payment, the safer it is for the seller).
1.
Payment in full before shipment (Safest)
Structure: 30% deposit + 70% balance paid before shipment; Process: Production completion → Send actual photos/inspection videos to client for confirmation → Receive 70% balance → Book shipping/dispatch goods; Applicability: Standard equipment (2–4 week lead time), first-time orders; Risk: Seller risk is extremely low (payment cleared before shipment)—mainstream practice for Chinese machinery exports (prioritizing seller capital security).
2.
Payment after FAT (Factory Acceptance Test)
Structure: 30% deposit + 40% upon production completion (after FAT acceptance) + 30% before shipment (30/40/30); FAT: Factory Acceptance Test (trial run with materials + performance verification); Applicability: Custom/non-standard equipment, large-scale production lines; Buyer Benefit: Intermediate payment made only after successful inspection (quality assurance)—FAT acceptance serves as a dual milestone for both quality and payment regarding custom equipment.
III. Payment Against Copy of Bill of Lading
Structure: 30% deposit + 70% payment against a copy of the Bill of Lading (B/L); Principle: The B/L copy proves the goods have been loaded (seller has shipped, buyer can pay); Suitability: Established clients, moderate trust; Risk: Goods are in transit when the buyer pays the balance (moderate risk for the seller)—a common compromise structure (70% against B/L copy, 30% deposit).
IV.
Payment After Inspection Upon Arrival
Structure: 30% deposit + balance payment after inspection upon arrival at the port or factory; Risk: Highest for the seller (goods shipped but balance unpaid; client might demand a price cut or refuse payment); Suitability: Long-term clients or phased delivery of large equipment; Mitigation: Release cargo only upon presentation of B/L + withhold original B/L until balance is cleared (control of title)—unless dealing with a long-term client, payment upon arrival carries high risk for the seller (use with caution).
V.
Notes for Overseas Buyers
First, specify the balance payment milestone in the contract (clear trigger conditions); second, payment before shipment is safest (for first orders); third, pay after FAT (Factory Acceptance Test) (quality assurance for custom equipment); fourth, pay balance upon arrival (negotiation leverage, but seller may require a guarantee); fifth, use platform escrow (funds released after inspection)—five options for machinery balance payment milestones (pre-shipment [safest] / FAT / against B/L / inspection upon arrival / L/C);
milestones equate to risk allocation—define clearly in the contract and ensure full payment before shipment for the first order.
