Shall I pay before or after the delivery of my goods when doing business with China?

There are different modes of payment that people use when doing business with China. It is more of a matter of convenience between the buyer and seller and the kind of agreement that they enter into. For businesses that have a long relationship, having a 30 day credit period is not uncommon. This means that the buyer can send the payment 30 days after he has received the goods from China. This however means that the seller’s business in China would sometimes need to wait for almost 120 days before getting its money back. From the time the seller’s business in China invests money and starts manufacturing till the date the goods are ready, it might sometimes take up to 2 months. It might take another month for the goods to reach the buyer. And then the buyer takes another month to make the payment to the seller’s business in China. So a total of 120 days might lapse before the seller’s business in China gets the payment. Unless the buyer and seller have a long standing relationship, this may not be a probable method of payment.

Normally, a one-time payment is avoided when doing business with China. Many businesses use the “30-40-30” payment principle. In this method, the buyer pays 30% of the amount to the seller’s business in China upfront. The seller’s business in China immediately starts production of goods for the buyer. When the products are ready for shipping from China, the buyer pays a 40% payment to the seller’s business in China after confirming the quality of the goods. Then the seller’s business sends the goods from China. The buyer then inspects the goods at the destination and then pays the remaining 30% to the seller’s business in China. This form of payment is effective in protecting the interests of the buyer’s and the seller’s business.

The phased approach towards payment in any business can be the safest method. Since the entire amount is not paid in one go, the transaction can be regulated and controlled more carefully if things do not go as planned. In case the shipment does not arrive or the quality of the products is not satisfactory, then the buyer would have the option to hold the payment in order to remedy the situation. The “30-40-30” method is therefore a very safe mode of payment that protects the interests of the business of both the buyer and the seller.