How payment works in fabric trading: T/T, deposits, and L/C

Fabric orders run from a few thousand dollars to six figures, placed with a supplier on the other side of the world, months before the goods arrive. The payment structure is how both sides manage that risk — and the terms below are the ones you'll actually encounter when sourcing from China.

T/T: deposit plus balance

Telegraphic transfer (T/T) — a standard bank wire — is the most common structure for established relationships and small-to-mid-sized orders. The typical pattern is a 30% deposit against confirmed order details, with the remaining 70% due before shipment, against a copy of the bill of lading or a pre-shipment inspection report. Some suppliers offer more buyer-friendly splits (20/80, or a portion due on delivery) for repeat customers with an established payment history; new relationships more often start closer to 50/50 until trust is established on both sides.

L/C: letter of credit

For larger orders, or a first order with a new supplier where neither side has a track record yet, a letter of credit shifts payment risk onto the banks. Your bank commits to pay the supplier once they present the agreed shipping documents — the supplier is protected because payment is guaranteed by a bank, not your creditworthiness alone, and you're protected because the bank only pays against the exact documents you specified up front. L/Cs cost more in bank fees than a wire transfer and take longer to set up, so they're generally reserved for orders where the fee is small relative to the size and risk of the deal.

Deposits and cancellation

Deposits exist because fabric production is committed the moment it starts — the mill has bought yarn, scheduled loom time, and often begun dyeing to your specification before your balance payment is due. A deposit is usually non-refundable if an order is cancelled after production starts, though it's normal to negotiate a partial refund if cancellation happens before dyeing or weaving begins. Get the cancellation terms in writing on the order confirmation, not assumed.

Currency and who pays the transfer fee

Most fabric trade out of China is quoted and settled in USD, which avoids RMB exchange volatility affecting either side mid-order. Wire transfer fees are usually split — the sender's bank fee is paid by the buyer, the receiving bank's fee by the supplier (marked "SHA" on the transfer) — worth confirming up front so a $30 bank fee doesn't turn into an argument over a $20,000 order.

A practical starting point

For a first order with a new supplier: expect something close to a 50% deposit, ask for photos or a video of the goods before the balance is due, and get the full payment schedule — including what triggers each payment and what happens on late delivery — written into the order confirmation before you wire anything. On repeat orders, terms typically improve as the relationship builds a track record on both sides.