Ask a Chinese supplier what payment terms they prefer and you'll almost always get one of two answers: T/T (Telegraphic Transfer) or LC (Letter of Credit). Ask an African importer which one they should use and you'll get a much less clear response โ partly because the choice involves the bank, the supplier relationship, the order value, and the importer's risk appetite all at once.
This guide cuts through the noise. Both methods are legitimate. Neither is universally right. The right one for your next shipment depends on specific conditions that are worth understanding before your supplier quotes payment terms.
T/T Transfer: Fast, Simple, and Dependent on Trust
A Telegraphic Transfer is a direct bank-to-bank wire payment from your account to your supplier's account. It's the simplest payment method in international trade โ no bank intermediation, no documentary process, just an instruction to your bank and a confirmed receipt from the supplier.
T/T payments typically involve a split structure on the China-Africa lane:
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30% deposit paid at order confirmation โ this covers your supplier's raw material procurement and gives them confidence to begin production.
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70% balance paid against documents โ either before the shipping documents are released (T/T before B/L) or against a copy of the Bill of Lading (T/T against copy B/L). The former gives your supplier payment security; the latter gives you proof the goods have shipped before you pay the balance.
โ ๏ธ Watch Out: T/T is only as safe as the supplier relationship it sits inside. If you pay a deposit to a supplier you haven't properly verified and they disappear or can't deliver, you have no bank mechanism protecting you โ only whatever legal recourse is available in China, which for small orders is rarely practical. T/T works well with verified, established suppliers. It carries real financial exposure with new or unverified ones. Before paying any deposit to a new Chinese supplier, see: How to Find a Reliable Supplier in China Without Getting Burned.
Letter of Credit: Bank-Mediated, Document-Controlled
A Letter of Credit is a commitment from your bank (the issuing bank) to pay your supplier (through their bank, the advising bank) a specified amount, provided the supplier presents a defined set of documents that comply exactly with the terms of the LC. The bank doesn't inspect the goods. It inspects the documents.
This is the fundamental mechanism that makes an LC valuable: your supplier gets certainty of payment if they perform, and you get certainty that payment will only be released if the documents confirm the goods have shipped in the correct quantity, condition, and timeframe you specified.
What an LC Protects Against
Non-shipment: your supplier can't be paid without presenting a genuine Bill of Lading. Short shipment: the LC quantity must match the B/L. Late shipment: an LC with a latest shipment date rejects documents presented after that date. Non-compliant goods description: the commercial invoice must match the LC terms exactly.
What an LC Doesn't Protect Against
Fraudulent documents: a determined fraudster can present falsified documents that appear compliant. Quality disputes: the bank checks paperwork, not cargo. Shipping the wrong goods with compliant documents is possible โ physical inspection at origin, not an LC, is your protection against this.
โ ๏ธ Watch Out: LC document compliance is strict to the point of pedantry. A discrepancy as minor as a punctuation difference between the goods description on the commercial invoice and the LC wording can give the bank grounds to refuse payment โ or to request your approval of the discrepancy before releasing funds. Every field on every document must match the LC terms exactly. This is why the Bill of Lading review process matters so much on LC-governed shipments. See: The Bill of Lading: Why Every Field Matters.
Which One Should You Use?
| Situation | Preferred Method | Reason |
|---|---|---|
| New supplier, first order | LC or T/T with small deposit | Limit exposure before trust is established |
| High-value order, any supplier | LC | Financial exposure justifies bank protection cost |
| Established supplier, repeat order | T/T (30/70 split) | Track record reduces risk; T/T is faster and cheaper |
| Bank financing required | LC | LCs are typically required as collateral for import financing |
| Small order, verified supplier | T/T | LC fees as a % of small order value are disproportionate |
๐ Pro Tip: Whatever method you choose, confirm the payment terms in writing in your purchase order before production starts โ not verbally, and not after the goods have been manufactured. A payment dispute that starts at the port because terms were never formally agreed is expensive and largely avoidable. CALL's Trade and Compliance team can advise on the payment terms most appropriate for your supplier relationship and order value before you commit.
Questions about payment terms on your next China order?
Our Trade and Compliance team can walk you through the right payment structure for your supplier relationship and cargo value.
Talk to Our Team โLast reviewed: June 2026 ยท Category: Trade Finance
Related articles: The Bill of Lading: Why Every Field Matters ยท Document Checklist for ChinaโAfrica Exports ยท Incoterms Explained ยท What's on Your Freight Invoice
