Letter of credit in importing from China

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May 3  |  China Import and Export  |   Tim

There are some payment terms in international business, such as cash, Paypal, Western Union, Documents against Payment, Telegraphic Transfer (T/T) and Letter of Credit (L/C). T/T and L/C are used widely by furniture importers all over the world, but most of the China furniture manufacturers can only accept T/T, 30% deposit and balance should be arranged before shipping or against Copy of B/L, they usually refuse Letter of credit payment, but we highly suggest that you insist on L/C payment, so what wrong with this payment in China? Why you should use Letter of Credit in importing from China?

Letter of Credit in importing from China

 

As a safe trading term, Letter of Credit has been accepted by many buyers and sellers for decade years, but it is still a new thing to most of the owners or sales of China furniture manufactures, they can’t get any cash deposit directly, and they have to make deal with “professional” banks, worrying that the banks earns a lot in this kind of payment term, sometimes they need to wait 6 months to get the payment. Another reason they deny letter of credit is the risk in this payment term, if they can’t make 100% correct documents as credit bank required, then furniture importers can choose whether to pay this order or not, because L/C payment is strict with documents, some furniture exporters in China do not have salesmen who is good at this payment term, even some banks in China can’t guarantee 100% correct documents, when the customer refuses paying, the bank would tell exporters that this customer is cheater, they would never say that it is the bank’s fault because they did not make 100% correct documents, so they gave the customers a chance to refuse paying.

Telegraphic Transfer is the opposite, it is easy to control, and the procedure is simple, furniture importers pay 30% deposit to furniture exporters in China, then the exporters arrange furniture manufacturing, they will send a notice to the importers when all goods are ready, then quality inspections, the exporters will arrange balance if the quality is OK, final the exporters arrange loading containers and shipping. It is not complicated as Letter of Credit for both importers and exporters, and the banks do not take part in it, that’s why the furniture manufacturers and trading companies choose T/T.

But Telegraphic Transfer is not safe for furniture importers, the amount of a hotel furniture project can be easily more than $500,000, if you pay 30% deposit (more than $15,000) directly to the furniture manufacturers, what should you do if he is a scammer? Or how do you proceed it if they hadn’t finish this order 3 month later, not 45 days as they promised in invoice? You can barely do nothing, flying to China and find a lawyer? The cost maybe more than $20,000, and maybe you need to wait 2 years to get the money back, terrible. Apparently, Letter of Credit is much safer, although you need to put up to 100% security deposit in bank (sometimes this step is not necessary if your company has good business relationship with opening bank), and face to more complicated procedure, pay more to bank, but remember, all this is to make sure you import from China safely, extra cost in this payment is minor compared with the total amount and risk in T/T. Just send furniture QC to check the suppliers in China, if they can’t reach your quality and delivery time requirement, you have nothing lose.

So we advise that furniture importers attach importance to Letter of Credit payment in importing from China, especially for big amount order such as hotel furniture project, make sure to have furniture QC before loading and shipping. Senyi Furniture has salesmen who are excellent in Letter of Credit, and we welcome furniture importers make business with us in L/C payment.

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