Key Takeaways
- The deposit percentage is the least interesting number; what the balance is tied to — inspection, documents, shipment — decides your exposure.
- T/T 30/70 is the workhorse; full prepay suits tiny stock orders; L/C earns its cost only on large capital commitments.
- Terms evolve with track record: shorten the balance tail as inspections pass and reorders accumulate.
- Quotes carry currency and validity; fix both in writing, and know which side carries exchange risk before rates move.
- Verify every bank-detail change through a second channel — payment diversion, not quality, is the costliest supplier event some buyers ever meet.
Buyers argue about the deposit percentage the way they argue about seating at a wedding. In practice, whether the deposit is 20 or 30 percent matters far less than what the balance is tied to: a passed inspection, a correct document set, a confirmed booking. Two suppliers can both say "30/70" and offer completely different protection, because the words around the numbers are the contract.
This article covers the common payment structures with Chinese toy suppliers, how to bind each payment to a milestone, how terms evolve as trust accumulates, and the currency and fraud questions that quietly decide whether the finance side of sourcing is boring — which is exactly what you want it to be.
The Common Structures
| Term | Typical structure | Buyer exposure | Fits best |
|---|---|---|---|
| T/T 30/70 | 30% at order, 70% before shipment | Goods risk if inspection skipped; deposit at risk pre-shipment | Most orders, most relationships |
| T/T escalating | Smaller deposit, balance after documents, earned over cycles | Narrowing tail as track record builds | Repeat buyers with clean history |
| Full prepay | 100% advance, common for tiny stock orders | Entire order value at risk | Small trial buys on established programs |
| L/C at sight | Bank undertaking against documents | Bank fees and document discipline; protects both sides | Large orders, first big commitments |
Read the exposure column honestly. The deposit is rarely the loss point — it is usually smaller than the balance and paid when the supplier still has every incentive to perform. The dangerous moment is the balance: paid before shipment, it removes your last financial lever; paid against an inspection report and shipping documents, it pays for what exists, not for what was promised. One refinement worth asking for: let the deposit cover materials while the balance covers labor and margin — factories accept it more often than buyers expect, and it aligns what you finance with what already exists.
Tying Payments to Milestones
The upgrade that costs nothing: define what releases the balance. The professional formulation reads something like — balance due within days of (a) final random inspection passed at the agreed AQL, and (b) receipt of a complete copy document set: invoice, packing list, bill of lading or airway bill, and any certificates the order promised. Conditions (a) and (b) are not distrust; they are the difference between paying for goods and paying for goods that are provably on their way to you.
Factories accept milestone language every day. The ones that resist "balance after inspection" are rarely offended by the inspection — they are protecting the option to ship whatever is on the floor when your balance arrives. That is precisely the option you are paying to close.
The Escalation Path for Repeat Buyers
Payment terms are a reputation ledger. A typical healthy evolution: strict 30/70 with inspection conditions on the first order; the same skeleton with a lighter touch on the second and third as inspections keep passing; then, for framework buyers, a reduced deposit and balance against documents. Some long relationships graduate to partial monthly settlement — earned, not asked.
Two rules keep the ladder honest. New SKUs reset the clock: a supplier you trust with your proven chew toy should still ship your first custom plush design against inspection. And leverage granted is leverage documented — every relaxation belongs in an updated order confirmation, not in the warm glow of a good call. Write the earned term into the next confirmation the week it is earned. The clauses worth negotiating alongside these terms are collected in clauses to negotiate with toy suppliers.
Currency, Validity and Who Carries FX
Most quotes arrive in US dollars, which means the supplier quietly carries the conversion — and manages it by pricing a buffer and stamping a validity window on the quotation. Respect that window. A quote that binds today's exchange rate for a season is a hedge the supplier extends you; treating it as permanent forces them to widen the buffer, and the buffer lands in your unit price.
For larger programs the tools get more deliberate. Some buyers settle in RMB and manage conversion on their side. Some fix rates with forward contracts through their bank. Some simply agree a re-quote trigger: if the rate moves beyond an agreed band, the price revisits. None of these requires sophistication — they require the currency conversation to happen before the order, in writing, instead of after delivery, in feelings.
When Something Goes Wrong
Late delivery or a held quality issue is where payment design pays for itself, because the balance is your only live lever once production ends. The escalation ladder that works: put findings in writing with photos and the inspection report; agree a remedy — rework, discount, replacement — before releasing funds; and keep the dispute inside the contract's clause rather than inside a negotiation of vibes. Buyers who prepaid without conditions discover that recovering money across a border is a legal hobby, not a business process. The payment structure and the trade term should be designed as one system; see Incoterms 2020 in practice for the shipping half.
Our own terms follow the ladder described here — conditions on the first order, lighter terms for proven programs — and they are written into every confirmation so both sides can rely on them. For current structures and quotes, start at the inquiry page and the terms arrive with the quotation.
Frequently Asked Questions
Is a 30% deposit and 70% balance standard in China?
When is a letter of credit worth the extra cost?
How do I protect a first order with a new supplier?
Should I pay in US dollars or RMB, and who carries the exchange risk?
Want terms that protect both sides of the deal?
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