The supplier's quote says "30% T/T deposit, 70% before shipment." You wire £13,500 to a factory you have never visited, in a jurisdiction where your contract is difficult to enforce. That is the default. Most UK first-time importers accept it because the supplier proposed it and everyone says "30/70 is standard."
30/70 is standard — but standard for whom? It is optimised for the supplier's cash flow. The 30% covers raw materials procurement and pre-production costs. The 70% arrives before the goods leave the factory's control. The buyer carries almost all the risk: money sent, goods not yet inspected, shipping not yet confirmed. For some orders that risk is acceptable. For others — high-value, first-time supplier, critical-path production — it is not.
This issue maps three payment structures — T/T (Telegraphic Transfer) splits, L/C (Letter of Credit), and Trade Assurance — against what each protects, what each costs, and when each is appropriate. The answer is not "always use L/C" or "never use 30/70." It is a decision tree that depends on supplier track record, order value, order criticality, and whether someone on the China side can read the supplier's real production and cash-flow position.
Reader walks away knowing
- For context: where else can you get this
- T/T (Telegraphic Transfer) — the default
- Letter of Credit — when it is worth the cost
- Alibaba Trade Assurance — what it actually covers
For context: where else can you get this
Your bank explains L/C mechanics but not when the cost is justified. Alibaba explains Trade Assurance but not its exclusions. China-sourcing blogs say "use 30/70" without explaining the supplier's cash-flow reality that makes it non-negotiable for many factories. This article brings all three structures into one comparison: what each protects against, what each costs with current UK benchmarks, and a decision tree the reader applies to their own order.
T/T (Telegraphic Transfer) — the default
Cash at risk before shipment = deposit + balance paid before releaseExample: on a £45,000 order with 30/70 T/T, the buyer sends £13,500 at deposit stage and £31,500 before shipment. Until inspection and loading evidence are tied to the balance payment, the full £45,000 can sit ahead of physical control.A T/T payment is a bank wire transfer. In China sourcing, it typically comes in a split structure. The most common is 30/70: 30% deposit on order confirmation, 70% balance before shipment. Other splits exist — 50/50, 20/80, and 0/100 against B/L (Bill of Lading) — but 30/70 is the starting point for most first orders.
What the buyer gets. A simple, low-cost payment method. Wire transfer fees from a UK business bank account are typically £5-£25 per transfer via online banking (benchmark: Lloyds and Barclays charge £9.50 for non-EUR currencies; NatWest charges £15; HSBC charges £0-£5 for standard online transfers). Processing takes 1-3 business days for USD SWIFT transfers; up to 5 business days for less common corridors including CNY.
What the buyer loses. Leverage. Once the 70% balance leaves your account before shipment, your only recourse if the goods are wrong is contractual — and enforcing a contract against a Chinese supplier from the UK is expensive, slow, and uncertain. The payment structure gives you no document-compliance gate, no third-party verification trigger, and no escrow protection.
The hidden cost: FX spread. The wire fee is the visible cost. The larger cost is the foreign-exchange markup. UK retail banks typically charge a 2-4% spread above the mid-market rate on GBP-to-USD or GBP-to-CNY conversions. Fintech alternatives are significantly cheaper: Wise charges the mid-market rate plus a fee from 0.33%, and Revolut Business offers the interbank rate within its monthly plan allowance (0.6% above for amounts exceeding the allowance). On a £45,000 transfer, the bank cost premium over a fintech provider is typically £700-£1,800. On a 30/70 split, you pay FX spread twice — once on the £13,500 deposit and once on the £31,500 balance.
Letter of Credit — when it is worth the cost
An L/C is a conditional payment guarantee issued by the buyer's bank. The supplier ships the goods, presents documents proving shipment and compliance to their bank, and the buyer's bank pays — but only if the documents match the L/C terms exactly. The mechanics are governed by UCP 600 (Uniform Customs and Practice for Documentary Credits, ICC Publication No. 600), which has been effective since 1 July 2007 and governs approximately $2.8 trillion in global trade annually.
What the L/C protects. Document compliance. The supplier must present a clean set of documents — Bill of Lading, commercial invoice, packing list, and any certificates specified in the credit — that match the L/C terms. Under UCP 600 Article 14(b), the buyer's bank has a maximum of five banking days to determine whether the presentation is compliant. Documents must be presented within 21 calendar days after shipment, per Article 14(c). This gives the buyer shipping-document control that T/T does not provide.
What the L/C does not protect. Post-arrival quality. An L/C verifies documents, not goods. If the goods arrive and fail your quality requirements but the documents were compliant, the bank has already released payment.
The cost. Working budget for a UK business bank issuing an L/C on a £50,000 order: £200-£800 (benchmark as of May 2026). This typically includes an arrangement fee (0.1-0.5% of L/C value), advising fee (£50-£200), amendment fees if needed (£50-£100 each), and document checking (£50-£150). Some banks may require cash collateral for the full L/C amount, which ties up cash equivalently to a T/T deposit — check with your bank before assuming the L/C keeps your cash free.
The operational risk. Document discrepancies. ICC Banking Commission data shows that 60-75% of first-presentation documents are rejected globally for non-compliance. Common discrepancies include data mismatches between documents, late presentation, incorrect transport documents, and missing signatures. This is not a rare problem — it is the norm. A discrepant presentation can delay supplier payment by 5-10 banking days while amendments are negotiated, straining the commercial relationship.
Decision triggers for L/C use. High order value relative to issuance cost. New supplier with limited operating history. Complex compliance documentation that benefits from formal third-party document checking. Critical-path order where the cost of failure dominates the issuance fee.
Alibaba Trade Assurance — what it actually covers
Trade Assurance is Alibaba's buyer-protection programme. It is free for buyers (suppliers pay a 2-3% transaction fee). It covers shipping delays and quality disputes — but only under specific conditions.
What is covered. Disputes where the goods do not match the order contract in terms of quality or shipping timeline. Payment is held in escrow through the platform. If the order terms are not met, the buyer can file a claim. The dispute window is up to 30 days after confirmed receipt for standard accounts, 60 days for Enterprise or Level 4/5 accounts. Refunds are capped at the supplier's Trade Assurance limit — not necessarily your order value.
What is NOT covered. Off-platform payments void all protection. If you negotiate with a Trade Assurance supplier but wire the payment directly to their bank account outside Alibaba, the protection does not apply. Post-arrival quality issues outside the platform's defined parameters are also excluded. Trade Assurance is not a product warranty.
Decision trigger. Small-scale orders from platform-listed suppliers, where the escrow and dispute mechanism is the primary protection layer. For orders above £20,000 or from suppliers where platform Trust is the only due diligence, Trade Assurance alone is insufficient.
A warning on terms. Alibaba's Trade Assurance terms can change between the time this article is published and when you act. Always read the current Terms of Service — not a summary from a blog — and confirm your product and payment structure fall within covered scope.
Negotiating away from 30/70
Three negotiation phrasings, presented as options rather than defaults. Not every supplier will engage, and pushing too hard can backfire (see dual-view below).
(a) 0/100 against B/L. "We'd like to use 0/100 against B/L for this first order — what tier of pricing does that put us in?" This frames the payment structure as a pricing discussion. It surfaces whether the supplier will engage at all. Most new suppliers will decline, but the question opens the negotiation space.
(b) 20/80 with PSI trigger. "Would 20/80 with the 80% paid against a passing pre-shipment inspection certificate be acceptable?" This is often the negotiating sweet spot. The supplier's cash flow is partially protected (20% covers raw materials), and the buyer gets a pre-shipment quality gate before releasing the majority of funds. PSI (Pre-Shipment Inspection) as a payment trigger is covered in detail in CSG-08.
(c) 50/50 with 50% on PO. "Our standard for a first order is 50% on PO, 50% against B/L." This asserts a buyer-side default. Some suppliers will accept. Some will counter back to 30/70. The 50% deposit is generous enough that few suppliers will object to the structure itself — the negotiation shifts to the release trigger for the second 50%.
Decision triggers, not hard thresholds
Payment-structure decisions depend on three variables in combination: supplier track record, order value, and order criticality. These are decision triggers, not rules. Each importer's risk position is unique.
New supplier + high-value order (above £40,000): L/C or 20/80 with PSI trigger is often considered. The L/C issuance cost is a small share of order value, and the document-compliance protection offsets the operational complexity.
New supplier + small order (below £20,000): Trade Assurance is often adequate when the supplier is platform-listed and the payment stays on-platform. L/C issuance cost may exceed 3% of order value, making it disproportionate.
Repeat supplier (multiple successful prior orders): T/T 30/70 is commonly acceptable. The buyer's risk is empirically reduced by track record. Some relationships move to 20/80 or even 0/100 against B/L after several successful shipments.
Critical-path order (production halt if supply slips): L/C is often considered regardless of value or relationship. The cost of a supply failure — production downtime, lost revenue, contract penalties — dominates the issuance fee. The document-compliance gate provides a structural check that T/T does not.
Gatekeeper view: what is visible from China-side
In a typical Chinese factory's order economics, the 30% deposit covers raw materials procurement — commonly 40-60% of factory cost — plus a portion of pre-production wage cost. The factory genuinely needs the deposit. It is not a bargaining tactic. Without it, the factory is self-funding raw materials for a buyer it has never worked with, on a product it may not be able to resell if the buyer walks away.
Pushing too hard on 0/100 against B/L can result in the supplier deferring your order behind cash-paying customers. The factory has a queue. Orders with deposits start production first. Orders without deposits wait.
20/80 with PSI is often the sweet spot because both sides get what they need: the factory gets enough cash to start production, and the buyer gets a quality gate before the majority of the money moves.
L/C is disliked by many Chinese factories. The bank fees reduce their margin. Document-perfectionism risk means a single data mismatch between invoice and B/L can delay payment by a week or more. And the factory receives no cash until the bank accepts the documents after shipment — meaning the entire production cycle is self-funded. In practice, some factories quote L/C orders 3-5% higher than T/T orders to compensate, or defer them behind T/T orders in the production queue.
Where this framework breaks
Very large orders (above £500,000). The decision tree's triggers may need adjustment. L/C becomes almost standard regardless of relationship, and the bank's structuring requirements — cash collateral, compliance checks, syndication for very large credits — add complexity not covered here. Professional trade-finance advice is warranted.
Ongoing relationships with open-account terms. Once the buyer and supplier have built trust over multiple successful orders, the relationship may move to open account — payment 30, 60, or 90 days after shipment. This framework focuses on first-to-third orders and does not cover open-account structures.
Multi-shipment orders with progressive delivery. If the order ships in three batches over six months, the payment structure needs to map to delivery milestones. A single 30/70 split does not apply cleanly. Each shipment effectively becomes its own payment cycle.
Suppliers who refuse to negotiate. Some factories, especially those with strong order books, will not move from 30/70 regardless of buyer leverage. The decision tree's negotiation paths assume willingness to discuss alternatives. If the supplier is firm on 30/70 and the buyer needs the product, the negotiation shifts to other risk-mitigation tools: PSI, inspection clauses, and contract terms.
Trade Assurance ToS changes. Alibaba's coverage terms can change between publication and the reader's action. Always verify the current terms before relying on coverage described in any third-party source — including this one.
Coming up
Issue #20 works through the cash-flow model for the same £45,000 order under two payment paths: T/T 30/70 and L/C at sight, with a 90-day timeline showing when money leaves the buyer's account, what bank charges apply, and where dispute leverage sits at each stage. Issue #21 moves to sampling and quality inspection (CSG-07).
Sources
Published UK bank and fintech transfer-pricing references named in the article, ICC UCP 600, Alibaba Trade Assurance terms, and the pre-shipment-inspection framework referenced in the guide support the payment-cost, document-credit and escrow-protection review points. Accessed or reviewed as part of the 2026-06-02 guide migration/review.
Control points before commitment
- Map your next planned order against the decision tree: supplier track record + order value + criticality. Write down which payment structure the triggers point to before talking to the supplier.
- If the triggers point to L/C, ask your bank for an indicative issuance cost quote before negotiating. Note whether cash collateral is required. If the issuance cost exceeds 3% of order value, reconsider whether 20/80 with PSI achieves similar protection at lower cost.
- If the triggers point to T/T with PSI trigger, agree the inspection criteria and nominate the inspector before confirming payment terms. The PSI clause works only if both sides know the rules before production starts.
- If using Trade Assurance, read the current Terms of Service at alibaba.com — not a summary from a blog — and confirm your product category, payment method, and dispute window fall within covered scope.
- For any wire transfer, compare your bank's GBP-to-USD or GBP-to-CNY rate against Wise or Revolut Business. The FX spread on a £45,000 transfer can be £700-£1,800 depending on provider. This cost applies regardless of payment structure.
Where Plinth&Co adds control
Plinth&Co helps structure payment terms around evidence and leverage: what must be checked before deposit, before balance payment and before repeat order. This is a buyer-side planning note, not legal, tax, customs or carbon-accounting advice; confirm final treatment with appointed providers or qualified specialists before acting. This is not legal advice, not tax advice, not customs advice and not carbon-accounting advice. Plinth&Co is not a factory. Plinth&Co is not a customs broker. Plinth&Co is not a tax adviser. Plinth&Co is not a law firm. Plinth&Co is not a carbon-accounting adviser.
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