In the last post, we looked at 8 payment methods you can use to pay your Chinese suppliers. In this post, I will look at “Payment Terms” that go along with the choice of payment method & factors influencing the negotiation of payment terms.
It is important not to confuse “Payment Terms” here with “Trade Terms” (FOB, CIF, etc.). “Payment Terms” include:
- The choice of payment method
- The timing of the payment
- Whether there is a pre-payment required & the percentage of the pre-payment
The combination of the factors above dictates the proportion of risk each party takes & the negotiation power buyers have in case disputes arise. Ideally, in every transaction, there would be a 50-50 sharing of risk but in practice, that is hardly the case.