Most import problems that look like quality problems are really payment problems. Money left the buyer before anyone had leverage. If you are moving production between mainland China, a Hong Kong invoicing entity and ASEAN factories in Thailand, Vietnam, Malaysia or Indonesia, the payment structure changes with each route — and so does your protection.
Three routes, three risk profiles
| Route | Who invoices you | Typical terms | Main buyer risk |
|---|---|---|---|
| Mainland China factory, direct | The producing factory | 30% deposit, 70% against copy B/L | Deposit spent before production starts |
| Hong Kong entity for a mainland plant | Offshore trading/finance arm | 30/70 or LC at sight | You never contract with the actual producer |
| ASEAN factory (TH/VN/MY/ID) | The producing factory | 30/70, or 100% on inspection for repeat runs | Longer material lead times, thinner cash buffers |
Deposit size is negotiable — link it to milestones
A flat 30% deposit is a habit, not a rule. For tooled parts, split it: material purchase, tooling sign-off, first-article approval. For repeat orders with a proven supplier, push the deposit to 10-20% and settle the balance against a passed pre-shipment inspection report. The principle is simple: every payment should buy a verifiable event, not a promise.
When a letter of credit actually helps
An LC at sight is worth its bank fees above roughly USD 80,000-100,000 per shipment, or whenever the supplier is new and the product is custom. It forces documentary discipline: inspection certificate, packing list, certificate of origin and clean bill of lading. Below that value, LC cost and administrative friction usually exceed the benefit — a milestone structure plus third-party inspection does more for less.
Currency and the offshore invoicing question
Mainland suppliers may quote USD but prefer CNY settlement; ASEAN factories quote USD, THB, VND or MYR. Fix the currency and the FX reference in the purchase order, not in email. If the invoice comes from a Hong Kong or Singapore entity while goods ship from a mainland or ASEAN plant, confirm three things in writing: which legal entity owes you the warranty, which entity is the exporter of record on the customs paperwork, and whether the origin declaration matches the production site. Mismatches here are what customs authorities in the US, EU, UK and Australia flag first.
Practical protections that cost nothing
- Name the producing factory and address in the purchase order, even when a trading entity invoices you.
- Make the final payment conditional on a named inspection standard and AQL level.
- Hold 5-10% retention for 30 days after arrival on first orders.
- Require the supplier's bank account name to match the invoicing entity exactly — never pay a third-party personal account.
- Put tooling ownership, storage location and release conditions in the same document as the payment schedule.
Frequently Asked Questions
Is it safer to pay a Hong Kong entity or a factory directly?
Neither is inherently safer. A Hong Kong entity can be well capitalised and easy to contract with; a direct factory relationship gives you visibility over production. What matters is that the entity you pay is the entity that owes you the goods, the warranty and the origin declaration.
Should I ever pay 100% upfront?
Only for very small trial orders where the amount is smaller than the cost of arguing. For production orders, always keep a balance payable after inspection.
Do ASEAN suppliers accept the same terms as Chinese suppliers?
Often stricter deposits at first, because working capital is tighter and raw material lead times are longer. That usually relaxes after two or three clean orders.
What if the invoice currency differs from the quote?
Reject the invoice and reissue it. Silent currency switching is one of the most common margin leaks in cross-border sourcing.
Next step
Send us your product drawing, photo or a competitor sample with your target price and annual volume. You will get a landed-cost quotation, a written specification, lead time and an inspection plan — plus a payment structure that keeps your leverage until the goods pass inspection.
WhatsApp Business @tuskoconsulting or email contact@tuskoconsulting.com — we reply within 12 hours.