Payment decisionT/T payment terms
Short answer
30/70 is the supplier's preferred structure, not the buyer's. In a standard 30/70 split, 70% of your money leaves before the goods are verifiably ready. The only leverage left is a legal claim in a jurisdiction you probably did not choose.30/40/30 fixes this by tying every release to a verifiable milestone:30% after factory verification, 40% after pre-shipment inspection (PSI) pass, 30% 30 days after arrival.
Three verifiable facts
Fact 1 — The 70% is released before the goods are verifiable
Claim: In a 30/70 structure, the 70% balance is typically due “before shipment” or “against copy of B/L.” At that point, the buyer has not seen the finished goods and has no third-party verification.
How to verify: Ask your supplier for their standard PI terms. Check when the 70% is due relative to inspection and shipment milestones.
Fact 2 — A B/L copy is not proof of correct goods
Claim: A bill of lading (B/L) proves the carrier received a container. It does not prove the contents match your specification, quantity, or quality. Paying against a B/L copy means you have paid in full before verifying what is inside.
How to verify: Read any B/L — it lists container number, weight, and destination. It does not list SKU-level contents or quality metrics.
Fact 3 — 30/40/30 is accepted by Chinese suppliers when framed correctly
Claim: Suppliers resist 30/40/30 when it is presented as “we don't trust you.” They accept it when framed as “we both need a PSI pass before the 40% moves, and the 30% after arrival covers the risk of hidden defects.” The structure is identical to how domestic Chinese buyers protect themselves.
How to verify: No public database exists. This is a negotiation pattern observed across buyer-side sourcing work.
Negotiation pattern from buyer-side practice, not a platform-published rate. Confirm against your own supplier conversations.
The problem with 30/70
In a standard T/T 30/70, the payment timeline looks like this:
Milestone 1
30%
Deposit after signed PI
Milestone 2
70%
Due before shipment or against B/L copy
Buyer has not verified goods
Milestone 3
—
No post-arrival holdback
- The 70% is typically due when the supplier says the goods are ready — but before you or a third party has inspected them.
- Once the 70% is paid, the supplier has received 100% of the order value. Your remaining leverage is a legal claim under a contract that may not be enforceable in China, and almost certainly is not in your home country.
- If defects are found after arrival, you have already paid in full. The supplier's incentive to cooperate drops sharply.
How 30/40/30 fixes it
The three-milestone structure keeps leverage on the buyer's side at every stage:
Milestone 1
30%
After signed PI + factory verification
Milestone 2
40%
After PSI pass or third-party inspection
Buyer verifies before paying
Milestone 3
30%
30 days after arrival
Hidden defect buffer
- 30% — Deposit: Released after signed PI. For custom orders, add a factory-verification trigger (visit or video call) before this 30% moves.
- 40% — Before shipment: Released only after a pre-shipment inspection (PSI) report shows the goods meet the PI specification. If the PSI fails, the 40% does not move until rework is complete and re-inspected.
- 30% — 30 days after arrival: Released once the goods have arrived and any hidden defects would have become visible. This 30% is your leverage if the shipment does not match what the PSI approved.
How to propose 30/40/30 to your supplier
Don't lead with “we don't trust you.” Lead with shared risk reduction:
- Frame it as quality assurance, not suspicion: “We both want to avoid disputes. A PSI pass before the 40% protects you from rework claims after shipment.”
- Reference domestic practice: “This is standard practice for domestic buyers in China. It is not unusual.”
- Offer something in return: If the supplier resists, offer a slightly higher total price or faster payment timing in exchange for the safer structure. The structure is worth more than the margin.
- Put it in the PI before the deposit: Do not negotiate payment terms after the deposit is paid. The PI is the only document the bank and any dispute platform will reference.
When 30/40/30 is not enough
- Orders over $50,000: Consider a Letter of Credit (LC) or escrow arrangement. The 30/40/30 structure still leaves significant capital at risk before arrival.
- First-time suppliers with no track record: Add a factory audit or video verification trigger before the 30% deposit.
- Custom / OEM orders with high tooling cost: The 30% deposit may cover the entire tooling cost. If the tooling is wrong, the 30% is a total loss. Structure tooling payment separately with its own verification milestone.
- Orders placed through a sourcing agent: Verify who holds the funds. If the agent holds the 40% between PSI and shipment, the agent becomes a counterparty risk. Seewho should hold your money.