Payment terms for China bag orders come down to one question: what event releases each dollar to the factory. The standard structure in the bag trade is a 30 percent deposit with the 70 percent balance paid against the bill of lading. A letter of credit governed by the ICC’s UCP 600 rules replaces that trust with bank-backed documents, and escrow services hold funds until shipment milestones are met. Each method shifts risk differently, and the choice depends mostly on order size and supplier history.

Buyers lose money on payment terms in two ways. The first is a deposit that funds nothing, paid to a factory that disappears or ships late. The second is the opposite: terms so tight that the factory treats the order as low priority and your production slot slides. The workable middle is a deposit that covers materials, a balance tied to a shipping document, and a dispute path that costs less than the order value.

T/T Deposits: The 30/70 Structure and What It Funds

Wire transfer, or T/T, remains the default for China bag orders because it is fast and cheap. The standard structure for bag factory orders is a 30 percent deposit and a 70 percent balance against the bill of lading, which is the structure tiiocti’s own sourcing guides recommend to buyers. Some factories quote 50/50, and a few ask for 100 percent before shipment. Treat the last one as a red flag unless you have history with the factory.

Understand what the deposit buys. On a custom bag order, the factory commits to fabric, printing screens, zippers, and thread before production. A 30 percent deposit roughly covers that material spend. When a factory asks for 50 percent or more, ask what the extra funds and check the answer against the material plan in your tech pack. If the factory cannot name the material lines, the deposit is not buying materials, it is buying your trust.

Wire details matter as much as percentages. Send the deposit only to the factory’s corporate bank account, never to a personal account or a third-party agent account. Confirm the account name matches the legal entity on your contract and on the commercial invoice. Add the order number to the wire reference so the factory can allocate the payment, and ask for a bank receipt, not just an email confirmation. The same discipline applies to the balance payment, which is why the trigger matters.

Balance Triggers: Bill of Lading vs Before Shipment

The 70 percent balance has two common triggers. The first is a copy of the bill of lading, which proves the factory actually loaded the goods. The second is a request for the balance before shipment, which leaves the buyer holding no leverage once the goods sit in a warehouse. The difference is a week of cash flow against the difference between a shipped order and a promise.

If you run third-party inspection, one more trigger is available: the balance releases against the inspection report. This aligns payment with the QC result, which is the point of the 14-question RFQ template that screens suppliers before payment terms are ever discussed. Whatever trigger you choose, write it into the purchase order in one sentence: balance payable against B/L copy, or against inspection report, or against packing list. Ambiguity here is where deposits get stuck.

Letters of Credit: UCP 600 and the Five-Banking-Day Rule

A letter of credit replaces supplier trust with bank documents. The buyer opens an L/C at their bank in favor of the factory, the factory ships and presents documents, and the bank pays when the documents comply with the credit’s terms. The global rulebook for this process is UCP 600, the Uniform Customs and Practice for Documentary Credits, published by the International Chamber of Commerce as ICC Publication No. 600, effective 1 July 2007. It governs letter of credit transactions worldwide and gives banks a maximum of five banking days to examine presented documents.

L/Cs remove two risks: the factory getting paid for unshipped goods and the buyer paying for goods that never loaded. They add three costs: the opening bank’s fee, the advising bank’s fee at the factory side, and the cost of discrepancies, which are document errors that let the bank refuse payment. Discrepancy fees are the hidden line item. A clean set of documents is a skill; ask the factory which forwarder will prepare the B/L and whether they have shipped under L/C before.

Sight L/Cs pay against documents presented at shipment, which is the standard for goods like bags. Usance L/Cs defer payment for 30 to 90 days after presentation, which gives the buyer financing but also asks the factory to accept a delay. If a factory pushes for a usance L/C, the discount it should offer on the unit price is the negotiation point.

Escrow and Platform Protection for First Orders

Escrow holds the buyer’s money until agreed milestones release it to the factory. The practical version most importers meet is the trade protection offered by sourcing platforms, which holds funds at each stage, from deposit through shipment confirmation. The mechanism is simple: the platform releases the deposit when production starts, and the balance when the shipment is confirmed against documents.

Escrow suits first orders and small orders where an L/C is overkill. Check three things before relying on it: the fee schedule, the evidence the platform accepts for each milestone, and whether the factory has used the platform before. A factory that refuses escrow on a first order is asking you to carry all the risk, and that answer is information. The platform does not inspect your bags; it only verifies documents, so pair escrow with a quote comparison across seven dimensions and a QC inspection at the factory.

Currency Choice and the Bank Fee Stack

Payment terms do not end at the percentage split. The currency and the fee allocation decide how much of the invoice value actually reaches the factory, and a sloppy fee clause can erase a negotiated price cut. Most China bag factories quote in USD because it is the settlement currency their banks handle cleanly. RMB settlement is available through the cross-border renminbi route, where the payment is settled in CNY, and it removes one currency conversion, but it requires the factory’s bank to accept cross-border RMB and the buyer’s bank to offer the route, so confirm both before you commit to it in the contract. The offshore CNH rate is a foreign-exchange term for trading, not a separate settlement code, so price the deal in the currency the contract names and let the banks settle it.

Wire transfers carry a three-part fee stack that most first-time buyers see only on the bank statement: the sending bank’s wire fee, the intermediary bank’s fee, and the receiving bank’s fee. The sending bank lets you choose how the fees are split, coded OUR, SHA, or BEN on the wire instruction. OUR means the sender pays everything, SHA splits the fees, and BEN pushes all charges onto the receiving factory, which the factory will price back into the unit cost anyway. State the split in the payment clause, and ask the factory for its receiving bank’s fee schedule before the first deposit so the landed cost model includes it.

The fraud pattern to know: a supplier email that changes the bank account details mid-order, usually right before a balance payment. Verify any account change by phone or video call with the person who signed your contract, and never rely on the new account number in the email thread alone. A factory with a legitimate banking change will expect the verification; a compromised account will push back.

The Payment Clause to Write Into Your Purchase Order

Five elements belong in the payment clause of every bag purchase order. First, the currency: USD, EUR, or RMB, stated with the settlement rule if your bank route allows RMB. Second, the deposit percentage and its trigger: deposit payable after sample approval. Third, the balance trigger, written as one sentence against a named document. Fourth, the fee split: each side pays its own bank fees, stated explicitly because L/C fees otherwise land on the beneficiary. Fifth, the refund condition: what happens to the deposit if the factory misses the shipment window or fails inspection, including the timeline for repayment.

The same discipline applies to your landed cost model: bank fees and payment currency costs belong in the calculation, because a 2 percent currency swing or an L/C fee changes the per-unit cost as surely as freight does. TIIOCTI quotes FOB, DDP, and EXW for woven PP moving bags and custom totes, and the standard terms are the 30/70 structure with the balance against the bill of lading, with L/C accepted on larger programs. The factory holds BSCI and GRS certification, and the first step is a moving bag quote with the payment terms written into the proforma.

Conclusion

Choose payment terms the same way you choose a factory: by what each side risks. A 30 percent deposit funds materials, the 70 percent balance against the bill of lading funds the shipment, and UCP 600-governed letters of credit or escrow step in when the order is too large or the supplier too new for trust alone. Write the trigger, the fee split, and the refund condition into the purchase order, and the payment structure stops being a source of surprises.

Request a proforma invoice with the full payment schedule from TIIOCTI before you commit, and confirm the deposit trigger against the sample approval date. The quote process takes one business day, and the payment terms are printed on the document, not improvised in chat.

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