T/T Risk Control · Home Decoration
T/T (Telegraphic Transfer) is one of the most commonly used remittance methods in international trade, referring to the importer transferring payment electronically through a bank into the exporter's designated account. In home furnishing export operations, T/T is typically combined with a deposit plus balance payment model, with the common structure being "30% deposit + 70% payment before shipment/against copy of bill of lading."
Compared with Letters of Credit (L/C), T/T offers simpler procedures, lower costs, and faster receipt of funds, but the risk falls almost entirely on the exporter's side—banks bear no payment guarantee responsibility, and whether the balance payment can be collected depends entirely on the importer's creditworthiness and the exporter's process control capabilities. This is precisely the core problem that "T/T risk control" aims to solve: while enjoying the efficiency advantages of T/T, reducing the probability of bad debt to an acceptable range through institutional design.
Why do Chinese custom home furnishing enterprises particularly need to pay attention to this?
Custom home furnishing (cabinets, wardrobes, wooden doors, whole-house customization) differs fundamentally from finished furniture exports:
Leading enterprises such as Oppein, Suofeiya, and Zbom have accelerated their overseas expansion in recent years, with both overseas engineering orders and distributor orders coexisting. T/T risk control has become a "required course" for foreign trade departments.
Scope of application: This article applies to custom home furnishing export operations that primarily use T/T as the settlement method, including full-container exports, engineering project supply, and overseas distributor wholesale scenarios. Pure L/C or OA (open account) operations are not the focus of this article, though some risk control logic may be universally applicable.
| Structure | Typical Ratio | Risk Bearer | Applicable Scenario |
|---|---|---|---|
| Deposit + full payment before shipment | 30%+70% | Low risk for exporter | New customers, small orders |
| Deposit + payment against copy of B/L | 30%+70% | Medium risk for exporter | Existing customers, regular orders |
| Deposit + payment after arrival at port | 30%+70% | High risk for exporter | Strong buyers, highly competitive markets |
Key control point: The later the balance payment milestone, the greater the exporter's risk. The custom home furnishing industry is advised to in principle not accept "payment after arrival at port" unless covered by Sinosure or the customer's creditworthiness is excellent.
T/T has no bank credit endorsement, so customer creditworthiness is the only "guarantee." It is recommended to establish a three-tier investigation mechanism:
Tier One: Basic Verification (Mandatory for All New Customers)
Tier Two: Professional Reports (When Order Value Exceeds a Certain Threshold)
Tier Three: On-site/Video Factory Inspection (Large Engineering Orders)
T/T risk control cannot rely solely on "trust"—it must be written into the contract. It is recommended to specify the following in the PI (Proforma Invoice) and sales contract:
(1) Payment Milestones and Ratios
(2) Retention of Title Clause
(3) Dispute Resolution and Jurisdiction
(4) Overdue Interest and Penalty
Under T/T, the bill of lading is the exporter's last "weapon." Key operational points:
Even with adequate upfront risk control, overdue balance payments may still occur. It is recommended to establish a standardized collection process:
| Overdue Days | Action |
|---|---|
| 1–7 days | Email + phone reminder, confirm payment plan |
| 8–30 days | Escalate to foreign trade manager, send formal demand letter |
| 31–60 days | Suspend production scheduling for new orders, initiate Sinosure claim |
| Over 60 days | Commission professional collection agency or initiate arbitration/litigation |
Note: Sinosure typically requires the insured to report a claim within a certain period (e.g., 10 working days) after becoming aware of a risk occurrence; failure to do so may affect compensation.
| Comparison Dimension | T/T | L/C (Letter of Credit) | OA (Open Account) | Domestic Sales |
|---|---|---|---|---|
| Payment collection risk | Medium-high (depends on customer credit) | Low (bank credit) | High | Low (mainly prepayment) |
| Capital occupation | Low | Medium | High | Low |
| Procedural complexity | Low | High | Low | Low |
| Cost | Low | High | Low | — |
| Applicable customers | SME importers, distributors | New customers, large orders | Long-term strategic customers | Domestic distributors |
| Custom home furnishing suitability | High (combined with deposit model) | Medium | Low | — |
Conclusion: T/T is the "primary settlement method" for custom home furnishing exports, but it must be combined with credit investigation, contract terms, document control, and Sinosure to keep risks within an acceptable range.
Case One: Australian Cabinet Distributor Order
A Chinese custom home furnishing enterprise cooperated with an Australian regional distributor, with the first order using "30% deposit + 70% payment against copy of B/L." After shipment, the customer delayed the balance payment on the grounds of "color difference from samples." Because the enterprise insisted on not releasing the original B/L, the customer could not take delivery of the goods, and ultimately paid the balance after 45 days overdue. Insight: B/L control is the last line of defense in T/T risk control.
Case Two: Installment Payment for a Middle East Engineering Project
An enterprise undertook a full cabinet project for a hotel apartment in the Middle East, with the contract specifying "30% deposit + 40% before shipment + 30% after installation acceptance." The enterprise insured with Sinosure and stipulated in the contract that acceptance standards would be based on third-party inspection reports. During project execution, the customer attempted to refuse the balance payment on the grounds of "installation defects," but the enterprise successfully recovered the payment based on the contract and inspection reports. Insight: When the balance payment milestone for engineering orders is late, Sinosure and clear acceptance standards are both indispensable.
Case Three: Bankruptcy of a US SME Importer
An enterprise cooperated with a US SME importer for many years, later relaxed risk control, and accepted "20% deposit + 80% payment after arrival at port." The customer filed for bankruptcy protection after the goods arrived at port, and the enterprise could not recover the balance payment. Because no Sinosure insurance was purchased, the loss was significant. Insight: An existing customer does not equal zero risk; T/T risk control cannot be relaxed due to cooperative relationships.
Q1: A new customer requests 100% payment against copy of B/L. Can this be accepted?
Not recommended. Custom home furnishing products are highly non-standard, and once the customer refuses delivery, they can hardly be resold. For new customers, it is recommended to require at least a 30% deposit, with the balance paid before shipment or against copy of B/L, and to purchase Sinosure insurance.
Q2: The customer says "Our company is very large and doesn't need a credit investigation." What should be done?
A large company does not necessarily mean prompt payment. It is recommended to insist on basic verification and require professional credit reports for large orders. The customer can be told that this is a standard company process, not a sign of distrust.
Q3: Can Sinosure cover T/T risks?
Yes. The Short-term Export Credit Insurance of the China Export & Credit Insurance Corporation (Sinosure) can cover accounts receivable under T/T, but insurance must be purchased before shipment, and reporting deadlines and compensation ratio requirements must be observed.
Q4: The customer refuses to pay the balance. What should be done after the goods arrive at port?
First, do not release the B/L and negotiate with the customer; if negotiation fails, consider resale, return shipping, or local auction. Return shipping is costly and resale is difficult, so upfront risk control is more important than post-event disposal.
Q5: Which is more suitable for custom home furnishing exports, T/T or L/C?
T/T is more suitable for existing customers and small-to-medium orders, offering high efficiency and low cost; L/C is suitable for new customers and large engineering orders, but procedures are complex. In practice, many enterprises adopt a combined strategy of "T/T as primary + L/C as supplementary."
1. Establish a customer tiering system: Classify customers into A/B/C tiers based on order value, years of cooperation, and credit status, with different tiers corresponding to different payment ratios and risk control measures.
2. Require a minimum 30% deposit for all new customers: Customized products must receive a deposit before production scheduling, and the balance payment milestone should in principle be no later than "against copy of B/L."
3. Mandatory Sinosure insurance: Incorporate Sinosure insurance into the shipment process—no production scheduling or shipping without insurance.
4. Standardize B/L control: Before the balance payment is received, do not sign telex releases or release original B/Ls; use "TO ORDER" as the B/L consignee whenever possible.
5. Standardize contract templates: Have the legal department create standard sales contract and PI templates specifying payment milestones, retention of title, and dispute resolution clauses.
6. Establish an overdue collection SOP: Handle matters by overdue day tiers, clarifying responsible persons, actions, and deadlines.
7. Regularly review risk control cases: Conduct quarterly joint reviews of overdue and bad debt cases by foreign trade, legal, and finance departments to update risk control policies.
8. Overseas sales training: Ensure frontline sales staff understand T/T risk control logic to avoid making arbitrary payment term commitments just to close deals.