Deposit

In foreign trade, a deposit refers to a portion of the payment that the buyer pays to the seller in advance after the contract is signed or before the goods are produced, usually 10%-30% of the total contract amount. Its core function is to guarantee contract performance: for the seller, the deposit can cover part of the production costs and reduce the risk of buyer default; for the buyer, paying the deposit can lock in the supply and price. It is commonly used in customized products, large orders, or cooperation with new customers. Notes: 1) A deposit is different from an advance payment; a deposit has a punitive nature, so if the buyer defaults, the seller may not refund it; if the seller defaults, the deposit must be returned double (depending on the law). 2) The contract should clearly specify the deposit ratio, payment time, balance payment conditions, and default clauses. 3) In international transactions, it is recommended to use T/T or L/C to pay the deposit, and pay attention to foreign exchange controls and exchange rate risks. 4) It is different from earnest money; a deposit has stronger legal effect.