Terms of Payment is one of the core clauses in international trade contracts, referring to the agreed time, place, currency, and specific method of payment for goods between the buyer and seller. Common methods include Telegraphic Transfer (T/T), Letter of Credit (L/C), Documents against Payment (D/P), Documents against Acceptance (D/A), Open Account (O/A), etc. In terms of usage scenarios, L/C is often used for new customers or large transactions to reduce risk, while T/T is commonly used for regular customers or small transactions. Points to note: payment milestones (e.g., advance payment, against copy of B/L, after arrival) must be clearly specified, along with the party bearing bank charges, currency type, and exchange rate risk. Difference from other terms: Terms of Payment focuses on 'how to pay', while price terms (e.g., FOB, CIF) focus on 'cost and risk allocation', and the two must be used in combination. In addition, the payment method directly affects cash flow and the security of foreign exchange collection. It is recommended to choose flexibly based on customer credit, transaction amount, and industry practice, and to insure against export credit risks.
📝 Examples
1. The payment terms of this contract are: 30% advance payment by T/T, 70% by T/T against copy of Bill of Lading. (This illustrates staged payment to reduce the seller's foreign exchange collection risk.)
2. Both parties agree to adopt payment by sight Letter of Credit, and the buyer must issue an irrevocable L/C 30 days before shipment. (This illustrates the specific requirements and timing for L/C payment.)
💡 Foreign Trade Tips
Foreign trade terms are the foundation of international business communication
Trade practices may vary slightly by country; pay attention when using them
When using terms in contracts, specify the applicable version (e.g., Incoterms 2020)
For unfamiliar terms, use GlobalSync's multilingual email helper to confirm with your partner