Payment Terms with Taiwan Factories: T/T, L/C, and What's Normal

For a first order with a new Taiwan factory, a deposit-and-balance wire transfer arrangement is the standard starting point — the exact split varies by factory and order size, but a meaningful deposit before production, with the balance due before shipment or against shipping documents, is the pattern most buyers encounter. Neither side is being unusual by asking for this: the factory needs assurance the buyer is committed before tying up production capacity and materials, and the buyer wants the goods substantially finished, or shipped, before releasing the rest of the money. Treat the specific split as negotiable within that general shape, not as a fixed rule.

A telegraphic transfer, or T/T, is simply a bank wire — no special mechanism, just money moving directly between accounts. The deposit-balance version splits payment into at least two wires: an upfront deposit that lets the factory buy materials and reserve production capacity, and a balance payment tied to a milestone — commonly before the goods leave the factory, or against copies of the shipping documents once the container is booked. This structure works because it splits risk roughly evenly: the factory isn't fronting the entire cost of your order, and the buyer isn't paying in full before ever seeing evidence the goods exist and are moving. As a relationship proves out over repeat orders, some factories will adjust this split further in the buyer's favor, though that adjustment is earned through order history, not requested on day one.

A Letter of Credit, or L/C, is a bank-issued guarantee: your bank commits to pay the factory once specific, pre-agreed documents are presented, which shifts the payment guarantee from your creditworthiness alone onto your bank's. An L/C makes the most sense for larger orders, for a first relationship where both sides want more formal assurance than a wire transfer provides, or where your own company's internal finance controls require it regardless of supplier trust level. The tradeoffs are real: an L/C costs bank fees on both sides, takes longer to set up than a wire transfer, and requires the shipping documents to match the L/C's terms exactly — a small paperwork mismatch can hold up payment even when the goods themselves are fine.

A few patterns are worth treating as serious warning signs rather than a quirk of doing business abroad:

Payment terms are rarely static across a real relationship. A first order commonly carries the highest deposit percentage and the least flexibility, simply because there's no track record yet on either side. As orders repeat successfully — on time, to spec, with no payment disputes — many factories will lower the deposit percentage, extend the balance payment further past shipment, or agree to open-account terms where payment follows delivery entirely. That evolution is a reasonable thing to ask about directly once you have two or three clean orders behind you, rather than assuming it will be offered unprompted.

If you're about to negotiate payment terms on a first order, our guide on verifying a Taiwan supplier remotely covers the checks worth running before any deposit goes out, and our piece on MOQ negotiation covers how order size and tooling investment interact with what a factory will accept upfront. When you're ready to move on a real part, describe it in plain English on our request page — Taiwan Supplier Hub returns a shortlist of at least three verified Taiwan suppliers that have confirmed they want the project within 14 days, US$99 at launch, refunded if we can't deliver.