How Payment Works on a Steel Order: T/T, L/C and the Paperwork Behind Both

A buyer sends an enquiry, we send a price, and at some point the conversation turns to how the money will move. That is usually where things slow down. Not because anyone is being difficult, but because payment sits between two banking systems, two sets of habits, and a physical product that has to be rolled, coated and packed before it can be loaded onto anything.

So here is how payment works on an export order, roughly in the order we deal with it. Buyers new to sourcing from China often find parts of this unfamiliar. Buyers who have been at it for years still run into the same handful of delays, so it may be worth skimming anyway.

Where the deposit fits

Most orders we quote are not stock items. A specific width, a specific zinc coating weight, a specific colour on a coating line — those have to be scheduled and run, and the mill buys the substrate before it does any of that. The deposit is what covers the raw material purchase, and it is the reason we can put a date on the production schedule at all.

On a galvanized steel coil order, the usual arrangement is a percentage up front and the balance before shipment or against a copy of the bill of lading. That split moves with the size of the order and the length of the relationship. A long-standing buyer placing a repeat order is not going to be treated like someone we have never shipped to. New buyers usually start on terms that protect both sides, and we say plainly that this is the reason, not any doubt about them.

T/T: two transfers, one order

Telegraphic transfer is what most of our orders run on, and it normally means two payments. The first is the deposit, sent once the proforma invoice comes back signed. The second is the balance, due after we send copies of the shipping documents and before the original set goes out by courier.

The upside is speed. Once the deposit lands we can book the slot, and once the balance clears we release the originals. The downside is that everything hangs on documents arriving on time and matching each other. If the invoice says one coil weight and the packing list says another, the bank on the other side will hold the payment while somebody figures out which number is wrong. We have watched a shipment sit for four days over a transposed digit in a coil number. Not a reason to avoid T/T, just a reason to proofread before sending.

L/C at sight: worth the fees when the order is big enough

Letters of credit cost money. There is an issuing fee, an advising fee, sometimes a confirmation charge, and a document examination fee if the bank finds discrepancies. On a small order those fees can eat a noticeable slice of the margin, which is why we do not push an L/C on every deal.

That said, a letter of credit at sight makes sense on larger contracts, on first orders where neither side has a track record, and on shipments into markets where the buyer's bank or local rules make a straight transfer awkward. It also forces both sides to be precise. An L/C is a promise to pay against documents, not against goods, so the description inside it has to match what we can actually produce and what the paperwork will actually say. That spec line gets read literally by a bank clerk who has never stood next to a coil.

The documents that actually move the money

For a coil order the set is fairly standard: commercial invoice, packing list, bill of lading, certificate of origin, and the mill test certificate. Depending on destination and product, insurance and inspection documents get added. On a galvanized corrugated roofing sheet order going to a distributor, the same core set applies.

Two of those cause more delay than the rest. The bill of lading is issued by the shipping line, so its timing is not entirely in our hands — if a vessel is rolled out of a sailing, the B/L date moves with it, and so does the payment trigger in a letter of credit. And any inspection requirement tied to payment has to be built into the schedule rather than bolted on a week before loading. If your contract says payment against a third-party inspection certificate, say so at the quotation stage. Retrofitting that into a production plan costs everyone time.

What actually causes payment delays

In our experience it is rarely a slow finance department on the buyer's side. The usual suspects look like this:

• The proforma invoice is issued, but the deposit does not go out until an internal approval cycle finishes. By then the production slot has moved to the next week.
• The applicant's name on the letter of credit does not match the invoice exactly — an ampersand where the invoice has "and", or a company suffix missing.
• A shipment deadline is written against shipment date while the buyer is tracking arrival date. Those are different dates, and the gap between them can run to a month on some routes.
• Somebody asks to change the coating colour or the coil weight after rolling has started. At that point it is a new order, not an amendment, and the clock restarts.

The way we see it

Payment terms are part of the product. A supplier who is cheap but vague about when money is due, which documents come with the shipment and who pays which bank charge is not actually cheaper once the delays are counted. On a carbon steel coil shipment or a container of PPGI coil, the money and the material move together, and the paperwork is what connects them.

If you are working out how to structure payment on an order, tell us three things: destination, order size, and whether it is a first purchase or a repeat. Those decide more about the terms than anything else. We would rather settle it while the quotation is being written than negotiate it from opposite sides of a loading deadline.

Zhishang Steel has always been a pioneer in custom steel and special supplies, and has been recognized for its efforts in enhancing work efficiency and product quality. In addition to ISO9001:2015 certification, we also adhere to strict quality policies and proprietary procedures. If you have any questions, please contact us to provide the best type of product solution for your pre-painted, coil coating metal process, we will closely support after-sales service to ensure that your subsequent problems can be solved in a timely manner, if you have any questions, please send email to info@zhishangsteel.com, we look forward to serving you.