You are wiring a 50% deposit to a new supplier's personal WeChat account for a USD 6,000 order. Two months later production stalls, the manager stops answering, and the goods never ship. The payment structure you chose — or failed to choose — is the single biggest lever on whether you get that money back.

Three structures, three risk profiles

Telegraphic transfer (TT). The default in Asian jewelry trade: typically 30-50% deposit TT at PO, balance TT against copy of bill of lading or before shipment. TT is cheap (bank fees USD 20-60 per leg), fast, and irreversible once sent. It protects the factory's production cost; it protects you only if the factory is trustworthy. Use TT with suppliers you have already audited — see the factory audit walkthrough.

Escrow (Alibaba Trade Assurance, Western Union escrow, or independent third-party). You pay the escrow provider; the supplier ships; funds release after you confirm receipt or after a set inspection window. Cost is roughly 2-5% of transaction value. Escrow is the right default for first-time suppliers, especially for orders under USD 10,000. It converts a blind wire into a conditional release.

Letter of credit (LC). A bank-backed instrument; the supplier gets paid when documents (invoice, packing list, inspection certificate, B/L) strictly match the LC terms. Cost is 0.1-0.25% plus bank fees, typically USD 150-400 per LC. LCs suit orders above USD 30,000 where documentary control matters — large seasonal reorders, tooling-funded private label. LCs are unforgiving: one mismatched document and the bank can refuse payment, so use them with a broker who has handled LCs.

Match the structure to the relationship stage

First order with a new factory — escrow or 30% TT + balance against pre-shipment inspection report. Budget a USD 200 third-party inspection before balance release.
Established supplier, small reorder — TT with staged call-off; link MOQ call-offs from the MOQ ladder to payment milestones.
Quarterly container, USD 30k+ — LC at sight with inspection clause, or TT 30/70 with escrow on the balance.

Never pay a trading intermediary's personal account for bulk orders; never pay 100% up front; never accept "discounted price" for skipping escrow. And remember: payment protection does not waive your compliance exposure. If goods fail FTC 16 CFR Part 23 stamp rules or EU nickel limits, the money problem becomes a customs problem — see REACH nickel limits. Even with funds released, you remain the importer of record.

Foreign exchange and hidden costs

Quotes in USD are not free of FX risk. Chinese factories quote USD, but their costs are RMB; a 3% RMB move can trigger a "price adjustment" email between PO and shipment. Fix the rate in the PO, or split deposit/balance so the rate is locked at order. Build a 2-3% payment cost buffer into the landed-cost margin formula so the wire fees never surprise the retail price.

What actually happens in a dispute under each structure

Under TT, there is no dispute mechanism — you negotiate directly with the supplier, and if they disappear you are left with a claim you would have to litigate across borders. Under escrow, the platform reviews evidence: your inspection report, photos, chat records, and the supplier's delivery receipts; release is held until either both parties agree or the platform rules. Escrow wins roughly 70-80% of material disputes where the buyer has dated inspection evidence. Under LC, disputes are documentary, not substantive — if the documents match, the bank pays; if they do not, the supplier fixes them within the amendment window. LC protects you from payment without documents, but it does not protect you from receiving ugly goods that arrived with perfect paperwork. That gap is closed by the inspection clause written into the LC terms. Whichever structure you choose, send the PO, the proforma invoice and the payment receipt to the same email thread — a clean paper trail is the one thing every dispute process, on every platform, actually rewards.

FAQ

Is Alibaba Trade Assurance worth the fee?

Yes for orders under USD 10,000 with a new supplier. The 2-5% fee buys dispute resolution and conditional release; on established suppliers, plain TT is cheaper and faster.

When does a letter of credit make sense?

Above USD 30,000 per shipment, or when tooling is prepaid across several SKUs. Below that, bank fees eat the benefit and document mismatch risk is real.

Can we recover money if TT already left?

Rarely. TT is irrevocable. Recovery requires litigation or trade-credit insurance, which is why the structure must be chosen before sending, not after a dispute.

Should we pay in RMB instead of USD?

Usually no. USD quotes are the trade norm and let you hedge naturally. RMB payment removes the factory's FX excuse but adds conversion friction on your side — decide per PO.

HOLYCOME works under escrow for first orders, TT 50/50 for reorders, and at-sight LCs for container seasons. We issue inspection-ready documentation so your balance release is clean. Ask for our payment terms sheet with the wholesale catalog.