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Common mistake: Releasing funds after provision of shipping docs

by Mike Bellamy

We are in the final stages of placing an order with a new supplier. Our preferred terms of payment are 30% of PO value placed as a deposit upon returned signed copy of PO followed by 70% of PO balance upon receipt of a scanned copy of B/L. However the supplier has come back saying that their terms are “30% deposit and 70% balance paid before shipment – balance paid when the goods ready to ship. We will show you the photos when the goods finished” Our concern is that we will have paid the full amount for the order and the products are not with our freight company i.e. FOB as agreed. Any advice would be greatly appreciated.

You need to be very very careful.  I recently saw a shipment of bricks arrive rather than electronics, because the supplier needed to show shipping docs before getting paying. The documents do not protect you. It simply shows that something has shipped. But the supplier could be sending you a load of junk. So in my opinion, a buyer is crazy to pay the supplier without doing an independent inspection of the shipment BEFORE the shipment and BEFORE final payment takes place.

Here are some short video tutorials on related subjects.

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Thanks again for your questions!

Question answered by Mike Bellamy, an Advisory Board Member & Featured Blogger at the not-for-profit China Sourcing Information Center. Mike is also the author of "The Essential Reference Guide to China Sourcing" and founder of PassageMaker Sourcing Solutions.


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