Quick answer: The most common payment terms in international ingredient trade are advance payment by telegraphic transfer (TT), partial deposit with balance before or against shipping documents, documentary letters of credit (LC), and cash against documents (CAD). Each option balances risk differently between buyer and seller. New relationships often start with more secure terms and move to more flexible ones as trust grows.
Key takeaways – TT is simple and fast; LC offers more security but costs more. – Deposits with balance against documents are common for coconut sugar. – Always verify bank details by phone before paying.
What are the main payment options?
| Term | How it works | Risk for buyer | Risk for seller |
|---|---|---|---|
| Advance TT | Buyer pays before production or shipping | Higher | Low |
| Deposit + balance | E.g. part upfront, rest before or after shipment | Medium | Medium |
| CAD | Bank releases documents when buyer pays | Medium | Medium |
| Letter of credit (LC) | Buyer’s bank guarantees payment if documents comply | Low | Low |
| Open account | Buyer pays after receiving goods | Low | Higher |
How does a letter of credit work?
- The buyer asks its bank to issue an LC in favour of the seller.
- The LC lists the documents required: invoice, bill of lading, packing list, certificate of origin, COA and so on.
- The seller ships and presents documents through its bank.
- If the documents match the LC terms exactly, payment is made.
LCs are secure but require careful document preparation. Small differences, such as a misspelled name, can delay payment.
What is common in coconut sugar trade?
For coconut sugar shipped by container from Indonesia, many contracts use a deposit to start production, with the balance paid before release of the original bill of lading or against copies of shipping documents. Long-standing customers may move to longer terms.
How do you choose the right term?
- Relationship length: new partners usually start with more secure terms.
- Order size: larger orders may justify the cost of an LC.
- Country risk and currency: consider exchange controls and bank fees.
- Cash flow: match terms to your own planning.
- Documents: agree exactly which documents are needed.
How do you protect payments from fraud?
Email fraud is a real risk in international trade. Criminals sometimes send fake emails that look like a supplier, asking buyers to pay into a “new” bank account.
- Confirm bank details by phone using a number you already know.
- Treat any request to change bank details with suspicion.
- Check the sender’s email address carefully, letter by letter.
- Send a small test payment for a new account if needed.
At IMC, we never change our bank details by email alone. If you receive such a request in our name, call us before paying.
Frequently asked questions
What does TT mean in trade? Telegraphic transfer, an international bank transfer.
Is a letter of credit safer than TT? Usually yes for both sides, but it costs more and needs precise documents.
What is cash against documents? The bank releases shipping documents to the buyer only after payment.
How do I avoid payment fraud? Verify any bank detail change by phone before paying.
PT Integral Mulia Cipta (IMC Group) has produced organic coconut sugar in Central Java, Indonesia, since 2012. For specifications or samples, email info@organic-coconut-sugar.com or WhatsApp +62 811 880 62273.
Leave a Reply