Payment Terms in TiO2 International Trade
Standard payment terms for TiO2 trade range from 100% TT advance (lowest risk for seller) to LC 90-day (more risk-sharing). Choose by relationship and country.
Payment terms in international TiO2 trade balance the seller's credit risk against the buyer's working capital needs. Different terms suit different relationships and jurisdictions.
100% T/T Advance: - Buyer pays full amount before production/shipment - Lowest risk for seller - Standard for very small orders (samples, < $5000) - Standard for first-time buyers from high-risk jurisdictions - Discount opportunity: some sellers offer 2–3% discount for full prepayment
30% T/T Advance + 70% T/T against B/L copy: - Buyer pays 30% upfront (against PI signing); 70% against shipping document copy - Most common term for established TiO2 trade - Balances seller's production cost risk and buyer's product control risk - Typical for repeat customers with payment track record - Seller risk: ~70% if buyer defaults at B/L stage (rare) - Standard for SEMITI orders to established buyers
30% T/T Advance + 70% T/T at sight of B/L original: - Similar to above but buyer requires the original Bill of Lading to take goods at destination - Seller can withhold original B/L until full payment received - More secure for seller in jurisdictions where T/T against copy is risky
Letter of Credit (L/C) at sight: - Buyer's bank guarantees payment to seller upon presentation of shipping documents - Documents typically include B/L, CoA, Inspection certificate, Insurance certificate, COO - Strong protection for both parties — buyer pays only when seller has shipped per terms; seller paid by bank rather than buyer - Higher transactional cost (LC issuance ~0.1–0.3% of value, negotiation fees) - Standard for: first-time relationships, large orders > USD 50,000, buyers in countries with foreign exchange controls
L/C usance 30/60/90 days (Deferred Payment LC): - Bank guarantees payment but pays seller after 30/60/90 days from B/L date - Functions as trade credit — buyer has goods in hand before paying - Seller can discount the LC with their bank for immediate cash (at ~5–8% annual discount rate) - More expensive due to discount cost, but accommodates buyer working capital needs - Standard for some Asian and Middle Eastern markets
Documents Against Payment (D/P): - Seller sends documents through banking channel; buyer must pay to receive documents - Lower banking cost than LC - Less secure than LC — bank doesn't guarantee payment, just controls documents - Workable for moderate-trust relationships
Documents Against Acceptance (D/A) 30/60/90: - Documents released against buyer's acceptance (promise to pay later) - Effectively trade credit - Seller bears collection risk - Used only with established repeat customers with strong payment history
Open Account (O/A): - Buyer receives goods, pays per agreed terms (typically 30/60/90 days) - Highest risk for seller, lowest cost - Reserved for long-standing relationships with substantial credit history - Common in EU intra-trade; less common in China-emerging markets trade
Bank Guarantee + Open Account: - Buyer's bank issues guarantee in seller's favor - Functions as security for open account terms - Used in some EU and US trade
SEMITI standard payment matrix:
| Buyer profile | Typical terms | |
|---|---|---|
| First-time small order (< $10k) | 100% TT advance | |
| First-time large order (>$10k, established country) | LC at sight | |
| First-time large order (high-risk country) | 100% TT advance or LC at sight | |
| Repeat customer (1–3 orders, on time) | 30% TT + 70% TT against B/L copy | |
| Repeat customer (5+ orders, perfect history) | 30% TT + 70% open account 30 days | |
| Premium customer (large volume, multi-year) | Negotiable to favor buyer |
Currency: - USD is the standard for international TiO2 trade - Some markets accept EUR, RMB - Currency hedging is buyer's responsibility unless otherwise agreed - Long lead time markets (Brazil, EU) face currency risk — typically buyer absorbs
Trade finance facilities for buyers:
Confirmed LC: For sellers in markets with unstable currency, a confirmed LC adds a second bank's guarantee. More expensive but worthwhile in some emerging markets.
Forfaiting: Sellers can sell LC usance receivables to a forfaiter at a discount for immediate cash. Common for medium-term (90–180 day) payment terms.
Factoring: Open account receivables can be factored. Less common in commodity trade but available.
Letter of Credit fee structure (typical Asia):
| Fee component | Typical rate | |
|---|---|---|
| LC opening | 0.125–0.25% of LC value | |
| LC negotiation | 0.125–0.25% | |
| Document examination | $50–200 flat | |
| Confirmation (if needed) | 0.10–0.30% | |
| Discrepancy fee | $75–150 per discrepancy |
Payment in CNY / RMB: Some Chinese exporters offer pricing in CNY/RMB. SEMITI typically prices in USD but can accommodate CNY for buyers with active CNY flow.
Payment timing best practices: 1. Send PI (Proforma Invoice) within 24 hours of order 2. Wait for signed PI back; payment instructions on signed PI 3. 30% TT typically received within 5 working days of PI 4. Begin production upon TT confirmation 5. Notify buyer 7 days before shipment for 70% TT preparation 6. Release shipping documents upon final TT confirmation 7. Final CoA + commercial documents sent same day as B/L
For new buyers, we typically recommend starting with LC at sight (regardless of order size) to establish formal trust. After 2–3 successful LC transactions, transition to 30%/70% TT.