Your Chinese supplier sent you a pro forma invoice. At the bottom, under payment terms: 30% TT advance, 70% TT before shipment. You countered with LC. They said they don't accept it. You settled for their terms without fully understanding what you had agreed to — or what you had given up.

This happens on hundreds of UAE import orders every week. Payment terms are one of the most negotiated — and most misunderstood — parts of any international trade transaction. Get them wrong and you either carry all the risk, or you lose the deal trying to protect yourself with a tool the supplier won't accept.

This guide covers the three payment methods that matter most for UAE importers sourcing from China, India, and other Asian markets: Telegraphic Transfer (TT), Letter of Credit (LC), and Cash Against Documents (CAD). What each one means, when each one makes sense, and how to use the right one at the right time.

Before getting into the mechanics, understand the frame.

There are five primary methods of payment in international trade that range from most to least secure: cash in advance, letter of credit, documentary collection, open account, and consignment. Shippingsolutionssoftware The most secure method for the exporter is the least secure for the importer — and vice versa. Every payment term is a negotiation about who carries the financial risk if something goes wrong.

As a buyer, you want to pay as late as possible, with as much verification as possible before money leaves your account. Your supplier wants to be paid as early as possible, with as little documentation overhead as possible. Payment terms are where those two interests meet — or clash.

TT is a direct bank-to-bank wire transfer settled via the SWIFT system. If you're dealing with a factory or trading company based in Hong Kong or mainland China, they are likely to request this type of payment. Generally, it takes between 1–5 days for a supplier to receive funds. Quality Inspection

TT is fast, simple, and universally accepted by Chinese suppliers. It is also the payment method that places the most financial risk on the buyer when structured incorrectly.

The 30/70 structure — what it actually means

One of the most common payment structures in China manufacturing is the 30/70 TT arrangement: 30% down when placing the order, and the remaining 70% due before shipment. In other words, the buyer pays in full before ever receiving or inspecting the goods. Harris Sliwoski LLP

Read that again. Under a standard 30/70 TT with payment before shipment, you pay 100% of the order value before a single carton leaves the factory. If quality falls short of specification — which happens — you have no financial leverage left. Your recourse is negotiation, not payment withholding.

The 30/70 TT system is inherently imbalanced because it asks the buyer to shoulder almost all the financial risk, with no meaningful leverage once the final payment is made. Harris Sliwoski LLP

The smarter TT structure

The superior arrangement is 30% advance at order confirmation, 70% after shipment — specifically, against a copy of the Bill of Lading. This changes the dynamic: the supplier has shipped the goods and sent you evidence of shipment, and you release the final payment only when you can verify the cargo is on the vessel and headed your way.

Many Indian exporters use a split TT — for example, 30% advance, 70% against copy of Bill of Lading — as a model with buyers in the UAE, UK, or Southeast Asia. EximBizz The same structure is entirely negotiable with Chinese suppliers, particularly once you have an established relationship and order history.

When TT makes sense:

When TT is too risky:

A Letter of Credit is a commitment by a bank on behalf of the buyer that payment will be made to the exporter, provided that the terms and conditions stated in the LC have been met, as verified through the presentation of all required documents. An LC also protects the buyer since no payment obligation arises until the goods have been shipped as promised. International Trade Administration

The LC replaces commercial trust with bank credit. Your bank guarantees to the supplier's bank that payment will be released once the supplier presents a compliant set of documents — typically a bill of lading, commercial invoice, packing list, certificate of origin, and inspection certificate. If the documents don't comply with the LC terms, the bank doesn't pay. No compliant documents, no money.

Types of LC you need to know:

A Sight LC requires the bank to pay immediately upon receipt of compliant documents. A Usance LC (also called a deferred payment LC) allows you to receive goods and pay after an agreed period — 30, 60, or 90 days. In a confirmed LC, the issuing bank engages a confirming bank to add its guarantee to the payment — providing an additional layer of security as the confirming bank becomes liable for payment if the issuing bank fails to fulfil its obligations. Sanufoods

For UAE buyers sourcing from markets where supplier banking infrastructure is less reliable, a confirmed LC adds a second layer of bank guarantee from your own UAE bank.

The practical problem with LCs in China trade

It is the rare Chinese manufacturer that will accept an LC. They are expensive, must be done right to be valid, and Chinese banks do not generally fall into a trusted category for foreign companies having their product manufactured in China. Harris Sliwoski LLP

This is the ground reality. Most Chinese factories — particularly small and medium manufacturers in Guangzhou, Foshan, Yiwu, and Shenzhen — are set up for TT and will decline LC requests for standard orders. LCs require them to present compliant documents to their bank, which involves a layer of documentary discipline that many smaller factories find burdensome.

LCs cost more — typically 1–2% in bank fees — and take longer to process. EximBizz For a USD 30,000 order, that is USD 300–600 in bank charges, plus time and documentation overhead on both sides.

When LC makes sense:

Cash Against Documents (CAD) is a payment method that requires the buyer to make payment, typically through a bank acting as an intermediary, after the seller has shipped the goods but before the buyer receives the shipping documents needed to claim them. altLINE

The mechanics: your supplier ships the goods, submits the shipping documents to their bank, which sends them to your bank. Your bank notifies you that documents have arrived and holds them until you pay. Once you pay, your bank releases the documents — you now have the Bill of Lading and can claim your cargo at the port.

CAD offers a middle ground between higher-risk open account terms and more secure but more complex and costly payment methods like letters of credit. altLINE

The important distinction from LC: with CAD, the bank acts as an intermediary handling the documents and collecting payment, but does not offer any guarantee that the seller will get paid. If the buyer refuses to pay, the seller has no bank guarantee to fall back on. altLINE

This means CAD protects the buyer more than TT (goods have shipped before any payment beyond the deposit), but protects the seller less than LC (no bank guarantee if the buyer refuses to pay upon document presentation).

When CAD makes sense:

1. Paying 100% TT before production starts. This is the most common mistake and it completely removes your leverage over quality, timeline, and specification compliance. Never agree to 100% advance unless the order value is small enough that losing it entirely would not materially affect the business.

2. Accepting LC without verifying the supplier's document capability. An LC is only as strong as the supplier's ability to present compliant documents. Banks are strict — even a tiny typo or date mismatch can result in rejection. EximBizz Before issuing an LC, verify that your supplier has experience with documentary credits and has an exporting relationship with a capable bank.

3. Treating all markets the same. TT is the default in China. CAD is common in India. Open account is standard in many European supplier relationships. Applying Chinese payment expectations to Indian suppliers — or vice versa — creates unnecessary friction. Know the norm for each sourcing market and negotiate from there.

Payment terms have a direct cost dimension that most importers miss. An LC costs 1–2% of the transaction value in bank fees. A usance LC gives you 30–90 days of deferred payment — which has a cash flow value that can offset the bank charge. A TT advance depletes your working capital from the moment of order, weeks or months before your goods arrive. When you are building your landed cost model (covered in detail in the UAE Landed Cost Calculation guide), factor in the financing cost of your payment term — not just the fee, but the capital tied up in transit.