Machinery purchases differ from commodity trading: high value, long lead times and customization mean sellers want deposits while buyers want leverage tied to inspection and delivery. Payment terms are effectively the heart of the contract, and getting them wrong is costly on both sides.
T/T (telegraphic transfer) is the most common arrangement, typically structured as 30/70 (30% deposit, 70% balance before shipment) or 30/50/20 milestones. The main risk is seller default on the deposit; mitigate it with a factory audit and a pre-shipment inspection tied to the balance payment.
An L/C at sight gives bank-guaranteed payment against compliant documents under UCP 600 rules. It is the right choice for first orders or values above roughly USD 50,000-100,000. Watch for the classic trap - document discrepancies - and budget for bank charges such as issuance, negotiation and amendment fees, typically 0.1-0.5% plus fixed costs.
Usance L/Cs (60, 90 or 120 days) and documentary collection (D/P) effectively finance the importer and are only sensible once trust is built. A standby L/C can serve as a performance or warranty guarantee without blocking working capital.
A hybrid structure often works best: a small deposit of 10-20%, a sight L/C for the balance, and a 5-10% retention released after commissioning or the warranty period. Mirror the payment milestones to contract milestones in writing, keep payments linked to inspection reports and bill-of-lading dates, and specify UCP 600 and a governing bank in the sale contract.