China Shoe Factory Payment Terms — T/T, L/C, PayPal Explained
A practical guide from MOHE factory on T/T, L/C, and PayPal payment terms for international shoe importers, with concrete numbers and insider tips.
Introduction
Welcome to MOHE. We operate three factories in Wenzhou, Putian, and Guangzhou, producing over 2 million pairs annually for global brands. As a manufacturer, we deal directly with importers every day. Payment terms are one of the first hurdles in any sourcing relationship. This guide explains the three most common methods — T/T, L/C, and PayPal — from our perspective. No fluff, just practical advice to help you make informed decisions.
T/T (Telegraphic Transfer) — The Industry Standard
T/T is the most widely used payment method in China’s shoe industry. It’s simple: you wire funds from your bank to ours. For most first-time orders, we require a 30% deposit before production begins, with the 70% balance due before shipment. This is standard across our factories.
Why T/T Works for Both Sides
- For you: You retain leverage by paying the balance only after seeing photos of finished goods or passing inspection. We typically share pre-shipment photos and can arrange third-party inspection (e.g., SGS, Bureau Veritas) at your cost.
- For us: The deposit covers raw material costs (leather, soles, lasts) which we must order upfront. Our minimum order quantity (MOQ) is 500 pairs per style for casual shoes, 300 pairs for sandals. Lead time is 45-60 days from deposit confirmation.
Tips for T/T
- Bank fees: Both sending and receiving banks charge fees ($15-$50 per wire). Use a bank with correspondent relationships in China to reduce costs.
- Exchange rates: We quote in USD. The exchange rate is locked at the time of deposit. For balance payments, we use the rate on the day of wire.
- Deposit percentage: For repeat customers with good history, we may reduce deposit to 20% or even 0% for small orders. But for new buyers, 30% is non-negotiable.
L/C (Letter of Credit) — For Large or Government Orders
L/C is common for large-volume orders (10,000+ pairs) or when importing to countries with strict currency controls (e.g., some African or Middle Eastern nations). It’s a bank guarantee: your bank promises to pay ours once you receive the shipping documents.
The Process
1. You open an irrevocable L/C at your bank in our favor.
2. We ship the goods and present documents (bill of lading, packing list, invoice, certificate of origin) to our bank.
3. Our bank checks documents against L/C terms. If compliant, they release payment.
Pros and Cons
- Pros: Security for both parties. You don’t pay until documents are presented; we know funds are guaranteed. Useful for large sums where T/T wire fees would be high.
- Cons: Banks charge fees (0.5%-2% of L/C value). Document discrepancies can delay payment. Our MOQ for L/C is 1,000 pairs minimum. Lead time is the same as T/T.
Our Advice
Avoid L/C for orders under $50,000. The paperwork and fees outweigh benefits. We’ve seen buyers lose weeks fixing typos on documents. If you must use L/C, work with a bank that has a China desk.
PayPal — For Samples and Small Orders
PayPal is convenient for small payments: samples, molds, or trial orders under $2,000. We accept PayPal for sample fees (typically $100-$300 per pair, including last making) and small batch orders (up to 50 pairs).
Limitations
- Fees: PayPal charges 4.4% + $0.30 per transaction. For a $1,000 payment, that’s $44.30 — much higher than T/T.
- Currency conversion: PayPal’s exchange rate is 2-3% worse than market rate.
- Dispute risk: Buyers can file disputes up to 180 days. For this reason, we only use PayPal with established customers or for low-risk sample payments.
When to Use PayPal
- Sample orders: Quick and easy. We ship samples within 7-10 days after payment.
- Prototype molds: We charge $200-$500 per mold (depending on complexity). PayPal works fine.
- Top-up payments: If you need to pay a small balance (e.g., $500) to release goods, PayPal is faster than wiring.
Comparing Payment Terms at a Glance
| Method | Best For | Deposit | Fees | Risk Level |
|--------|----------|---------|------|------------|
| T/T | Standard orders, all sizes | 30% deposit | Low ($15-$50 wire) | Low for both with trust |
| L/C | Large orders, regulated countries | 0% (bank guarantee) | 0.5%-2% of L/C value | Low for both, but paperwork heavy |
| PayPal | Samples, small orders <$2,000 | 100% upfront | 4.4% + $0.30 | Medium (dispute risk) |
Our Payment Policy at MOHE
We’ve been in business for 15 years. Our policy is simple:
- New customers: 30% T/T deposit, 70% before shipment. We accept PayPal for samples.
- Repeat customers (3+ orders): 20% deposit, 80% before shipment. Net 30 terms possible after 1 year of consistent orders.
- Large accounts (50,000+ pairs/year): Negotiable. We can offer 10% deposit or even L/C at sight.
Important: We never accept credit cards or Western Union. Too much fraud risk.
Final Tips for Importers
1. Always get a proforma invoice with payment terms in writing. Our PI includes bank details, MOQ, lead time, and Incoterms (usually FOB Shanghai or Xiamen).
2. Factor in all costs: T/T wire fees, PayPal fees, L/C bank charges. A $50,000 L/C might cost you $1,000 in fees — more than T/T.
3. Build trust over time. Start with T/T for small orders. Once we’ve shipped 3-4 orders on time, ask for better terms. We’re flexible for reliable partners.
4. Use a sourcing agent if you’re new to China. They can handle payments and inspections. But verify they are not marking up factory prices.
We hope this guide helps you source with confidence. If you have questions, contact our sales team. We’re happy to walk you through the process.
— The MOHE Production Team