International Trade Payment Terms Explained: TT, LC, and DP for Taiwan Exporters

International trade payment risk runs on a spectrum: at one end, advance payment (100% safe for the seller, risky for buyer); at the other, open account/Net-30 terms (risky for seller, convenient for buyer). Between these extremes are Letter of Credit and Documents Against Payment.

Understanding which method to use with which buyer — and when to push back — is fundamental to running a healthy export business. The wrong payment term with an unreliable buyer can destroy a shipment's entire profit margin.

The four main methods Taiwan exporters use with US, Australian, and Japanese buyers: TT (Telegraphic Transfer / wire transfer), LC (Letter of Credit), DP (Documents Against Payment), and Open Account (Net-30, Net-60, Net-90).

TT is a direct bank-to-bank wire transfer. For exports, the typical structure is 30% deposit TT before production, 70% balance TT before shipment (after the buyer approves pre-shipment photos or inspection).

Risk for seller: the 70% balance is paid before the buyer physically receives goods, but after you have shipped — if the buyer disputes quality or claims damage after payment, they cannot easily reverse a TT. The deposit before production protects you from producing goods that the buyer then refuses to pay for.

Risk for buyer: they are wiring significant money to a foreign supplier before receiving goods. A buyer working with you for the first time has limited recourse if goods are defective. This is why new buyers often push for smaller deposits (10–20%) until trust is established.

For Amazon FBA sellers importing their own goods: you are essentially both buyer and seller, so payment terms only apply when you use a Taiwan manufacturer rather than your own factory. In this case, TT 30/70 is the standard for most Taiwan factories.

A Letter of Credit is a document issued by the buyer's bank guaranteeing payment to the seller upon presentation of specified shipping documents (commercial invoice, bill of lading, packing list, certificate of origin, etc.).

How it works: buyer asks their bank to issue an LC in your favor. You ship the goods and collect the shipping documents. You present the documents to your bank, which forwards them to the buyer's bank. The buyer's bank verifies the documents match the LC terms and releases payment to your bank.

LC is most appropriate when: the order value is large ($50,000+), you are working with a new buyer in a country with currency controls, or the buyer's creditworthiness is uncertain. The bank guarantee eliminates the risk of buyer default.

LC disadvantages: expensive ($500–2,000 in bank fees on each side), slow (30–60 days for document processing), and inflexible (any discrepancy between the documents and the LC terms — even a typo — can delay payment for weeks). For experienced buyers and sellers with established relationships, LC is overkill.

Open account terms mean you ship goods and invoice the buyer, who pays within the agreed number of days after receipt of goods or invoice date. Net-30 means payment due 30 days after invoice, Net-60 is 60 days, etc.

For Taiwan exporters selling to US B2B distributors or retailers, open account terms of Net-30 to Net-60 are industry standard. Major US retail chains like Target and Walmart pay on Net-45 or Net-60 as a matter of policy — you cannot negotiate this if you want to supply them.

Managing open account risk: run credit checks on new B2B buyers (through Dun & Bradstreet or Experian Business), require trade references from suppliers they already pay, start with small test orders on shorter terms (Net-15 or Net-30) before extending longer credit, and consider trade credit insurance (from Atradius or Coface) for large accounts.

For Taiwan sellers new to export: start all buyer relationships with 50% TT upfront, move to 30% TT / 70% TT upon shipment after 2–3 successful transactions, then consider Net-30 after 12+ months of consistent on-time payment.