Payment Terms & Credit Risk Guide: LC vs TT for Metal Roofing Tiles from China

TL;DR: Choosing the wrong payment term can cost you 0.3-0.5 % in bank fees or expose you to 100 % supplier default risk. In this 5 000-word factory guide, SKW Roof shares 16 years of export data: LC at sight vs TT 30/70, Alibaba Trade Assurance, credit insurance, and the exact risk-control checklist we use for 1 380 containers.

1. 2025 Payment Landscape for Roofing Importers

• LC at sight: 34 % of SKW Roof orders (up from 28 % in 2023).
• TT 30/70: 51 % (still dominant for repeat buyers).
• Trade Assurance: 12 % (first-time buyers, <5 containers/year).
• DP/OA: 3 % (long-term partners, 3+ years).

Bank fees: LC 0.3-0.5 % of invoice; TT flat 30-45 USD; Trade Assurance 2 % (Alibaba free for buyer, but supplier marks up).

2. LC at Sight: When & How to Use

2.1 What is LC at Sight?

A letter of credit where the seller’s bank pays upon presentation of compliant documents (BL, invoice, packing list, certificate of origin). No credit period—payment within 3-5 banking days.

2.2 Cost Structure

Total: 0.3-0.5 % of invoice value.

2.3 When to Use LC at Sight

• First-time order > 30 000 USD (risk > bank fee).
• Country risk: Nigeria, Kenya, Ghana (banking system stable but buyer-seller trust low).
• Political risk: elections, forex restrictions (LC is bank-guaranteed).
• Supplier credit: unknown or <2 years factory history.

2.4 LC Checklist for Roofing Tiles

1. Specify clean on-board BL (no claused BL accepted).
2. Allow 5 % tolerance on quantity (packing loss).
3. Require SGS or BV inspection certificate as document.
4. State AZ150 coating mass in description field.
5. Permit transhipment (many China-Africa routes tranship in Singapore).

3. TT 30/70: Factory Perspective & Risk

3.1 How TT 30/70 Works

• 30 % deposit: upon PO, before production.
• 70 % balance: against BL copy (email) or fax.

SKW Roof production starts after 30 % hits our account (1-2 banking days).

3.2 Why Factories Prefer TT

• Cash flow: 30 % upfront funds raw material purchase.
• No bank tie-up: LC ties 100 % of credit limit; TT uses only 30 %.
• Faster: LC document check 3-5 days; TT balance 1 day.
• Cheaper: no LC issuance or discrepancy fees.

3.3 Risk for Buyer

Maximum exposure: 30 % deposit if supplier defaults before shipment.

SKW Roof risk mitigation:

• 16-year factory, 48 000 m² plant, 6 production lines (bank lien impossible).
• Provide factory video walkthrough with date stamp.
• Send production progress photos every 3 days.
• Allow 3rd-party inspection before balance payment (SGS 298 USD).

3.4 When TT is Safe

• Repeat buyer: ≥3 containers, clean payment history.
• Small trial order: <10 000 USD, risk acceptable.
• Stable supplier: >5 years export, SGS/BV audited.

4. Other Terms: DP, OA, CAD

4.1 DP (Documents against Payment)

• Buyer pays at bank to receive documents (BL, invoice).
• Risk: buyer can refuse documents; tiles sit at port accruing demurrage.
• SKW Roof: rarely accepts DP unless buyer is 5+ year partner.

4.2 OA (Open Account)

• Supplier ships, buyer pays 30-60 days after arrival.
• Risk: 100 % supplier exposure; requires credit insurance.
• SKW Roof: OA only with Euler Hermes/Coface coverage.

4.3 CAD (Cash against Documents)

• Bank acts as intermediary, no LC issued.
• Risk: bank does not guarantee payment; weaker than LC.
• SKW Roof: not accepted (no advantage over TT).

5. Alibaba Trade Assurance: Step-by-Step

5.1 What is Trade Assurance?

Alibaba escrow service: payment held by Alibaba until buyer confirms receipt and quality.

5.2 Fee Structure

• Buyer: 0 % (free).
• Supplier: 2-3 % of order value (usually marks up price).

Net cost to buyer: +2 % vs direct TT.

5.3 How to Use It (Roofing Tiles)

1. Place order on Alibaba, select Trade Assurance.
2. Pay 30 % deposit via Alibaba (credit card or TT).
3. Production: SKW Roof uploads progress photos to Alibaba portal.
4. Inspection: buyer requests SGS via Alibaba (cost 298 USD).
5. Balance: pay 70 % to Alibaba, shipment released.
6. Arrival: 7-day inspection window; if quality fails, open dispute.
7. Refund: Alibaba refunds up to covered amount (max 10 000 USD for new buyers).

5.4 Pros & Cons

5.5 When to Use Trade Assurance

• First-time buyer, <5 containers/year.
• Order <30 000 USD (fits coverage limit).
• Buyer not familiar with LC process.
• Supplier is Alibaba Gold (SKW Roof is 12-year Gold).

6. Trade Credit Insurance: Coface vs Euler Hermes

6.1 What is Trade Credit Insurance?

Insures against buyer insolvency, protracted default, political risk. Covers 85-90 % of invoice value.

6.2 Premium & Coverage

6.3 How It Works (Supplier Perspective)

1. Supplier buys policy on buyer credit limit (e.g., 200 000 USD).
2. Supplier ships OA (30 days).
3. Buyer defaults (bankruptcy, non-payment).
4. Supplier files claim with insurer.
5. Insurer pays 85-90 % after waiting period (45-75 days).

6.4 SKW Roof OA Policy

We accept OA only if:

• Buyer has Euler Hermes/Coface credit limit >order value.
• Policy number disclosed and verified.
• Payment term ≤60 days.
• Interest rate: 0.8 %/month (cost of money).

Example: 50 000 USD order, 60-day OA, premium 0.8 % = 400 USD cost vs LC fee 250 USD; OA wins if buyer credit is solid.

7. Risk Matrix: Supplier, Country, Currency

8. SKW Roof Payment Policy & Flexibility

8.1 Standard Terms

• First order: TT 30/70 or Alibaba Trade Assurance.
• Repeat (3+ containers): TT 30/70 or LC at sight.
• Strategic partner (1+ year): OA with credit insurance.

8.2 Flexibility (Real Cases)

• Colombia distributor: 20 % deposit + 80 % 60 days OA (Coface limit 150 K USD).
• Kenya contractor: LC 30 days sight (project financed by IFC).
• US Amazon seller: 100 % TT before shipment (small order 8 000 USD).
• Philippines stockist: 30 % TT + 70 % upon arrival (trust built over 5 years).

8.3 Payment Speed

• LC documents checked 24 h; payment 3-5 banking days.
• TT deposit credited 1-2 days; BL copy triggers 70 % within 12 h.
• Alibaba deposit: 1-3 days (depends on payment method).

9. Case Studies: Payment Failures & Wins

9.1 Failure: TT 100 % Upfront, Small Factory Default

• Buyer: US roofer, first import, 12 000 USD order.
• Supplier: “Cheap” factory in Hebei, 2 years old, no Alibaba.
• Terms: 100 % TT before production.
• Result: Factory disappeared after payment; no BL, no refund. Loss 12 000 USD.
• Lesson: Never 100 % TT to unknown factory; use Trade Assurance or LC.

9.2 Win: LC at Sight + SGS, Nigerian Distributor

• Buyer: Lagos distributor, new to SKW Roof, 45 000 USD order.
• Terms: LC at sight, SGS inspection required.
• Process: SGS found colour deviation ΔE 2.1; we re-produced before shipment.
• Result: Buyer received perfect tiles; LC paid smoothly. Now 6 containers/year repeat.

9.3 Win: OA + Euler Hermes, Chile Importer

• Buyer: Santiago, 8-year partner, 250 000 USD/year.
• Terms: OA 60 days, Euler Hermes credit limit 300 K USD.
• Benefit: Buyer improves cash flow; SKW Roof pays 0.8 %/month interest (vs LC fee 0.4 % quarterly).
• Result: 11 % volume increase 2024 vs 2023.

10. Buyer Checklist: Payment Risk Control

1. Supplier verification
   • ☑ Business licence (translated, notarized)
   • ☑ ISO 9001 certificate (valid on IAF database)
   • ☑ Alibaba Gold Supplier years (SKW Roof: 12 years)
   • ☑ Factory video with date stamp
   • ☑ 2 references in your country
2. Payment term selection
   • ☑ First order <20 K USD → Trade Assurance
   • ☑ First order >30 K USD → LC at sight
   • ☑ Repeat order → TT 30/70
   • ☑ Strategic partner → OA with credit insurance
3. Document control
   • ☑ Draft LC before issuance (avoid discrepancies)
   • ☑ BL must show “clean on board”
   • ☑ Packing list matches PO within 5 %
   • ☑ Certificate of origin (Form A if GSP)
4. Inspection
   • ☑ SGS/BV booked before balance payment
   • ☑ Inspection report number added to BL
   • ☑ Sample tiles air-freighted before shipment
5. Insurance
   • ☑ Marine insurance 110 % of CIF value
   • ☑ Trade credit insurance if OA
   • ☑ Contingency 0.5 % of order value for disputes

FAQ – People Also Ask

Q1. Is LC at sight safer than TT 30/70 for metal roofing imports?

A: LC at sight is 100 % bank-guaranteed but costs 0.3-0.5 % of value; TT 30/70 is faster and cheaper but requires supplier trust built over 3+ containers.

Q2. What is the cheapest safe payment term for first-time buyers?

A: Alibaba Trade Assurance with 30 % TT + inspection-before-shipment gives 90 % protection at zero bank fee—ideal for 1-5 container trial orders.

Q3. Does trade credit insurance cover Chinese supplier default?

A: Yes, if supplier passes Coface/Euler Hermes credit check; premium 0.6-1.2 % of invoice value, covers 85-90 % loss, payout in 60-90 days.

Q4. Can I negotiate 10 % deposit instead of 30 %?

A: SKW Roof accepts 20 % deposit for repeat buyers (5+ containers); 10 % only with OA credit insurance.

Q5. What if my bank rejects LC issuance (credit limit)?

A: Use TT 30/70 + SGS inspection; or split order into 2 smaller LC; or ask supplier for 60 days OA with credit insurance.

Q6. How do I verify a Chinese supplier’s bank account is legitimate?

A: Request bank confirmation letter (in English) with SWIFT code; cross-check company name matches business licence; call bank branch (Alibaba Gold factories have verified accounts).

Ready to place your first order with payment peace of mind?

Email business@skywalkerchina.com with your target quantity and preferred payment term. We will recommend the safest, cheapest structure for your risk profile—no obligation.