| Procurement Specialists |
| Plastics and Packaging |
| Lifestyles Products |
| Promotional Products |
| Office, School & Institutional |
| Industrial Products |
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Procurement Services |
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Product Development:
Streamline
has a great deal of experience helping clients bring new ideas
to the marketplace.
Quality Assurance:
Streamline
ensures that the quality and integrity of its clients’
products are maintained and their lead times are met.
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- What are typical payment terms?
- Are checks acceptable?
- Are wire transfers acceptable?
- What is a letter of credit (LC)?
- What is an irrevocable LC?
- What is a sight draft?
- What are typical
payment terms?
Many Chinese factories will only work on a payment
schedule of 30% down to initiate production and 70%
payable before the merchandise is even released for
shipment.
Credit terms are infrequently extended because a credit
system depends upon the precept that everyone else
is extending credit, as well. Chinese suppliers must
pay for their raw materials and labor when production
is undertaken and are thus, unwilling to wait 30 -
60 days to receive payment from international clients.
This clearly is subject to discussion under circumstances
where the client makes repeated orders or guarantees
large orders.
Additionally, many Chinese factories have had the
unfortunate experience of having their shipments refused
or payment defaulted. As Chinese, they are not in
a strong position to pursue such matters through international,
legal channels.
As a consequence, since the China market has such
strong comparative advantages with regard to capacity
and cheap labor, manufacturers are able to demand
and receive terms that are the most beneficial for
them.
It is true that some large factories accept credit
terms and Letters of Credit (LCs). However, these
same large factories tend to be the ones that have
been in business for a long time and as a consequence
tend to be the same ones that charge higher prices
and are more inflexible with regard to order size,
frequency, and alteration.
- Are checks
acceptable?
China has no system for dealing with checks regardless
of whether they are private or drawn directly from
a bank. Checks of any kind deposited into Chinese
banks will take three months to clear. For this reason,
wire transfers are the preferred mode of payment.
- Are wire
transfers acceptable?
While it is true that wire transfers are the accepted
mode of payment, China is known as a "country
of slow deposit ". In most of the world, bank
wires are completed within a few hours to two days
following the request for a wire transfer. In China,
wires initiated may "disappear " for up
to two weeks before transferred monies actually arrive
in beneficiary accounts.
Because of this unfortunate reality, it is generally
preferable to provide proof that a wire was actually
initiated and is en route. A faxed copy of the wire
confirmation form to the intended beneficiary generally
serves this purpose quite well.
Without such proof, the supplier may hold off on production
or shipment until the money transferred actually arrives.
Delays of this kind may hinder delivery deadlines
so providing immediate proof is advisable.
- What is a
letter of credit (LC)?
A commercial letter of credit is a contractual
agreement between a bank, known as the issuing bank,
on behalf of one of its customers, authorizing another
bank, known as the advising or confirming bank, to
make payment to the beneficiary. The issuing bank,
on the request of its customer, opens the letter of
credit. The issuing bank makes a commitment to honor
drawings made under the credit. The beneficiary is
normally the provider of goods and/or services. Essentially,
the issuing bank replaces the bank's customer as the
payee.
Elements of a Letter of Credit:
A payment undertaking given by a bank (issuing
bank)
On behalf of a buyer (applicant)
To pay a seller (beneficiary) for a given amount
of money
On presentation of specified documents representing
the supply of goods
Within specified time limits
Documents must conform to terms and conditions set
out in the letter of credit
Documents to be presented at a specified place
- What is an
irrevocable LC?
The irrevocable LC may not be revoked or amended without
the agreement of the issuing bank, the confirming
bank, and the beneficiary. An irrevocable letter of
credit from the issuing bank insures the beneficiary
that if the required documents are presented and the
terms and conditions are complied with, payment will
be made. If a letter of credit is irrevocable it is
referenced on its face.
What is a sight draft?
All letters of credit require the beneficiary to present
a draft and specified documents in order to receive
payment. A draft is a written order by which the party
creating it, orders another party to pay money to
a third party. A draft is also called a bill of exchange.
A sight draft is payable as soon as it is presented
for payment. The bank is allowed a reasonable time
to review the documents before making payment.
- What is a
sight draft?
All letters of credit require the beneficiary to present
a draft and specified documents in order to receive
payment. A draft is a written order by which the party
creating it, orders another party to pay money to
a third party. A draft is also called a bill of exchange.
A sight draft is payable as soon as it is presented
for payment. The bank is allowed a reasonable time
to review the documents before making payment.
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