The factory wants 50% deposit and 50% before shipment. You would rather pay on delivery. Neither side is being unreasonable — each is asking the other to carry the risk that the goods and the money will not both arrive as promised, and the payment method is where that risk actually gets allocated, not the contract’s opening paragraph about “good faith.”
Below is how the three payment methods a Vietnamese exporter is likely to offer actually work, who is protected in each, and what a Vietnamese bank and exporter typically do with each one.
💬 Negotiating payment terms on a new supplier relationship? Tell us the order size and the supplier and we will talk through which method fits.
Deposit and balance by telegraphic transfer
The simplest method and the one that puts the most trust in the other party — a deposit paid before production starts, the balance paid against an agreed trigger before or at shipment, both by ordinary bank wire.
T/T (telegraphic transfer, an ordinary international bank wire) carries no built-in verification that the goods matching the order actually exist or have shipped — it is only as safe as the trust between buyer and supplier and whatever independent inspection sits alongside it. A deposit-and-balance structure typically works like this:
- A deposit is paid after the contract or purchase order is signed, before production starts.
- The balance is paid against a stated trigger — commonly a completed pre-shipment inspection, a copy of the bill of lading, or a set number of days before the vessel sails.
- The trigger is written into the purchase order in the same terms used for the inspection standard — see setting up pre-shipment inspection and AQL sampling — so “before shipment” means a specific, checkable event rather than a date either side can dispute.
The buyer’s exposure sits on the deposit: money paid before any goods exist, recoverable only through the relationship or a dispute process if production never happens as promised. The exporter’s exposure sits on the balance: goods produced, and in some structures already loaded, before the remaining payment is confirmed. This is why the balance trigger matters more than the percentage split — a balance released against an inspection report and a shipping document is a materially different risk from a balance released on trust after the goods are already gone.
Documentary letter of credit under UCP 600
A bank’s own payment undertaking, conditional on paper rather than on the goods — the exporter is paid once it presents exactly the documents the credit specifies, whether or not the buyer is satisfied with what actually arrived.
A documentary letter of credit (L/C) is issued by the buyer’s bank (the issuing bank) in favour of the exporter, and most L/Cs in trade with Vietnam are governed by the ICC’s Uniform Customs and Practice for Documentary Credits, UCP 600. Under this framework:
- The issuing bank undertakes to pay once the exporter presents documents that comply exactly with what the credit specifies — commercial invoice, packing list, bill of lading and any others the credit names.
- Payment is made against those documents, independent of whether the actual goods match the contract; a bank examines paper, not cargo. This is the credit’s central feature and its central limitation.
- A discrepancy between the documents presented and what the credit specifies — a wrong date, a misspelled name, a missing signature — gives the bank grounds to refuse payment until it is corrected, regardless of how minor the actual mismatch is in commercial terms.
- The exporter’s bank in Vietnam (the advising or negotiating bank) typically checks the documents before forwarding them, precisely because discrepancies are common and costly to fix after the fact.
An L/C protects both sides in a specific, narrow sense: the exporter is assured of payment once compliant documents are presented, and the buyer is assured that payment will not release until those documents — evidence that the goods were shipped as described — exist. It does not verify the goods themselves match the contract; that is what the inspection stages in pre-shipment inspection and AQL sampling are for, run before the documents that trigger the L/C are even presented.
💬 Setting up your first letter of credit with a Vietnamese exporter? Tell us the terms your bank is proposing and we will help you check them against the order.
Documents against payment under URC 522
A middle ground between trust and a bank guarantee — the exporter’s bank holds the shipping documents and releases them to the buyer only once the buyer pays, but no bank promises the payment will actually happen.
Documents against payment (D/P), a form of documentary collection, is commonly governed by the ICC’s Uniform Rules for Collections, URC 522. The mechanism:
- The exporter ships the goods and hands the shipping documents — critically, including the document needed to claim the goods at the destination port — to its own bank (the remitting bank).
- The remitting bank forwards the documents to a bank in the buyer’s country (the collecting bank), with instructions to release them only against payment.
- The buyer cannot clear or take possession of the goods without the documents, so paying is effectively a precondition to obtaining them.
- Unlike an L/C, no bank undertakes to pay — the collecting bank is only following instructions to release documents against payment, and if the buyer never pays, the exporter is left holding goods already shipped to a foreign port, with the documents unreleased.
D/P sits between plain T/T and an L/C: the buyer cannot walk away with the goods without paying, but the exporter is not protected the way an L/C protects it — there is no bank promise behind the payment, only a document-release mechanism. It suits a relationship with an established level of trust, where a full L/C’s cost and paperwork are not warranted but an unsecured wire transfer feels like too much exposure.
How Vietnamese banks and exporters typically handle each method
All three methods run through an ordinary commercial bank in Vietnam, and the exporter’s own bank is usually the first checkpoint on document quality regardless of which method is used.
| Method | Vietnamese exporter’s typical bank role | Where delay usually happens |
|---|---|---|
| T/T deposit and balance | The exporter’s bank simply receives and credits the wire; no document checking role | Waiting for the balance trigger to be confirmed and accepted by both sides |
| L/C (UCP 600) | The exporter’s bank (advising/negotiating) pre-checks documents before forwarding to the issuing bank, because a discrepancy delays payment | Correcting a document discrepancy after the goods have already shipped |
| D/P (URC 522) | The exporter’s bank (remitting) forwards documents to the buyer’s bank with collection instructions; it does not guarantee payment | The buyer’s bank waiting on the buyer to actually pay, with the exporter unable to do anything but wait |
Cross-border payment into and out of Vietnam runs through the country’s foreign-exchange framework, administered by the State Bank of Vietnam; the currency-quoting rule already covered in comparing Vietnamese supplier quotations sits inside that same framework. Where a payment structure looks unusual against ordinary practice — a request to route funds through a personal account, or through a third country not named anywhere in the contract — that is worth raising as a question before the first payment goes out, not after.
💬 Sunsho Trade structures payment terms into the purchase orders it manages and works directly with Vietnamese exporters’ banks on document checking. See our sourcing and negotiation service, or tell us which method the supplier has proposed.
Risk by method
The three methods sit on a line from most trust required of the buyer to most trust required of the exporter — knowing where a proposed structure sits on that line is more useful than treating any one method as inherently safe.
| Method | Buyer’s main exposure | Exporter’s main exposure | Where it typically fits |
|---|---|---|---|
| T/T deposit and balance | Deposit paid with nothing to show for it if production never happens | Balance may be delayed or disputed after goods are produced or shipped | An established relationship, or a first order small enough to absorb the deposit as the acceptable risk |
| L/C (UCP 600) | Cost and paperwork of the credit; goods may not match documents even though they were compliant | None once compliant documents are presented — payment is a bank obligation, not the buyer’s choice | A larger order, a new relationship, or a buyer’s own bank requiring it |
| D/P (URC 522) | Must pay before physically inspecting the arrived goods, only the documents | Goods already shipped with no guarantee the buyer will pay to release them | A relationship with more trust than a first order, less cost tolerance than an L/C |
None of the three eliminates risk; each moves it to a different point in the transaction. Choosing between them is choosing which point in the transaction you are least willing to be exposed at.
Frequently asked questions
1. Is a 30/70 or 50/50 deposit split standard for Vietnamese suppliers?
There is no fixed industry standard, and any specific ratio quoted to you is that supplier’s own position, not a rule. What the split should reflect is the order’s risk and the relationship’s history — a first order with an unfamiliar supplier reasonably has a smaller deposit than a long-running account, and the ratio is a negotiation, not a given.
2. Can I combine an L/C with a pre-shipment inspection requirement?
Yes, and it is a common combination. The inspection confirms the goods before shipment; the L/C’s documents (which can include an inspection certificate as one of the required documents) confirm that shipment happened as described. Name the inspection certificate explicitly among the documents the credit requires if you want it to be a condition of payment.
3. What happens under D/P if I refuse to pay when the documents arrive?
The collecting bank does not release the documents, so you cannot clear the goods, but the exporter is left with goods already shipped to your port and no payment. This is why D/P is generally used only where some trust already exists — an exporter taking on a first-time buyer under D/P terms is accepting real exposure.
4. Does a letter of credit guarantee the goods will match what I ordered?
No. A bank examines documents for compliance with the credit’s wording; it does not inspect the goods. An L/C protects the payment mechanism, not the product — pair it with the inspection stages in pre-shipment inspection and AQL sampling if product conformity is the risk you are managing.
5. Which method should a first-time buyer use with a new Vietnamese supplier?
There is no single right answer — it depends on the order value, how much cost and paperwork you can absorb, and how much trust already exists. A small first order is often run on T/T with a modest deposit and a balance tied to inspection; a larger or first-of-its-kind order more often justifies an L/C’s added cost for the payment certainty it provides.
Sources: International Chamber of Commerce, UCP 600 (Uniform Customs and Practice for Documentary Credits) and URC 522 (Uniform Rules for Collections). Checked on 25 September 2026.