Payment Terms and Letters of Credit in Textile Trade
Payment terms allocate risk between buyer and supplier, and the instrument chosen changes both cost and documentary discipline.
The following sections cover the definition, the specification values, production control, testing and commercial impact.
Common instruments
Telegraphic transfer, documentary collection and letters of credit cover most apparel transactions.
In practice the goal is predictability: the same result on the first order and on the fifth reorder.
How an LC works
The bank pays against compliant documents, so accuracy of invoice, packing list and bill of lading is critical.
Add the value to the pre-production sample approval sheet so it is checked before bulk rather than after shipment.
- Ask for a separate price line for the requirement
- Confirm minimum quantities before committing the colourway
- Build one extra approval round into the calendar
Cost and risk balance
An LC reduces supplier risk but adds bank charges and documentary risk for the buyer.
Record the machine settings for each approved lot, so a repeat order can be reproduced rather than re-invented.
Deposit structures
Typical arrangements include a deposit with balance against documents, with the ratio reflecting trust and order size.
Where a claim will be published, check that the test method supports the exact wording used in marketing.
- Confirm the numeric range and the test method in the specification
- Keep an approved physical standard at the machine
- Retest after the agreed care regime before shipping
Practical safeguards
Match documents carefully, avoid discrepancies and align inspection certificates with LC requirements.
Where volumes are modest, consider consolidating colours or constructions to reach an economical run length.
Summary
A clear specification, a trained operator and a documented test together remove most of the risk from this part of the programme.
