International trade payments
T/T Advance Payment (Telegraphic Transfer) in International Trade
T/T (telegraphic transfer) advance payment means the importer remits funds through the banking system to the exporter before the goods are shipped, in full or in part. It is simple, fast and cheap, gives the seller maximum security and places almost all of the risk on the buyer.
- Exporter risk
- Risk level 1/5
- Importer risk
- Risk level 5/5
- Cost
- ●○○○○
- Applicable rules
- There is no specific ICC rule set for T/T transfers; they are governed by the sales contract, bank terms, SWIFT message standards and the foreign exchange laws of the countries involved.
How it works
- The parties sign a contract stating the advance amount, payment deadline, currency and beneficiary account details.
- The seller issues a proforma invoice or payment request showing its bank details and SWIFT code.
- The buyer instructs its bank to remit, attaching the contract or proforma invoice as the bank requires.
- The buyer's bank sends a SWIFT payment, possibly via one or more intermediary banks.
- The seller's bank credits the account and the seller confirms receipt.
- The seller produces and ships the goods and sends the documents to the buyer, usually original B/Ls, a sea waybill or a telex release.
- The buyer takes delivery and clears import customs; the buyer's bank follows up on the arrival of goods paid in advance.
Parties involved
- Remitter (Applicant): the importer, who orders the transfer.
- Remitting bank: the importer's bank, which executes the transfer via SWIFT.
- Intermediary bank: a correspondent bank, often needed for USD transfers, which may deduct a fee.
- Beneficiary bank: the exporter's bank, which credits the account.
- Beneficiary: the exporter receiving the funds.
Exporter
Advantages
- Paid before shipment, eliminating buyer non-payment risk.
- Working capital available to buy materials and produce.
- Minimal bank formalities and cost.
Drawbacks
- Harder to compete if rivals offer softer payment terms.
- May have to issue an advance payment guarantee if the buyer requests one.
Importer
Advantages
- Can negotiate a better price or production priority in return for paying upfront.
- Fast and inexpensive.
Drawbacks
- Risk that the seller does not ship, ships late or ships poor-quality goods.
- Cash tied up from payment until the goods are sold.
- Exposed to email payment-diversion fraud.
Cost
T/T charges usually comprise a transfer commission calculated as a percentage of the amount with a minimum and maximum, a SWIFT message fee, intermediary bank fees and a crediting fee at the receiving bank. Who pays depends on the OUR, SHA or BEN option chosen on the payment order. Total cost is normally the lowest of all methods, but intermediary deductions under SHA often create small differences when reconciling invoices.
Practice in Vietnam
In Vietnam the most common structure is a 30 percent T/T deposit on signing and the 70 percent balance against a copy of the bill of lading, after which the seller arranges a telex release or sends the originals. The biggest risks are that the buyer pays the balance against a scanned B/L that has been altered, or that a foreign seller receives full payment and never ships. For import prepayments, Vietnamese banks track the transaction until the company submits the import declaration; if the goods do not arrive on time, the company must explain and seek a refund from the supplier.
Common partial advance structures
| Structure | Seller | Buyer | Note |
|---|---|---|---|
| 100 percent in advance | Very low risk | Very high risk | Only for small orders or highly trusted partners |
| 30 percent deposit, 70 percent against copy B/L | Low to medium risk | Medium risk | The buyer should verify the B/L with the carrier before paying the balance |
| 30 percent deposit, 70 percent before arrival | Low risk | Medium risk | The seller holds the original B/Ls until paid in full |
| 30 percent deposit, 70 percent by L/C or D/P | Low risk | Low to medium risk | More balanced but adds bank fees |
Frequently asked questions
Should I choose OUR, SHA or BEN charges?
If the contract requires the seller to receive the full invoice amount, the buyer should choose OUR. SHA is the most common, but the beneficiary often loses an intermediary fee, so agree in advance who bears the shortfall.
How long does a T/T take to arrive?
Usually from the same day to a few business days, depending on the currency, cut-off times and the number of intermediary banks. Holidays in the currency's home country can add delays.
How can I reduce risk when paying a large advance?
Ask the seller for an advance payment guarantee from a reputable bank, split payments by milestone, and always verify the beneficiary account by phone.
This content is for general guidance and does not replace legal or banking advice for a specific transaction.
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