Who this is for
Manufacturers and buyers in Africa paying for production-line equipment from China — especially first-timers worried about wiring a large deposit to a factory 12 000 km away. This is the money side of the import; it pairs with the supplier audit checklist and FAT vs SAT.
The principle: pay for proof, not promises
Almost every payment disaster in China sourcing comes from the same root cause — money released ahead of verified delivery. Once you have paid, your leverage is gone; the supplier's incentive to fix problems drops with every instalment. The entire craft of safe payment is keeping money and leverage aligned with verified physical progress. Get that right and most other risks shrink.
Decision rule: never let cumulative payments run ahead of verified, accepted deliverables. If you have paid 80% and only a FAT video exists, you have already lost the negotiation.
The milestone structure that works
The proven structure for production-line equipment:
- 30% deposit on order, to start the build. Normal and reasonable.
- 50% on successful FAT — paid only after the machine passes the Factory Acceptance Test against written criteria, with your representative present. Not on a date; on a pass.
- 20% on successful SAT — paid only after the line passes Site Acceptance Test on your floor, with your raw material and utilities. This retention is what gets the supplier to South Africa to make it work.
The 20% SAT retention is the single most important number. It is the difference between a supplier who shows up to commission properly and one who goes quiet once the container ships. See FAT vs SAT for how those acceptance gates work.
Failure mode: agreeing to "30% deposit, 70% before shipment." This pays the supplier in full before the equipment leaves China — you keep nothing for SAT, and you are entirely dependent on goodwill once it lands. Walk back any term that pays out before SAT.
The payment instruments — and when to use each
| Instrument | How it works | Best for | Watch-out |
|---|---|---|---|
| T/T (telegraphic transfer / bank wire) | Direct bank transfer on each milestone | Trusted / audited suppliers with milestone control | No bank protection — relies on your milestone discipline |
| Letter of Credit (LC) | Your bank pays the supplier's bank only against compliant documents | Large or first-time contracts; both sides protected | Document-based, not quality-based; bank fees; precise paperwork |
| Escrow | Third party holds funds, releases on agreed conditions | Smaller deals, new relationships | Less common for large industrial equipment; provider trust |
| Trade credit insurance | Insures against supplier non-performance / default | De-risking large exposures | Premium cost; claims process |
For most mid-size production-line buys with a properly audited supplier, T/T on a strict milestone schedule is normal and workable — the protection comes from the milestone discipline and the SAT retention, not the instrument. For large or first-time contracts, a letter of credit adds bank-level document control and is worth the fees. An LC protects against documentary non-delivery; it does not check quality — that is what FAT/SAT are for. Use both together on big contracts.
The fraud checks that take five minutes and save fortunes
- Beneficiary name must match the contracting company. If the contract is with Factory A but you are asked to pay "Trading Company B" or a personal account, stop. This is the most common diversion scam.
- The bank account should be in mainland China (for a mainland supplier). A sudden request to pay an offshore account (Hong Kong, elsewhere) is a red flag that warrants direct voice verification.
- Treat ANY change of bank details as a fraud alarm. "Our account has changed, please pay this new one" — almost always business-email-compromise fraud. Verify by phone with a known contact, never by replying to the email.
- Confirm the company is real and licensed — see the supplier audit checklist for verifying the business licence and entity.
- Keep the first deposit modest until the relationship is proven.
The single most important habit: a mid-contract email saying the bank details have changed is, until voice-verified with a known person, fraud. This one rule prevents the most expensive single mistake in international payments.
What the contract must say before any money moves
Payment safety lives in the contract, agreed before the deposit:
- Milestone schedule tied to FAT and SAT passes with written acceptance criteria.
- Bilingual, English governing — English controls in any conflict.
- Bank and beneficiary details fixed in the contract, with a clause that changes require signed, voice-verified confirmation.
- Liquidated damages for schedule slip and performance shortfall.
- Warranty from SAT, not from shipment.
- Dispute resolution in a neutral seat (HKIAC or SIAC are common).
This is the same contract discipline covered in our import guide and demonstrated in the FAT rescue case study, where a buyer who had paid 80% with no SAT retention nearly lost the project.
Incoterms affect when you pay for what
Your Incoterm (FOB, CIF, DAP) determines which costs sit inside the supplier price and which you pay separately — which in turn shapes the payment schedule and what your milestones cover. See Incoterms for African imports. Keep equipment milestones (deposit/FAT/SAT) separate from freight and duty payments so each is verifiable on its own.
What CISH does
On China Procurement & Sourcing engagements we draft the bilingual contract, set the milestone schedule, verify the supplier entity and bank account, and witness FAT so each payment is released against proof. On Turnkey projects CISH signs the supply contract itself and carries the supplier-payment risk — you contract with CISH, not the offshore factory.
Frequently asked questions
What is a safe payment split for a Chinese machine?
30% deposit, 50% on a successful FAT, 20% on a successful SAT. The 20% retention to SAT is what keeps the supplier motivated to make the line work on your floor. Avoid any structure that pays out fully before shipment.
T/T or letter of credit?
T/T on a strict milestone schedule is fine for an audited, trusted supplier. Use a letter of credit for large or first-time contracts, where bank-verified documents protect both sides. On big contracts, use an LC alongside FAT/SAT acceptance gates.
The supplier says their bank account has changed — is that normal?
Treat it as fraud until proven otherwise. Business-email-compromise scams almost always work by sending "new bank details" mid-contract. Verify by phone with a known contact before paying a cent — never by replying to the email.
Is a 50% deposit normal?
30% is normal. Pushes for 50%+ up front shift risk onto you and reduce your leverage. A reputable supplier with a healthy order book rarely needs more than 30% to start.
Should I pay an agent or the factory directly?
Pay the entity named in your contract, to a bank account matching that entity. If a trading company contracts with you, your contract and payment are with them — but verify the factory behind them exists and is auditable.