LC vs TT Payment Terms in Textile Export

TT (Telegraphic Transfer, also called T/T or wire transfer) is a direct bank-to-bank funds transfer, typically structured in instalments - commonly 30% advance on order confirmation and 70% before shipment (against a copy of the bill of lading or pre-shipment inspection report). LC (Letter of Credit) is a bank-issued payment guarantee: the buyer's bank commits to pay the seller once the seller presents specified shipping documents (bill of lading, commercial invoice, packing list, certificate of origin, inspection certificate) that exactly match the LC terms - the bank, not the buyer directly, is the paying party, subject to strict document compliance.

The most common structure for first and repeat orders is 30% advance TT on order confirmation (used by the manufacturer to purchase raw materials and begin production) and 70% TT before shipment, paid once the buyer has approved a pre-shipment sample or received a pre-shipment inspection report confirming quality and quantity. Some long-standing repeat buyers negotiate more buyer-favourable terms, such as a smaller advance or partial payment against documents after shipment.

LC is generally considered safer for the buyer because payment is only released once the seller presents documents proving the goods were shipped as specified - the buyer's bank checks compliance before releasing funds, and if documents don't match the LC terms, payment can be withheld pending correction. TT, especially advance TT, carries more buyer risk since funds are transferred before or during production with less independent verification, relying more on trust and the seller's track record.

TT with an advance payment is generally safer for the seller, since a portion of funds is secured upfront before committing raw materials and production capacity, and the balance is typically collected before the goods leave the factory or port. LC, while a bank-backed guarantee, exposes the seller to the risk of document discrepancies - banks can refuse payment over even minor mismatches between the LC terms and the shipping documents, delaying or jeopardizing payment despite goods having shipped.

For first-time buyers, Anabyn requests 50% advance TT to confirm the order and begin production, with the remaining 50% TT due when production is complete, before dispatch, against a pre-shipment inspection report and the approved sample. For established repeat buyers with a proven payment history, more flexible terms can be negotiated. Confirmed Letters of Credit at sight are also accepted for larger orders, particularly from buyers whose procurement policy requires LC-based payment.

An LC "at sight" means the issuing bank pays the seller immediately (typically within a few banking days) upon presentation of compliant shipping documents, rather than at a deferred future date (as in a usance or deferred-payment LC). At-sight LCs are the most common structure in textile export trade and are generally preferred by sellers since they avoid extended payment delay after shipment.

LC transactions typically incur bank charges on both sides - issuance fees for the buyer's bank, advising/confirmation and negotiation fees for the seller's bank - which can add roughly 0.5–2% of transaction value depending on the bank and LC complexity, plus processing time of several days to weeks for issuance and document checking. TT transfers are typically faster and cheaper, limited mainly to standard wire transfer fees (often a flat fee per transaction, e.g. $20–$50), making TT the lower-friction option for buyers and sellers with established trust.