How to Pay Korean Suppliers Safely: T/T, Letters of Credit and More

Key takeaways

• Every payment method moves risk between you and the supplier: a T/T paid in advance puts it on you, while letters of credit and documentary collections let banks control the documents in between.
• Deposit and balance splits are negotiable; there is no fixed Korean standard. Tie the balance to a passed pre-shipment inspection or to shipping documents.
• Letters of credit still run on UCP 600: in March 2026 the ICC Banking Commission decided not to revise it. Banks check documents, not goods, so make an inspection certificate one of the required documents.
• Pay only from your contracting company to the supplier's own company account in Korea. Third-party payments and netting trigger Korean foreign-exchange reporting and are a classic fraud pattern.
• Treat any email that changes bank details as suspect until you confirm it by phone on a number you already have. Business email compromise cost victims who reported to the FBI just over US$3 billion in 2025.

What are the main ways to pay a Korean supplier?

There are six main options: bank transfer in advance, a deposit and balance by bank transfer, a letter of credit, a documentary collection, open account and, for some platform orders, escrow. The U.S. International Trade Administration sums up the buyer's side of the problem: "any payment is a donation until the goods are received". Each method decides how much of that risk you carry.

How does paying by T/T (bank transfer) work?

A T/T (telegraphic transfer) is an ordinary international bank wire, usually sent over the SWIFT network to the supplier's bank in Korea. It is fast and simple, but there is no chargeback: once the money is credited, getting it back depends on the receiving bank and the recipient. All of your protection comes from when you pay and to whom.

Many suppliers ask a new customer for a deposit before production and the balance later. There is no fixed Korean standard for the split. A supplier buying custom materials for your order may ask for a larger deposit; one shipping goods from stock may ask for less. Write the split and what triggers each payment into the purchase order, for example "30% deposit, 70% after a passed pre-shipment inspection". Payment terms are part of the wider negotiation on price and lead time; see working with Korean suppliers.

How to pay by T/T safely

1. Check the beneficiary. The account must be in the supplier's registered company name, at a bank in Korea. Compare it with the business registration you checked (see how to verify a Korean supplier).
2. Get the details on a pro forma invoice. The pro forma invoice (PI) is the supplier's formal offer. It should show the company name, bank name, account number and SWIFT/BIC code, plus the amount, currency and Incoterms rule, the delivery term such as FOB Busan (Free On Board: the supplier clears the goods for export and loads them onto your vessel at Busan; see shipping options and Incoterms).
3. Choose who pays the bank charges. With the "OUR" option you pay all transfer charges and the supplier receives the full amount. With "SHA" (shared), intermediary banks may deduct fees on the way and the invoice arrives short.
4. Reference the order. Put the PI or order number in the payment reference and send the supplier your bank's transfer confirmation.
5. Tie the balance to evidence. Release the balance only after a passed pre-shipment inspection or, if agreed, against a copy of the bill of lading (the carrier's receipt for the goods).

When should you use a letter of credit?

Use a letter of credit when the order is large, the relationship is new, or the supplier needs bank-backed security before it buys materials. A letter of credit (L/C) is your bank's commitment to pay the supplier once it ships and presents the documents the credit requires. The U.S. International Trade Administration calls L/Cs one of the most secure payment instruments, but also "labor-intensive and relatively expensive due to bank fees".

L/Cs are governed by the ICC's UCP 600 rules (the 2007 revision), and those rules are staying put. At its meeting on 19 March 2026 the ICC Banking Commission decided not to revise UCP 600 or its companion practice guide, ISBP 821, after 20 national committees voted against a revision and 7 in favour, as reported by Documentary Credit World. Electronic presentation uses the eUCP supplement, version 2.1, in force since July 2023.

Two UCP 600 principles matter most to buyers. Every credit is irrevocable, so it cannot be cancelled or amended without the supplier's agreement. And banks deal with documents, not goods: if the papers comply, the bank pays, even if the goods are wrong. Plan the credit with that in mind:

• Require an inspection certificate from an independent inspection company, so the bank can only pay once the goods have passed.
• Keep the document list short and consistent with the pro forma invoice. Every extra document is another chance of a discrepancy that delays payment.
• Set realistic dates. Choose the latest shipment date and the expiry date with production time and Korean public holidays in mind.
• Choose sight or usance. A sight L/C pays as soon as compliant documents are presented; a usance L/C pays at a fixed later date, giving you time to sell the goods.

Opening an L/C uses your credit with your bank, so ask your bank about its requirements and fees before you offer one to a supplier.

How do documentary collections (D/P and D/A) work?

In a documentary collection the supplier ships first and sends the shipping documents through the banks, which release them to you on agreed terms. With D/P (documents against payment) you receive the documents, and therefore the goods, when you pay. With D/A (documents against acceptance) you receive them when you sign a bill of exchange promising to pay on a later date. Collections follow the ICC's URC 522 rules.

The banks only pass the documents along: they "do not verify that the documents are accurate and do not guarantee payment", in the words of the U.S. International Trade Administration. Collections are cheaper and faster than L/Cs but are recommended only for established relationships, so expect a supplier to offer them once you have a track record. Under D/P you still pay before you can open the cartons, so a pre-shipment inspection remains your quality check.

Can you get open-account terms, and what is K-SURE?

Yes, but usually only after a record of orders paid on time. Open account, where goods ship now and you pay in 30, 60 or 90 days, carries the highest risk for the supplier, so it is something you earn rather than ask for on a first order.

Korean exporters can protect themselves when they give credit. K-SURE (Korea Trade Insurance Corporation), Korea's export credit agency, offers short-term export credit insurance that covers an exporter against non-payment by the buyer or the L/C-issuing bank on credit periods of under two years, for both commercial and political risks. A supplier that wants to insure sales to you may ask for company information, so keep your registration documents, trade references and recent accounts ready when you ask for terms.

Do escrow and platform protection work with Korean suppliers?

They can, for small orders that are paid through a platform. The U.S. International Trade Administration notes that escrow services are becoming an option for small export transactions: a third party holds your money until the order is completed.

One example is Alibaba.com Trade Assurance. It covers orders paid through Alibaba.com and lets buyers claim refunds if an order is not shipped, goes missing or arrives defective, incorrect or damaged; some features apply only to certain countries or products. It matters for Korea because KOTRA linked its buyKOREA platform with Alibaba.com in 2026 (see where to find Korean suppliers). If a supplier you met there asks you to pay its bank account directly, Trade Assurance does not cover that payment. Protection differs by platform and changes over time, so read the current terms, including claim deadlines, before you rely on it.

Should you pay in US dollars or Korean won?

Expect to pay in US dollars. According to the Bank of Korea, Korea's 2025 exports were invoiced in these currencies:

Suppliers that sell mainly in Korea quote in won. If you agree a won price, your cost in your own currency moves with the exchange rate until you pay, so build a margin into your budget or ask for a dollar price. Either way, state the currency on the pro forma invoice and compare your bank's conversion rate with the market rate. The landed cost calculator shows how bank charges and exchange rates add to the price you pay.

What Korean rules affect how you pay?

Korean companies can receive payment from abroad freely; what creates paperwork is an unusual payment route. Under Korea's Foreign Exchange Transactions Act, the Korean party must file a report or notification when, for example:

• export proceeds are offset (netted) against other debts instead of being paid;
• payment comes from, or goes to, a third party who is not a party to the contract;
• a contract worth more than US$100,000 is settled more than one year after shipment;
• more than US$10,000 moves outside the foreign-exchange banks.

Breaches can be punished with fines or up to a year in prison, so careful suppliers avoid unusual routes. The practical rule is simple: pay from the company named in your purchase contract directly to the supplier's own Korean bank account in its legal name. A request to "pay our partner company" or a personal account is both a foreign-exchange problem and a classic fraud signal.

One more Korea-specific point: exports are zero-rated for Korea's 10% VAT, and so are domestic supplies made to an exporter under a purchase confirmation or local L/C. A domestic-only supplier's price may include VAT, so ask how the goods will be exported before you compare quotes. The export procedures guide explains the documents involved.

How do you avoid payment fraud?

The biggest single risk is often not the supplier but a fraudster who gets into the email conversation and sends "updated" bank details. The FBI calls this business email compromise (BEC) and defines it as a scam targeting businesses that work with suppliers and regularly pay by wire transfer. In 2025 its Internet Crime Complaint Center (IC3) received 24,768 BEC complaints, with reported losses of just over US$3 billion.

• Check that the account name on every invoice matches the registered company name, and that the bank is in Korea.
• Agree in your contract that bank details can only change by a signed letter that you confirm by phone.
• Follow the FBI's advice to verify any change of account information through a second channel, and protect your own email accounts with two-factor authentication.
• If money has gone to the wrong account, act within hours, not days: see the FAQ below.

How Korea Import Hub helps you pay safely

Our founders are former Korean exporters, and our team in Incheon checks that a supplier's registration and bank-account name match before you send a deposit. We negotiate payment terms in Korean and inspect goods before you release the balance, with a photo report. For domestic-only suppliers that are not set up to export, we can buy on your behalf and handle the export documents and freight. Tell us about your order and we will reply within 24 hours on business days with next steps and a written quote before any paid work.

Frequently asked questions

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