Understand payment options for importing from Korea. Compare T/T, L/C, and other methods to protect your transactions and choose the safest, most cost-effective option.
Payment Methods Overview
| Method | Security (Buyer) | Cost | Speed | Best For |
|---|---|---|---|---|
| T/T (30/70) | Medium | Low ($20-50) | Fast (1-3 days) | Most common, established suppliers |
| T/T (100%) | Low | Low ($20-50) | Fast | Trusted suppliers only |
| L/C | Very High | High ($300-800) | Slow (7-14 days) | Large orders ($50K+), new suppliers |
| D/P | Medium-High | Medium ($100-300) | Medium (5-10 days) | Middle ground |
| Escrow | High | Medium (2-5%) | Medium | E-commerce, small orders |
| PayPal | High | High (3-5%) | Fast | Samples only (<$3,000) |
T/T (Telegraphic Transfer / Wire Transfer)
What is T/T?
Definition: Bank-to-bank electronic fund transfer through SWIFT network. This is the most common payment method for Korea imports, used in 85%+ of transactions.
T/T Payment Structures
30/70 T/T (Standard)
Structure:
- 30% deposit before production
- 70% balance before shipment
Pros:
- Balanced risk for both parties
- Supplier motivated to deliver quality
- Low cost ($20-50 per wire)
- Industry standard (easy to negotiate)
Best for:
- First 1-3 orders with new supplier
- Orders $5,000-$100,000
- Verified suppliers with good reputation
50/50 T/T (Higher Risk)
Structure:
- 50% deposit before production
- 50% balance before shipment
When suppliers request:
- Large orders requiring significant materials
- Custom products (non-standard)
- New/small suppliers with cash flow concerns
100% T/T in Advance
Structure:
- 100% payment before production/shipment
Only use if:
- Trusted supplier (5+ successful orders)
- Small amount you can afford to lose
- Supplier referred by trusted source
Progressive Payments
Structure:
- 30% deposit upon order
- 30% upon production midpoint
- 40% before shipment
When used:
- Very large orders ($100,000+)
- Long production time (3+ months)
- Complex products requiring multiple stages
Advantage: Milestones allow quality checks throughout production.
How to Send T/T
Step 1: Get Bank Details
Required information:
- Bank name (e.g., Shinhan Bank)
- Bank address (Seoul branch)
- Account holder name (MUST match company)
- Account number
- SWIFT/BIC code (e.g., SHBKKRSE)
Step 2: Initiate Wire Transfer
Online banking:
- Find "International wire transfer"
- Enter supplier's bank details
- Specify amount, currency (USD or KRW)
- Review fees
- Authorize and save confirmation
Important: Always save wire transfer confirmations as proof of payment.
Step 3: Notify Supplier
Send email with:
- Amount sent
- Date sent
- Order reference number
- Bank confirmation attached
Request confirmation within 2-3 business days.
Step 4: Confirmation
Typical timeline:
- 1-3 business days for USD → KRW conversion
- Supplier confirms: "Payment received"
- Production starts
- If >3 days, contact supplier and bank
T/T Costs & Fees
L/C (Letter of Credit)
What is L/C?
Definition: Bank guarantee ensuring payment if documents match terms. Payment is based on DOCUMENTS, not goods themselves.
How L/C Works
Apply for L/C at your bank with good credit or collateral (100-110% of L/C value). Approval: 1-5 days.
Your bank sends L/C via SWIFT to supplier's Korean bank. Supplier reviews terms and accepts or requests amendments.
Supplier manufactures goods and arranges shipment. Obtains required documents (B/L, invoice, packing list, certificates).
Supplier presents documents to their bank. Bank examines if documents match L/C terms exactly.
If compliant, bank pays supplier. Your bank debits your account. Documents sent to you.
Use Bill of Lading to claim goods from shipping line. Use documents for customs clearance.
L/C Costs
Example: $50,000 L/C
- Issuance fee: $400
- Handling fee (0.25%): $125
- Courier: $75
- Amendment fee (if needed): $100-200
Total: $600-800 = 1.4-1.8% of transaction
L/C is 15-30x more expensive than T/T ($50)
L/C Pros & Cons
Pros
- Secure for both parties (bank guarantee)
- Supplier confident they'll be paid
- You control payment (documents must match)
- Good for new suppliers, large orders
Cons
- Expensive ($700+ vs $50 for T/T)
- Slow (7-14 days vs 1-3 for T/T)
- Complex (requires expertise)
- Documents ≠ quality (still pay if compliant)
- 70% of L/Cs have initial discrepancies
When to use L/C: First-time supplier with large order (>$50K), high-risk countries, supplier insists.
When to skip L/C: Established supplier (3+ orders), Korea (low-risk country), small orders (<$10,000), speed matters.
Other Payment Methods
D/P (Documents against Payment)
Simpler, cheaper alternative to L/C. Documents released to buyer only after payment.
Cost: $100-300 total
Best for:
- Medium trust level (between T/T and L/C)
- Orders $10,000-$50,000
- Want security without L/C complexity
Escrow Services
Third party holds payment until transaction complete. You inspect/approve goods before release.
Cost: 2-5% of transaction
Best for:
- E-commerce small orders ($1,000-$10,000)
- First-time supplier (low trust)
- High scam risk industries
PayPal
Fast, instant payment with buyer protection and dispute resolution.
Cost: 3-5% fees (supplier usually absorbs)
Best for:
- Samples ($50-500)
- Very small orders (<$3,000)
- E-commerce purchases
Note: Many Korean suppliers don't accept PayPal (prefer T/T).
O/A (Open Account)
Ship goods first, pay later (Net 30/60/90). Pure trust - no documents against payment.
When suppliers offer:
- Long-term relationship (2+ years)
- Proven payment history (15+ on-time payments)
- Large customer (supplier values relationship)
Benefit: Maximum cash flow flexibility - receive and sell goods before paying.
Payment Security Best Practices
Verify Supplier Before Payment
7-Point Verification
- ✅ Business registration number verified
- ✅ Export capability confirmed
- ✅ Factory video tour completed
- ✅ Certifications verified (ISO, CGMP, etc.)
- ✅ References checked (2-3 past customers)
- ✅ Financial stability assessed
- ✅ Samples tested
Red Flags (Walk Away)
- ❌ Requests 100% upfront (new relationship)
- ❌ Unusually low price (40%+ below market)
- ❌ Pressure tactics ("Pay today or lose stock!")
- ❌ Personal bank account (name ≠ company)
- ❌ Bank in different country
- ❌ Refuses inspection
- ❌ Changes bank account suddenly
- ❌ Generic email (Gmail instead of company domain)
Use Inspection Before Final Payment
Standard practice for T/T 30/70:
- Pay 30% deposit
- Production completes
- Hire inspection company ($300-600)
- Inspector checks goods at factory
- If passes: Pay 70% balance
- If fails: Request corrections before payment
ROI: Prevent $10,000-$50,000 loss from defective shipment. Only pay 70% AFTER inspection passes.
Payment Terms Progression
Stage 1: First Order
Payment: 30/70 T/T or L/C
Order: $5,000-$20,000
Mutual distrust, shared risk
Stage 2: Orders 2-5
Payment: 30/70 T/T
Possible: Negotiate to 20/80
Building trust, confidence growing
Stage 3: Orders 6-15
Payment: 30/70 T/T or Net 30
Negotiate: Net 30 terms
Established relationship, proven history
Stage 4: Strategic
Payment: Net 30-60
Benefits: Better pricing, priority
1+ year, regular orders, valued partner
Currency Considerations
Why Use USD
- International standard for trade
- Korean banks easily convert USD ↔ KRW
- Invoices, quotes typically in USD
- Stable currency (less volatility than KRW)
- No confusion (both parties understand USD)
Using Wise (Save 50-70%)
International money transfer service with lower fees than banks and real mid-market exchange rate.
Cost comparison ($10,000 transfer):
- Traditional bank: $250-$350 total
- Wise: $100-150 total
- Savings: $100-200 per transfer
Best for regular importers and orders <$100,000.
Common Payment Mistakes
Mistake 1: Paying 100% Upfront
Problem: Send $10,000 (100% payment). Supplier disappears or ships defective goods. No leverage.
Solution: Never pay 100% to new supplier (max 50%, ideally 30%). Keep 70% as leverage until goods inspected.
Mistake 2: Paying Before Samples
Problem: Pay 30% deposit before testing samples. Bulk order quality terrible, not as pictured.
Solution: Always order samples first ($50-500). Test thoroughly. Only pay deposit after sample approval.
Mistake 3: No Inspection Before 70%
Problem: Pay 70% immediately when supplier pressures. Goods arrive defective. Already paid 100%, supplier ignores complaints.
Solution: Hire inspection company ($300-600). Only pay 70% after inspection passes.
Mistake 4: Paying to Wrong Account
Problem: Scammer intercepts email, changes bank details. You wire money to scammer's account.
Solution: Always verify bank details by phone. Check account holder name matches company. Be suspicious of sudden account changes.
Key Takeaways
- ✅ T/T 30/70 = standard - Used in 85% of Korea import transactions
- ✅ L/C expensive but secure - Best for $50K+ first orders, but overkill for Korea
- ✅ Never pay 100% upfront - To new suppliers, max 30-50%
- ✅ Always inspect before final payment - Hire inspection company ($300-600)
- ✅ Use USD - International standard, simplest
- ✅ Verify bank account holder name - Must match company name
- ✅ Progress to better terms - After 10+ orders, request Net 30
- ✅ Written agreement mandatory - Proforma Invoice at minimum
- ✅ Red flags = walk away - Personal account, 100% upfront, pressure tactics
- ✅ Wise can save 50-70% on fees - Vs traditional bank wires
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