What payment terms are normal for a first apparel order?

Short answer: For a first order with a new supplier, a deposit before production and a balance before shipment or against shipping documents is a common structure, because the factory buys fabric and trims for your order and the buyer has no trading history yet. The deposit percentage varies with the order, the materials and the relationship, so treat it as negotiable. What matters most is when the balance is due and what must happen first. Linking the balance to an accepted pre-shipment inspection report means you only pay in full once a sample of the goods has been checked. Paying the balance against a copy of the bill of lading confirms the goods have shipped. A letter of credit is a bank undertaking that can give both sides security on larger orders. Under ICC UCP 600, a credit is a separate transaction from the sale contract, and banks deal with documents, not with goods. That means a letter of credit pays against compliant documents, not against good quality, so you would still need an inspection certificate listed as a required document if quality is to be part of the check. UCP 600 also sets practical rules, for example that presentation of original transport documents must be made no later than 21 calendar days after the date of shipment, unless the credit sets otherwise, and within its expiry. Keep payment terms, Incoterms rule and inspection conditions together in the purchase order, so each step has a clear trigger.

Common payment structures

• Deposit before production, balance before shipment.
• Balance against copy of shipping documents.
• Letter of credit for larger orders.

What to link to payment

• Approved pre-production sample.
• Accepted inspection report.
• Shipping documents.

A worked example

As an illustration, a brand could agree a deposit on order confirmation and a balance due within an agreed number of days after an accepted inspection report, with shipment only after the balance is received.

Payment and risk

Payment terms do not change who bears transit risk; that follows the Incoterms rule. Make sure both are aligned, so you are not paying for goods before they are delivered under the agreed rule without knowing it.

Checking before you pay

Before paying a deposit to a new supplier, check the company name on the bank account matches the contract and proforma invoice. Be wary of last-minute requests to pay a different account, which are a common fraud pattern.

Limits

Payment terms cannot fully protect against quality problems or supplier failure. Checking the supplier, samples and inspection remain essential.

Facts, recommendations and uncertainty

Established: under UCP 600 a credit is separate from the sale contract and banks deal with documents, not goods. Recommendation: link the balance to an accepted inspection report and shipping documents. Uncertain: whether terms can change after a trading history is built.

Sources and further reading

• ICC — Uniform Customs and Practice for Documentary Credits (UCP 600)
• ICC — Incoterms® 2020

Standards and regulations are referenced by their published scope. Test parameters, cycles and pass levels should be agreed with your laboratory for the specific product; legal requirements should be confirmed for each destination market.