Often used interchangeably — deposit implies partial advance.

Only if contract says so — default may be non-refundable after MOQ production.

Unusual — L/C pays on docs; advance is separate T/T before LC shipment.

VAT/tax timing follows local rules — may trigger on receipt.

Small T/T common — keep amount low until trust built.

Payment

What is Advance Payment?

Advance payment in export trade — deposit structures, buyer/seller risk, and alternatives.

Reading time: 8 min read·Updated: 2026-06-30·Author: Trade31

Advance payment is money sent before shipment — typically 10–30% deposit to start production.

Definition

Advance payment is any payment made before the seller fulfills delivery obligation — full prepayment or partial deposit.

Standard in custom manufacturing; rare for spot commodity unless market power favors seller.

Covers raw materials, allocates capacity, filters non-serious buyers. May be non-refundable if buyer cancels after production starts.

Inspection before balance, escrow, performance bond, export credit insurance, or L/C instead of large advance.

Due diligence on factory and trade history reduces fraud risk.

State deposit %, refund conditions, production lead time after receipt, and what happens if seller fails to ship.

30% deposit

Buyer T/T USD 15k on USD 50k order — factory buys components; balance before BL.

Scam

100% advance to unknown vendor — no goods; buyer recourse limited cross-border.

Advance vs deposit?: Often used interchangeably — deposit implies partial advance.
Refundable deposit?: Only if contract says so — default may be non-refundable after MOQ production.
Advance under L/C?: Unusual — L/C pays on docs; advance is separate T/T before LC shipment.
Tax on advance?: VAT/tax timing follows local rules — may trigger on receipt.
Advance for samples?: Small T/T common — keep amount low until trust built.

Balance advance risk with payment method. See T/T Payment and L/C vs T/T.