For a first chemical order from India, the most common terms are an advance deposit with the balance paid against shipping documents, or a letter of credit. Open credit terms usually come later, once you have a track record or the supplier has insured the risk.
Each option shifts risk between you and the supplier. Pick terms that match how well you know each other.
The main options
- Full advance payment by telegraphic transfer: easiest for the supplier, riskiest for you.
- Part advance and balance against a copy of the bill of lading: common for new relationships, and the deposit funds raw materials.
- Letter of credit at sight: your bank pays when compliant documents are presented, which protects both sides if well drafted.
- Documents against payment: the bank releases title documents when you pay.
- Documents against acceptance: you accept a bill to pay later, which gives you credit.
- Open account: you pay after receiving goods, usually 30 to 90 days, once trust is established.
Points specific to chemicals
Chemical orders often have made-to-order elements, such as custom grades or labels. Suppliers ask for advances to cover raw materials they cannot easily resell. That is reasonable, but keep the advance to what the raw materials justify.
Tie the balance to quality, not only to shipment. A letter of credit can require a third-party inspection certificate as one of its documents. That way the bank does not pay unless an inspector confirms the goods. See third-party inspection for chemicals.
Indian exporter considerations
Indian exporters must receive export proceeds through banking channels within the period set by the Reserve Bank of India. Many also use export credit insurance from the state-owned Export Credit Guarantee Corporation of India or private insurers. If a supplier is insured, it may offer you credit terms sooner.
Protecting yourself
- Pay only to a bank account in the supplier's registered company name.
- Confirm bank details by phone with a known contact, because email fraud is common.
- Keep advances small on first orders.
- Link payment to an inspection certificate where you can.
- Write the payment terms, the quality standard and the claims process into the purchase contract.
Payment terms also interact with the Incoterm. Our article on the best Incoterm for chemical imports covers that side.
Moving to better terms
Terms usually improve with a track record. After a few orders that arrive on time and pass inspection, ask for a lower advance or a move from letter of credit to documents against payment. Offer something in return, such as a forecast, a larger order or a framework agreement. Suppliers value predictability. Put any agreed change in writing, and keep the inspection link even when you move to open terms.
Next step
We supervise loading and issue inspection reports you can tie to payment. Book a free sourcing review.