L/C vs T/T for Vietnam imports: payment terms decoded

Payment terms are negotiated, not given. For Vietnam imports, the choice between Letter of Credit (L/C) and Telegraphic Transfer (T/T) carries real cost and risk implications on both sides. T/T (Telegraphic Transfer) — the default. The standard pattern: 30% deposit on order confirmation, 70% balance against B/L copy (or against PSI pass + B/L). Cheap, fast (2–3 working days bank-to-bank), and most Vietnamese suppliers prefer it. Risk profile: buyer carries production risk on the deposit; supplier carries default risk on the balance. When T/T works. Established supplier relationship (3+ orders), order value under USD 100k, supplier with strong reputation, third-party PSI in place to gate the balance payment. L/C (Letter of Credit) — the formal alternative. Bank-issued payment guarantee. The buyer's bank commits to pay the supplier upon presentation of compliant documents (B/L, commercial invoice, packing list, CO, inspection certificate). Banks charge 0.15–0.5% of LC value per quarter — non-trivial cost. When L/C makes sense. First order with a new supplier, large order value (USD 100k+), supplier insists on payment guarantee for capacity allocation, buyer has weak credit history with the supplier. L/C terms to negotiate. - At sight vs deferred (30/60/90 days from B/L date). - Confirmed (a second bank guarantees) vs unconfirmed. - Document tolerance and amendment cost — Vietnamese banks are strict on document compliance, and a mistyped product description can hold up payment. D/P and D/A — the underused middle ground. Documents against Payment (D/P) or Documents against Acceptance (D/A). Bank-mediated but cheaper than L/C. Common in Asia-Asia trade, less common Asia-EU, but worth asking about. What Vietnamese suppliers actually want. Most prefer T/T 30/70 for speed and simplicity. They will accept L/C from large new buyers but will price 1.5–3% higher to cover bank fees, document handling, and the slight working capital cost of waiting for L/C drawdown. Practical advice. First order from a new Vietnamese supplier: T/T 30/70 with PSI gate, or 30/40/30 (deposit / mid-production / pre-shipment). Reserve L/C for genuinely large orders or capital-intensive custom production where the supplier needs assurance to allocate machine time. 5B Trading routinely brokers payment-term negotiation. Most of our buyers settle on T/T 30/70 within two orders.