Guide
Paying an Indonesian supplier.
Most Indonesian export orders are paid by bank transfer, with a deposit before production and the balance before or against shipping documents. The instrument matters less than what you attach the balance to, and the account you send it to matters more than either.
The four instruments.
What each one is for, and what it genuinely protects. None of them inspects your goods.
- Telegraphic transferT/T, wire, SWIFT
The default in this trade. A deposit before production and the balance against documents or against a copy of the bill of lading. Fast, cheap and completely unprotected: once the money has left, getting it back is a matter of persuasion.
- Letter of creditL/C, documentary credit
Your bank promises to pay the producer's bank when a named set of documents is presented exactly as specified. It moves the argument from the goods to the paperwork, which is a real improvement and a real cost.
- Documentary collectionD/P, cash against documents
The producer ships and sends the documents through the banks. You pay to get them, and without them you cannot clear the container. Cheaper than a credit and weaker: the producer carries the risk that you simply do not collect.
- EscrowThird-party holding
A third party holds the money and releases it on an agreed trigger. Common on platform trades and rare on real container orders, mostly because Indonesian producers will not wait and the fees on a container-sized sum are unattractive.
Five rules that hold.
These are not about which instrument you chose. They are the things that decide whether the money reaches the people who make your goods.
- 01
Pay a company, never a person
The account name has to match the company on the invoice and on the contract. A request to pay a director's personal account, a family member, or a company in a different country is the single most common shape of a loss in this trade. There is no legitimate reason for it that survives a follow-up question.
- 02
Never let the account change mid-order
An email saying the usual account is under audit and here is a new one is the oldest fraud in international trade, and it usually arrives from a real address because somebody's mailbox was read. Confirm any change by voice on a number you already had, and treat the request as hostile until you have.
- 03
Tie the balance to inspection, not to shipment
The point of leverage is the moment before the container is sealed. If the balance falls due on shipment, you have paid for goods nobody independent has looked at. If it falls due on a passed inspection, the producer has a reason to care what you think.
- 04
Know what the deposit is actually for
A producer buying raw material for your order has real cash out before they earn anything, and that is what a deposit funds. A trader with no factory has no such cost, which is why an unusually large deposit demand is worth understanding rather than negotiating.
- 05
Put the terms in the contract in numbers
Percentage, trigger, currency, account, and what happens if the inspection fails. Agreements that live in a WhatsApp thread are agreements until there is a dispute, at which point they are a thread.
Why nobody will print your deposit rate.
Thirty per cent is quoted all over the internet as the standard Indonesian deposit, and it is a habit rather than a rule. What a producer asks for depends on whether they are buying raw material for you, how long the production run is, whether they have shipped to your market before, and whether they have ever been left with a container nobody collected.
A number printed on a website becomes a number you argue for, and a producer who genuinely needs more will either walk away or agree and cut a corner somewhere you cannot see. It is more useful to ask what the deposit funds and to check that the answer describes real costs.
Questions buyers ask.
Is a letter of credit worth the cost?
On a first order with a producer you have not verified, sometimes. It moves the risk from the goods to the documents, which is a genuine improvement, and it costs money at both banks plus a great deal of care in drafting. On a small order the fees can approach the value of the protection, and most buyers get more safety per dollar from a pre-shipment inspection.
Can I pay the whole amount after delivery?
Almost never on a first order, and you should be suspicious of anyone who agrees. A producer who accepts full payment after arrival from a buyer they do not know is either very large, very desperate, or not a producer at all. The middle case is the one that costs you money.
What if the supplier asks for payment to a Hong Kong company?
Ask why, and get the answer in writing. There are legitimate reasons an Indonesian group holds an offshore trading entity, and there are illegitimate ones. What is never acceptable is a mismatch between the company on your invoice and the company on the account without a documented explanation, because that is exactly the shape of both fraud and of a trader pretending to be a factory.
Does an inspection before payment actually help?
It is the single most useful thing you can attach money to. A pre-shipment inspection happens while the goods are still in Indonesia and while the producer still wants the balance, which is the only period when a problem is cheap to fix. After the container sails your options are argument and insurance.
What do you do about payment?
We never take your money for the goods. The producer invoices you and you pay them, and our own fee is 5 per cent of the order value, paid separately. That separation is deliberate: an agent who handles the payment for the goods has a different set of temptations from one who does not.
Read next.
Verifying an Indonesian supplier
What to check before any money moves, and which registrations mean something.
Incoterms from Indonesia
What FOB actually commits each side to, and why it is the wrong rule for a container.
Bill of lading
The document your balance is usually paid against, and what holding it means.
Not sure about a supplier's terms?
Send us what they proposed. We will tell you what is normal in that trade and what we would want changed before anything moves.