Silver Export Payment Terms: T/T, L/C and Credit Risk

Five Common Structures

Silver exports usually use one of five: full advance T/T, deposit plus balance against a bill of lading copy, letter of credit, D/P documents against payment, and open account. Risk sits in different places: advance T/T puts it on the buyer, an L/C substitutes bank credit for commercial credit, D/P uses the collecting bank to hold documents, and open account leaves the seller carrying all credit risk. Small orders and new buyers suit the first two. An L/C only makes sense for mid-to-large orders where the buyer has solid standing with its bank. Open account belongs to long-term customers with a payment record, and only with insurance behind it.

Setting the Deposit

New buyers commonly see 30 to 50 percent, existing buyers 20 to 30. The deposit exists to cover your loss if the buyer walks, so it should cover sunk material and labor cost rather than a token 10 percent. Sample and tooling fees are better invoiced and settled separately instead of folded into the deposit, or the sampling stage runs at a loss. Tie the balance to control of the goods: balance against a bill of lading copy is the usual neutral structure, and release only after funds clear, never on a screenshot of a transfer.

Where Letters of Credit Bite

An L/C looks safe, but cost and operational risk land on the seller. First, soft clauses: a term requiring payment after the applicant certifies inspection hands control back to the buyer. Second, discrepancies: one word off across description, quantity, packing or shipment date triggers fees, commonly tens of dollars per discrepancy. Third, time: document examination, courier and negotiation often run two to three weeks slower than T/T. Fourth, fees: opening, advising, negotiation and amendment charges add up, which makes an L/C uneconomic on small orders. Use one only when document capability is solid, the amount is large, and every soft clause has been reviewed.

Open Account and Credit Insurance

The real cost of 30 or 60 day terms has three parts: capital tied up, translated at your funding rate; a bad debt provision based on customer and country risk; and currency exposure. Export credit insurance covers political and buyer credit risk, but it must be arranged in advance, declared per shipment, and pays a percentage up to a cap rather than in full. Platform-backed protection, such as trade assurance, suits smaller orders with limits and rates that shift with transaction history. Before granting terms, review payment history, company age, and whether bank references or financials are available.

Writing Silver Price and Currency Clauses

Silver jewelry quotes carry two floating variables, and both belong in the contract. For silver, fix a base date and a formula, for example pricing against the London silver fix on order confirmation with any move beyond plus or minus five percent settled on actual silver weight at delivery. For currency, specify the settlement currency, the reference rate such as the mid-rate on payment date, and a tolerance band, sharing the excess proportionally. State the quote validity too, commonly three to seven days. Without these clauses, a silver spike or a currency move quietly takes the margin and turns into a dispute.