Common Payment Terms in The Injection Molding Industry – A Guide for Buyers And Suppliers

1. Standard Payment Terms

(1) Deposit + Final Payment (Most Common)

• 30% Deposit, 70% Before Shipment

• The buyer pays 30% upfront to secure the order, and the remaining 70% is paid before delivery.

• Best for: New customers or custom molds to reduce supplier risk.

• 50% Deposit, 50% Before Shipment

• Higher deposit for expensive molds or high-risk orders.

(2) Milestone-Based Payments (For Large Orders)

Example:

• 30% (upon order confirmation)

• 40% (after T1 sample approval)

• 30% (before shipment)

• Advantage: Balances risk for both parties by linking payments to project progress.

(3) Letter of Credit (L/C) – Secure but Complex

• Sight L/C: Payment issued immediately upon document submission.

• Usance L/C: Deferred payment (e.g., 60 days after shipment).

• Key Point: Ensure documents (inspection reports, mold photos) match L/C terms to avoid rejection.

(4) Open Account (OA) – High Trust Required

• Payment due 30/60/90 days after delivery.

• Risk: Only recommended for long-term partners; consider export credit insurance.

(5) PayPal/Wire Transfer (For Small Deposits)

• Used for sample fees or small deposits, but high fees and chargeback risks exist.

2. Special Clauses in Mold Manufacturing

(1) Mold Ownership

• Buyer-Owned: Full payment transfers ownership.

• Supplier-Owned: Buyer pays a "usage fee" but doesn’t own the mold (common in OEM deals).

(2) Quality Holdback

• Withhold 5–10% of payment until mass production confirms no defects.

(3) Mold Development Failure

• Define refunds or rework responsibilities if the mold fails testing.

3. Key Considerations

• For New Clients: Require ≥50% deposit or L/C to prevent non-payment.

• Trigger Conditions: Specify payment timing (e.g., "70% upon inspection report approval").

• Currency Risk: Fix exchange rate ranges for long-term orders (±3% tolerance).

• Dispute Resolution: Agree on arbitration (e.g., CIETAC for China-based deals).

Example Payment Terms

• "30% deposit with PO, 70% balance before shipment."

• "50% down payment, 40% after T1 approval, 10% after mass production verification."

Conclusion

Choosing the right payment terms depends on order size, trust level, and risk tolerance. Suppliers should protect cash flow, while buyers need assurance of quality and delivery. Always document terms in a contract to avoid misunderstandings.