Sunflower Oil Supplier Payment Terms: T/T, LC, DP, and DA Explained

What the four terms actually mean

Payment terms decide who carries the risk between the moment oil is loaded and the moment it is paid for. In bulk edible oil trade four instruments cover almost every deal, and they sit on a spectrum: T/T favours the seller, D/A favours the buyer, and the two letter-of-credit variants sit in between with a bank standing in the middle.

T/T — telegraphic transfer

A T/T is a straightforward bank-to-bank wire. It is the fastest and cheapest of the four, with no bank examining documents and no fee beyond the transfer charge.

In practice it is rarely 100% up front. The common structure is a deposit on contract signature with the balance against shipping documents, or against a copy bill of lading once the vessel has sailed. The split is the negotiation: a seller who does not know you will want more down, and the deposit is what funds procurement and loading.

The risk sits with whoever pays first. Pay the full amount before loading and you are exposed until the goods arrive. For a first order with a supplier you have not used, a deposit plus balance against documents is the reasonable middle.

L/C — letter of credit

A letter of credit replaces the counterparty’s promise with a bank’s. Your bank undertakes to pay the seller once the seller presents documents that match the credit exactly.

Two words matter. Confirmed means a second bank, usually in the seller’s country, adds its own undertaking — so the seller is not relying on your bank or your country’s banking system. At sight means payment falls due on presentation rather than at some later date.

The protection is real and so is the cost. Issuance, confirmation and amendment fees add up, and a credit is paid against documents, not against goods. A discrepancy as small as a misspelling can hold payment, which is why the document list in the credit should be agreed before it is opened, not after.

D/P — documents against payment

Under D/P the seller ships, then sends the documents through the banking chain with instructions to release them only against payment. Without the documents you cannot clear the cargo, so in practice you pay to collect.

It is cheaper than a credit because no bank guarantees anything — the banks simply handle paper. That is also the weakness: if you walk away, the seller has a cargo sitting at a port with demurrage running. Sellers therefore offer D/P mainly to buyers with a track record.

D/A — documents against acceptance

D/A works the same way except documents are released against your acceptance of a time draft — a written promise to pay in 30, 60 or 90 days. You get the goods and clear them before paying.

For a buyer this is the best of the four: free credit for the tenor of the draft. For a seller it is the worst, as they have surrendered the cargo and hold only a promise. Expect D/A to be offered on an established relationship, often alongside credit insurance, rather than on a first order.

What a supplier will realistically accept

The terms you are offered track the relationship, not your negotiating skill. A first-time buyer with no history should expect T/T with a deposit, or a confirmed L/C at sight. Those are the two that let a seller commit to procurement without taking an unsecured position.

Open account, D/A and unconfirmed credits come later, after several clean shipments. Pushing for them on an opening order usually means either a much higher price or a supplier who should concern you.

How the terms move the price

The payment term is part of the price, even when it is quoted separately. A seller financing you for 90 days has that cost in the figure, and bank charges on a confirmed credit can be a real line item on a container-sized parcel.

When you compare two offers, compare them on the same term and the same Incoterm. An FOB price on confirmed L/C and a CIF price on T/T are not comparable numbers, and the difference between them is rarely the one you assume.

What we quote on

We quote FOB or CIF to a named port under Incoterms 2020, with payment by bank transfer in EUR or USD. If your bank or your internal policy requires a letter of credit, say so with your enquiry so the document list can be agreed before anything is opened — amendments cost money and delay loading.

A certificate of analysis and a certificate of origin travel with every consignment, with the rest of the export document set issued alongside. Orders typically ship within 7 to 14 days of confirmation.

Send your grade, volume, packing format and destination port and we will quote against them. Send us the details, or read how to write a purchase contract and fixed price vs floating price models alongside this.