In this guide we'll go over the basics of using telegraphic transfer, or "T/T" bank wire transfers to pay your Chinese suppliers. While T/T is considered to be a universally accepted and relatively secure method of payment, it does require some close attention to detail in order to make sure your money gets where it needs to go. Let's face it, any transfer of large sums of money halfway across the world and through language and cultural barriers is going to expose the payer to some amount of risk. By following these steps, readers can help minimize the risk of delaying payment or being victimized by fraud.
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Don't abbreviate! Check for typos!
Chinese business names tend to be long -- too long even to fit in many Western online banking text fields. Take
Shenzhen XinYingxin Electronics Technology Co., Ltd. factory for example. Two potential hazards arise when addressing a T/T to a company with a name like this.
- You may be tempted just to type in as much of the name that will fit into the text field for payee name, and cut it off there. Don't! Without an exact name match, Chinese banks are very likely to return your payment. In addition to the added hassle, this will also postpone your ability to send payment by as long as two to three weeks.
- Instead, use the address fields to fill in whatever part of the payee's name was cut off.
- Double check for any typos. This is especially important for buyers who do not speak Chinese, and for whom a misspelling in a foreign language might not be very noticeable on first glance.
Fraud protection: don't work hard, work smart!
It's common for unsuspecting buyers to be swindled by scam artists posing as their supplier. They set themselves up to receive payment for your order "on behalf" of the factory management. However, in reality, they have no actual relationship with your supplier. Once they receive your payment, they're riding off into the sunset, never to be heard from again. Meanwhile, your real supplier is wondering why you haven't paid for your order yet.
On the other hand, whereas some inexperienced buyers make the mistake of being too trusting, many others make the mistake of being too suspicious. These buyers assume everybody is out to get them, and even legitimate, licensed export agents or intermediaries are treated like thieves. Whereas these more suspicious buyers may be less likely to cheated, they're much more likely to unnecessarily delay the payment process, causing frustration and profit loss on both sides of the deal.
- Make sure to get all payment instructions in writing as part of your purchase agreement. And require that any changes to the payment instructions be submitted in writing, signed and countersigned by both you and the supplier.
- If you're instructed to pay into an offshore account, such as one based in Hong Kong rather than mainland China, verify that the name on the account is similar to the name of the factory you're dealing with.
- In other words, if the Shenzhen XinYingxin Electronics Technology Co., Ltd. instructs you to wire payment to the Hong Kong XinYingxin Electronics Technology Co., Ltd., there's no need to be overly suspicious.
- But if you're instructed to pay into an offshore account whose name does not resemble the factory with which you've been doing business already, this should raise a red flag.
- If you're instructed to pay a third-party export agent, ask for documentation of the agent's export license.
- Never send payment to somebody's personal bank account. Only wire money to accounts tied to officially registered businesses.
Plan ahead for bank fees
- If you plan on sending regular T/T payments to China, try negotiating for a lower fee rate with your own bank. Most banks will provide preferential terms on wire transfer fees in exchange for the chance to service all of your overseas payments.
- Even if you don't yet have specific plans to send payments to China on a regular schedule, there's no harm in telling your bank that you plan on using this service more in the future. It's not unusual for a bank to offer lower transfer rates in exchange for even just the chance at a more long term business arrangement.
- Expect every overseas T/T payment to incur outbound bank fees, inbound bank fees and intermediary fees. In other words, your bank, your supplier's bank and the institution that services the transfer between the two banks will all take their own cut out of your T/T payment.
- Regardless of how you and your supplier plan on handling these fees (will you pay them all? Will they? Will you pay the outbound fees and they pay the inbound fees?), make sure it's agreed to in writing.
- In most cases, only the outbound bank will have access to the fee schedule of the intermediary bank. So if your agreement requires the supplier to take on any part of this cost, you will probably have to provide them with documentation of it, because they likely won't be able to look it up from their end.