Payment terms decide who carries risk in a custom manufacturing order, and packaging has an unusual risk profile: a factory typically buys 60–70% of an order's cost in materials before production starts. Greyboard, specialty paper and inks come from paper mills on prepayment, so a supplier who ships before collecting money is lending you their working capital. That is why deposits are the norm. Here are the four structures you will actually encounter.
The Four Payment Structures
| Structure | Typical split | Buyer's risk | Supplier's view | Realistic order size |
|---|---|---|---|---|
| 30/70 T/T | 30% deposit, 70% before shipment | Medium — 70% paid against photos/inspection, not yet in hand | Standard; deposit covers material purchase | $3,000–50,000 |
| 50/50 T/T | 50% deposit, 50% before shipment | Lower balance exposure | Preferred when custom tooling is involved | First custom orders, die-cut work |
| 100% T/T advance | Full payment before production | Highest | Only worth it for tiny runs | Under $1,000 |
| L/C at sight | Bank guarantees payment against shipping documents | Lowest payment risk | High fees, strict document compliance | Above $30,000–50,000 |
| Platform escrow | Funds held by platform, released on confirmed delivery | Low, with dispute channel | Platform fee typically 0.5–3% | New buyer–supplier pairs |
The 30/70 split is the industry default: the deposit lets the factory buy board and paper the same week, and the balance lands before shipment. As a buyer, your protection is not the split — it is what you tie the balance to. A pre-shipment inspection clause converts most of that risk into a manageable check. On repeat orders, buyers often shift to 70% against copy of bill of lading, freeing cash flow during ocean transit.
Why Factories Ask for Deposits
A deposit is a materials prepayment, not distrust. On a typical $10,000 folding carton order, the factory pays the paper mill within days of receiving your deposit, and that money is spent — board is cut to your sheet size and cannot be resold. Custom tooling works the same way: a cutting die ($30–120) and printing plates are made to your artwork alone and have zero resale value, which is why tooling charges are usually bundled into the deposit. Our custom ODM service page explains how tooling is quoted and amortized on larger runs.
When a Letter of Credit Makes Sense
An L/C at sight shifts payment risk to a bank: the supplier is paid against compliant shipping documents, and you never wire money against promises. The catch is cost and rigidity:
- Bank fees: typically $300–800 per side, plus amendment fees if terms change.
- Document strictness: discrepancies (a typo in the vessel name, one late document) give the buyer's bank grounds to refuse payment, so both sides need an experienced documentary clerk.
- Sensible threshold: below roughly $30,000, fees and admin usually exceed the risk they insure; T/T with inspection is cheaper protection.
What a First Order Should Realistically Get
From the factory side, here is the honest position: pure open account (net-30/60) on a first order is not something a healthy manufacturer accepts — materials are prepaid upstream and the factory has no collateral beyond your goods. But the risk runs both ways, so structure a first order so neither side is exposed:
- Safest structure: 50/50 T/T, or platform escrow if you found the supplier through Alibaba or similar. The escrow fee is cheap insurance.
- For ODM projects: three milestones — 30% to start, 40% on approval of the pre-production sample, 30% before shipment. The factory never carries your materials unpaid; you never pay in full before seeing a physical sample.
- Walk away from both extremes: a supplier demanding 100% upfront on a $20,000 order is under financial stress, and a buyer demanding net-60 on a first order is asking the factory to finance the deal.
After two or three clean orders, terms loosen on their own — most suppliers will move repeat buyers to lower deposits or balance-against-B/L-copy without being asked. If you are costing out a first order, our folding cartons line is the most common entry point and can be quoted with either structure.
FAQ
Is a 30% deposit really the standard with Chinese packaging factories?
Yes, 30/70 T/T is the default up to roughly $50,000. Expect 50/50 on orders with custom tooling or expensive specialty paper, and 100% advance only on very small runs where admin costs dominate.
Can I pay after delivery?
Not on a first order with any established factory — materials are prepaid upstream, so open account terms only emerge after a payment history, typically two to four clean orders. Platform escrow is the practical middle ground.
At what order value does a letter of credit become worthwhile?
Roughly $30,000–50,000 and above. Below that, L/C bank fees ($600–1,600 both sides) and document administration usually cost more than the payment risk they cover; pre-shipment inspection plus 30/70 T/T is cheaper.