Hi Orix,

Banks do not, and can not, get involved in guarantees for non-shipment in the context you mention.

Do your Due Diligence before you pay money and you will be reasonably safe.

Full and proper Due Diligence is the normal way to do business ... whether you are buying inside your own country or from China or anywhere else in the world.

Chinese buyers use L/C is that they are not allowed to send/wire money by T/T (strict currency control and the yuan is not convertible). As they need the foreign currencies to buy/import, the government/Central Bank has to accept it first. And the only control they can use to make sure the money does not go to the wrong pockets - money for goods - is the L/C. Cheers. Julien, Shanghai

Replying to [sixer]:
WE ARE ONE SUPPLIER.USUALLY WE ACCELPT T/T PAYMENT ONLY BECAUSE IT'S SIMPLE AND LESS BANKING CHARGES.BUT WE ALSO ACCEPT L/C AT SIGHT IF THE ORDER IS BIG ENOUGH.

Replying to [sixer]: They want to be the one who can be in charge of the deal, it can be a good deal but never can be a fair deal, it does not meet the international trade basic requirement. When ever they want the trade pay by TTs they are holding the handle of the knife, they can pull the knife anytime they like....bad deal

Replying to [sixer]:In my view, every one need the money to produce the product. In China maximum factories work on 30% Advance and 70% when the container is ready. If the business is big, they are ready to work on the LC also. But as a seller, every one want the deal safe.

Replying to [allenscafe]:
Letter of credit is the best method for payment.
Both the buyer and seller has to be very cautious in their transactions.

Replying to [Ms Lucia]:
It seems like TT is very simple and a GREAT idea, but what happens if i don't get my order? the supplier has my money and i have nothing, who do i turn to now.

Replying to [sixer]:It's true that most Chinese companies prefer T/T payment. because it's easy and ecomic. by L/C the process is trouble and bank charge is high. besides it's not suitable to do business with some countries by L/C because of the bad law and bad reputation in the local market. in theory L/C should be the most safe and reliable payment way for both the buyer and the seller. but in practice L/C has some leaks. when Chines company ship their goods to the destination port, the buyer should buy the documents from issuing bank at first ,then go to get their goods by B/L. but some buyers in some countries never buy documents until the goods are auctioned by the local custom. then the buyer can get the goods at quite lower price.
So in the final analysis being lack of safety affects the choice of payment way.

Replying to [sixer]:

L/C takes too many formalities in China, while T/T is much simpler!
This is why most of the traders prefer T/T instead of L/C

Replying to [allenscafe]: I'm the manufacturer in China mainland. I agree with Allen, and in fact we have lot of manufacturers were cheat by the L/C payment. it's not means we Chinese don't know L/C, but it's not profect. If the buyer and seller both had founded enough credit, then it's no matter L/C or TT will be happy to accepted by both parties.