The golden rules
- Keep leverage all the way through. Money moves in steps, and each step is released only once the next risk is under control.
- Tie the deposit to a standard, not a generic invoice. Never wire an advance against a proforma invoice alone.
- Bind the deposit to a sealed, signed Golden Sample and a strict Bill of Materials (BOM). Anything produced that differs from them means the factory has broken the contract.
- Weaponize the balance. The factory saying “we are done” never triggers payment. Only an independent, third-party inspection that confirms the goods meet the sample and BOM does.
- No pass, no balance. If the goods fail, the factory reworks them at its own cost and they are inspected again.
- Never pay the next dollar until the next risk is under control.
- Get acceptance before any money moves. The factory must accept the quality and payment terms in a signed contract before the first payment.
A supplier that refuses these terms has told you what you need to know. Do not proceed.
Why the deposit needs its own protection
Inspection can only check goods that already exist, and that happens after the deposit is paid and production has started. So the deposit cannot rely on inspection. Its protection is the Golden Sample, the BOM and the staged payment steps below.
The ten steps in brief
1. Verify the company registration independently
For mainland China, look the company up on the GSXT registry using its Chinese registered name or its 18-character Unified Social Credit Code. If the site is busy or blocks overseas access, use a third-party lookup of the same data, or pay an inspection or due-diligence firm to pull the record. For Hong Kong companies, use the Companies Registry. Check the supplier's domains with a WHOIS lookup and compare the domain's age with the years in business the supplier claims. If you cannot verify the company by any route, do not send money.
2. Match the bank beneficiary name exactly
The beneficiary name on the wire instructions must match the verified registered company exactly. Confirm the bank details by phone on a number you found yourself, and ask your bank for a verification call before any wire.
3. Agree and seal the Golden Sample and the BOM
Get a production-quality sample, sealed and signed by both parties with a dated photo record, plus a strict BOM covering materials, components, specifications, tolerances, certifications, packaging and labelling. Each party keeps a sealed sample, or an inspector holds one.
4. Put it all in a signed written contract
Email is not enough. The contract should say that the sample and BOM are the only standard, set out the payment steps, require the independent inspection, oblige the factory to rework failures at its own cost, state what happens to the deposit if production is not underway, and name the governing law and dispute forum. Have a qualified lawyer review those last terms.
5. Use platform buyer protection where possible
If the supplier is on Alibaba, pay through the platform so Trade Assurance holds the payment until the agreed conditions are met, and make sure the order terms reference the sample and BOM. Read the current terms, because coverage and limits change.
6. Ask for a bank guarantee or performance bond
For a first or large order, ask for a guarantee from the supplier's bank that covers the deposit. Refusal is information.
7. Split the deposit into milestone payments
Send a small first tranche on a signed contract and sealed sample. Release the rest of the deposit only when production is verifiably underway against the BOM.
8. Get a live video walkthrough and proof of progress
Before the first payment, ask for a real-time video call on the production floor with dated work in progress shown on request. During production, require dated photos or videos at agreed checkpoints.
9. Hold the balance behind independent third-party inspection
Appoint an inspector such as SGS, Bureau Veritas or Intertek, arranged and paid for by you, not the supplier. The inspection is at the factory, against the sample and BOM, before shipment. Release the balance only on a written pass report, and do not approve shipment before then.
10. Keep full records and consider trade credit insurance
Keep every contract, sample record, inspection report, invoice, photo and message. For larger or repeat orders, look into trade credit insurance for non-performance risk.
Payment nodes at a glance
| Payment | Released when |
|---|---|
| First tranche (small deposit) | Contract signed, sample and BOM sealed, registration and beneficiary verified |
| Second tranche (rest of deposit) | Production verifiably underway against the BOM, with dated proof |
| Balance | Written pass report from independent inspection. No shipment approval before this. |
| If inspection fails | No balance. The factory reworks at its own cost, then the goods are re-inspected. |
A hard truth. Enforcing a claim against an overseas supplier is slow and often impractical compared with the sums involved. Prevention matters far more than any after-the-fact remedy.
Want the full fill-in version? Our payment safeguard guide turns these steps into checklists, red-flag lists and a deal tracker. See the guides page.
Please note. This article is general information, last checked in October 2026. Rules, forms and thresholds change, so confirm the current requirements with the agency or office named in the sources below before you rely on any detail. It is not legal advice.