Full Question: We are in the final stages of placing an order with a new supplier, what should we do?
We are in the final stages of placing an order with a new supplier. Our preferred terms of payment are 30% of PO value placed as a deposit upon receipt of the returned signed copy of the PO, followed by 70% of PO balance upon receipt of a scanned copy of B/L. However, the supplier has come back saying that his terms are "30% deposit and 70% balance to be paid before shipment - balance to be paid when the goods are ready to be shipped. I will show you the photos when the goods are finished". Our concern is that we would have paid the full amount for the order and the goods would not be with our freight company, i.e. FOB as agreed.
Answer: You need to be very careful. I recently saw a shipment of bricks arrive instead of electronics; because the supplier only needed to show shipping docs before getting his payment. Just the documents don’t protect you! They simply show that something has been shipped. But the supplier could be sending you a load of junk. So in my opinion, a buyer is crazy to pay the supplier without doing an independent inspection of the goods BEFORE shipment and BEFORE final payment takes place.
