Getting paid by a Chinese buyer: terms that protect you

Getting paid by a Chinese buyer: the letter of credit, documentary collection, FOB versus CIF, what confirmation costs, and the frauds aimed at sellers.

Getting paid by a Chinese buyer is the part of exporting that nobody teaches, and it is where Nigerian exporters lose containers. The goods are the easy bit. Choosing the payment instrument, choosing the incoterm and checking the buyer are what decide whether you have a business. This page is the four ways to be paid, the one to use for a first deal, and the frauds that target sellers rather than buyers.

The four ways to be paid #

Advance payment. The buyer pays before shipment. Safest for you, least attractive to a serious buyer, and realistically available only for small orders or samples.

Letter of credit. A written undertaking by a bank, given on the buyer's instructions, to pay you at sight or at a determinable future date up to a stated amount, provided you present the documents the credit specifies. That definition comes from the ICC Academy, and the ICC is the body whose rules govern these instruments worldwide.

Documentary collection. Banks handle the shipping documents and release them to the buyer only against payment or against acceptance of a bill of exchange. Cheaper than a letter of credit, but the banks give no payment guarantee of their own. If the buyer simply refuses, you have a container at a Chinese port and a problem.

Open account. You ship, the buyer pays later. Highest risk to you. Reserve it for buyers you have traded with repeatedly and successfully.

For a first transaction with a buyer you do not know, the trade standard is an irrevocable letter of credit, and ideally a confirmed one.

What does confirmed mean, and what does it cost? #

Confirmation is a definite undertaking by a second bank, in addition to the issuing bank's. In practice the confirming bank is usually in the exporter's own country. So instead of relying on a Chinese bank's promise, you rely on a Nigerian bank's promise, and you deal with somebody you can walk into.

On cost, we have to be careful. Nigerian banks including Access Bank and First Bank publish trade finance and letter of credit services on their own sites, but none publishes a fee schedule. A specialist Africa trade finance site quotes indicative annual confirmation fee ranges of roughly 2.5 to 4 percent for the larger Nigerian banks, with surcharges for naira volatility and foreign exchange allocation risk. That is an industry site rather than a bank or the Central Bank, so treat it as a sense of scale and get a quotation from your own bank's trade desk.

Confirmation is not free and it is not always necessary. For a first container from an unknown buyer it usually pays for itself the first time it is needed.

FOB, CIF or CFR? #

The incoterm decides where your responsibility ends.

FOB, free on board: your obligation ends when the goods are loaded on the vessel at the Nigerian port. The buyer arranges and pays for the sea freight and the insurance and carries the risk from that point.

CFR, cost and freight: you also arrange and pay the carriage to the destination port, but not the insurance.

CIF, cost, insurance and freight: you pay the carriage and the marine insurance.

For an inexperienced exporter, FOB is the sensible choice. It leaves the international carriage to the buyer's forwarder, who does it every week, and it keeps you out of freight contracting and marine insurance on your first shipment. It also makes your price simpler to compare, which serious buyers like.

The counter argument is that CIF lets you control the freight and sometimes earn on it. That is a second year decision, not a first.

The 180 day clock, which should shape everything #

Nigerian non oil export proceeds must reach your domiciliary account within 180 days of the bill of lading date, and since January 2025 the Central Bank has stopped banks approving extensions. Our NXP page sets this out with the sources.

Work backwards. A sea voyage to China takes weeks, the buyer inspects on arrival, and if your terms then allow ninety days, you are outside the window. This is the single strongest practical argument for a letter of credit payable at sight: the documents are presented, the bank pays, the money is home.

The frauds aimed at sellers #

The advance fee. A keen buyer with a large order asks you to pay first: registration in China, notarisation, certification, a licence, a lawyer's fee, or a trip. This is the oldest one and it is still working. A real buyer never charges you for the right to sell to them.

The switch bill of lading. A second bill of lading is issued for the same cargo with altered details, such as a changed cargo description or shipper identity. It has legitimate uses in some trades, and it can also be used to draw improperly on a letter of credit or to defraud a seller. Keep control of your originals and do not agree to a switch you do not understand.

Inspect and discount. The goods arrive, the buyer claims a quality shortfall and demands a price cut, knowing that you cannot afford to ship them home. The defence is a pre shipment inspection by an independent agency, with the certificate forming part of the letter of credit documents, so the specification was agreed and evidenced before loading. Our documents page covers the clean certificate of inspection.

Take delivery and vanish. Only possible if you shipped on open account or released documents without payment. The instrument protects you here, not the relationship.

Checking the buyer before any of this #

China's free public registry at gsxt.gov.cn shows a company's registration status and its unified social credit code, the eighteen character identifier every registered Chinese entity carries. Ask the buyer for their exact Chinese company name, their unified social credit code and a copy of their business licence, then have the registry checked by somebody who reads Chinese. Our finding buyers page explains the process, and the desk does this check as a service.

The recommended shape of a first deal #

1. Buyer verified on the Chinese registry
2. Specification agreed in writing, with the inspection standard named
3. FOB a named Nigerian port
4. Irrevocable letter of credit, confirmed by your Nigerian bank, payable at sight
5. Documents listed in the credit that you can actually produce, and checked against your paperwork before you ship
6. Pre shipment inspection booked before the loading date
7. Money home inside 180 days of the bill of lading

None of that is exotic, and getting paid by a Chinese buyer on those terms is ordinary trade rather than luck. It is what every experienced commodity exporter does, and it is the difference between a shipment and a lesson. The rest of the route is on our step by step export guide.

First published 20 Sep 2026. Last checked 20 Sep 2026 by The ChinaBridge desk. Something here out of date? Tell us in the comments and we will fix it.