Payment Terms for Dehydrated Onion Imports: T/T, LC and What Is Normal

Dehydrated onion payment terms are where a first import most often stalls: the buyer will not pay a stranger in advance, the supplier will not ship a container of goods to a stranger on credit, and neither side knows what the normal middle ground looks like. There is one, and it is well established. This guide sets it out: the four instruments used in this trade, telegraphic transfer with an advance, documents against payment, letters of credit and open account, what each costs and what each protects, the terms that are normal for a first order, a second order and a running relationship, the fraud that actually happens and how to shut it out, and how the payment schedule fits with the price lock, the production run and the vessel.

It is written for the importer, from Europe or elsewhere, buying from an Indian exporter or plant; the exporter's own view is included where it explains why a term is offered or refused. Values are as of March 2026, and nothing here is legal or financial advice: bank charges, letter-of-credit fees and credit-insurance premiums vary by bank and by country, and your own bank and adviser quote the real ones.

What this guide covers

• The four instruments and what each protects
• Telegraphic transfer with an advance: the trade standard
• Documents against payment and against acceptance
• Letters of credit: when they are worth the cost
• Open account and credit insurance
• What is normal: first order, second order, running relationship
• How payment fits the price lock, production and the vessel
• The Indian side: why exporters ask for what they ask for
• What each instrument costs, and who pays
• The fraud that happens and how to shut it out
• Currency: euro, dollar or rupee
• Payment and quality disputes
• Contract wording that works
• Paying for samples and courier
• How big should the advance be? The arithmetic
• KlarHarvest's terms
• Frequently asked questions

The four instruments and what each protects

Every instrument sits somewhere on a line between cash in advance, which protects the seller completely, and open account, which protects the buyer completely. Trade moves along that line as trust builds, and the usual mistake is to expect the far end of the line on the first order.

Telegraphic transfer with an advance: the trade standard

The instrument used for most dehydrated onion shipments is a bank transfer in two parts: an advance at order confirmation and the balance when the goods have shipped. The advance is usually 30 percent, sometimes 20 or 50, and it does two things for the exporter: it funds part of the raw onion purchase, which the plant must pay for in cash at the yard, and it commits the buyer, so that the plant does not dry a container of a specific cut and colour for a buyer who then disappears. The balance is paid against a copy of the shipped-on-board bill of lading and the other documents sent by e-mail, and the original documents, or a telex release of the bill of lading, are sent only when the balance has arrived; the buyer cannot take delivery at the destination port without them. The buyer's exposure is therefore the advance, for the three to five weeks between order and shipment, against a supplier who has been vetted, and the seller's exposure is the balance, for the few days between shipping and payment, against goods it still controls through the documents. Both exposures are small and both are proportionate. "30 percent advance, 70 percent against copy documents" is the phrase, and it is understood in every plant office in Mahuva.

Variants: 30 percent advance, 70 percent against a pre-shipment inspection report and the packing list before the container is stuffed, which suits a buyer who wants a third party to see the goods before the balance leaves; and 100 percent against copy documents with no advance, offered by exporters to buyers with a track record, which leaves the buyer with no exposure until the goods are on the water.

Documents against payment and against acceptance

Documentary collection puts the banks between the parties without either bank taking on risk. The exporter ships, hands the documents to its bank with instructions, and that bank forwards them to the buyer's bank, which releases them to the buyer only against payment, D/P, or against acceptance of a bill of exchange payable at a future date, D/A. The buyer knows the goods have shipped before paying; the seller knows the buyer cannot take the goods without paying or accepting. What D/P does not do is oblige the buyer to take up the documents, and a buyer who walks away leaves the seller with a container at a European port and the choice of finding another buyer or shipping it home; that is why exporters offer D/P to buyers they know rather than to first-time buyers, and why a modest advance is often combined with it. D/A extends credit, usually 30 to 60 days after sight, with only the buyer's acceptance as security, and belongs to a relationship where several orders have paid on time. Bank charges are small, a few hundred euros per collection, and the documents move through the banking system rather than by courier, which adds a few days. The collection rules are the International Chamber of Commerce's URC 522, and either party's bank can explain them.

Letters of credit: when they are worth the cost

An irrevocable letter of credit is the buyer's bank's undertaking to pay the exporter against documents that comply exactly with the credit's terms, usually confirmed by a bank in India so that the exporter has a local bank's promise as well. It removes the buyer's risk of paying for goods not shipped, and the seller's risk of not being paid for goods that were, at the price of cost and rigidity. The costs are the issuing bank's fees, the confirmation fee, the negotiation fees and the discrepancy fees, which together run 0.5 to 1.5 percent of the value for a European buyer and an Indian exporter, plus the buyer's credit line being blocked for the amount. The rigidity is the well-known problem that a majority of first presentations under letters of credit carry discrepancies, a spelling difference, a date, a missing stamp, each of which lets the bank refuse payment until the buyer waives it. For a first container from a supplier the buyer has vetted but never dealt with, or where the buyer's own procurement policy requires it, a letter of credit is a reasonable choice; for a pallet, its fixed fees are absurd against the value; for a running relationship, the advance-and-balance transfer is cheaper and faster for both. The rules are UCP 600, and an L/C should be drafted with the exporter's documents in mind, with the documents named exactly and the presentation period long enough, 21 days is standard, for the originals to reach the bank. Larger buyers sometimes use a standby letter of credit, which sits behind an open-account arrangement and is drawn only on default; it gives the exporter security at lower fees than a documentary credit and is worth asking a bank about once volumes justify it.

Open account and credit insurance

Open account, where the exporter ships and invoices at 30, 45 or 60 days, is how established trading houses in the Netherlands and Germany buy from their long-standing Indian suppliers, and it is what a buyer earns after several orders have paid on time. The exporter carries the full credit risk unless it is insured, and Indian exporters can insure it through the Export Credit Guarantee Corporation of India, ECGC, which covers buyer default and country risk for a premium of roughly 0.3 to 0.8 percent of the invoice depending on the buyer's country and rating; European buyers may find their own supplier offers open account more readily once the buyer has been rated by ECGC or by a private insurer such as Allianz Trade. The insured exporter is more willing, the premium is small, and the arrangement is the normal end state of the relationship. Buyers should expect to provide financial statements or a credit reference for the rating, and should expect the credit limit to start below a container's value and grow.

What is normal: first order, second order, running relationship

A first-time buyer asked for 100 percent in advance on a container should decline and offer 30/70, which any legitimate exporter accepts; an exporter offering open account to a stranger on a first container should make a buyer wonder why. The middle of the table is where the trade lives.

How payment fits the price lock, production and the vessel

Payment dates are tied to production, and production is tied to the raw onion, which is why the schedule below matters more than the percentages. At order confirmation the exporter locks the plant's price, valid for the production slot, and the advance arrives within three to five banking days; the plant buys onion and dries the lot in the following one to three weeks, depending on season and cut; the lot is tested, packed and, if the buyer wishes, inspected, and the balance under a 30/70-inspection variant is paid then; the container is stuffed and gated in at Pipavav, the vessel sails, the shipped-on-board bill of lading is issued two to four days later and copy documents are e-mailed; the balance under plain 30/70 arrives within three to five banking days and the originals or a telex release follow the same day. Twenty-five to thirty days later the container is in Hamburg or Rotterdam. The buyer's cash is therefore out for roughly the same period as the goods are in transit plus the production time, six to eight weeks from advance to delivery, which is the working-capital fact to plan around; the exporter's cash is out for the raw onion less the advance until the balance arrives. Why the price lock is short and why an advance that arrives late can void it are explained in Why Dehydrated Onion Quotes Are Valid for 7 Days; the whole sequence from sample to delivery in From Sample to First Container.

The Indian side: why exporters ask for what they ask for

It helps to know what the exporter is managing. The plant buys onion for cash at the market yard and pays labour and fuel weekly, so a container's worth of flakes, some 15 to 17 lakh rupees, roughly 16,000 to 19,000 euros, in raw material and conversion, is paid out before a kilogram ships; a plant that produced to order without an advance would be financing every buyer's stock. Indian export finance is available, pre-shipment packing credit at concessional rates against a confirmed order, and post-shipment credit against documents, but banks lend against a firm order or a letter of credit, not against an e-mail, which is another reason an exporter wants the order confirmed in a form its bank recognises. Exporters must realise foreign exchange within nine months of shipment under Reserve Bank of India rules, so very long credit terms are not just risky but administratively awkward. Duty drawback and the RoDTEP export incentive are paid against realised export proceeds, so an unpaid invoice costs the exporter the incentive too. And the exporter's own margin is thin, 7 to 20 percent on a container, so a single unpaid balance can wipe out a season; the margin arithmetic is in What Does Dehydrated Onion Cost per Kilogram? None of this obliges a buyer to accept any particular term, but it explains why the advance exists and why a serious exporter is glad to move to documents or open account once orders have paid.

What each instrument costs, and who pays

On a 20,000 euro container, the difference between a transfer and a confirmed letter of credit is a few hundred euros, which is small against the value but large against the margin, and an exporter quoting for L/C terms will usually add half a percent for it. Fees under an L/C are stated in the credit itself; "all bank charges outside India for the buyer's account" is the standard clause.

The fraud that happens and how to shut it out

Two frauds account for nearly every loss in this trade, and neither involves the product. The first is the substituted bank account: an e-mail, apparently from the exporter, says the bank details have changed, and the balance goes to a criminal's account. It works because the exporter's or the buyer's e-mail has been compromised, and the message arrives in the real thread. The defence is a rule, written into the contract and observed without exception: bank details are exchanged once on signed letterhead, any change is confirmed by a phone call to a number obtained independently, and no payment goes to a changed account without that call. The second is the non-existent exporter: a website with copied photographs, a certificate lifted from a real plant, a low price, and a request for 100 percent in advance; the money goes, no goods follow. The defence is the vetting in 25-Point Checklist Before You Choose a Dehydrated Onion Supplier, a refusal to pay more than 30 percent in advance to any unvisited, unverified supplier, and a pre-shipment inspection before the balance. From the exporter's side, the mirror frauds are the buyer who takes documents on D/A and disappears, and the forged proof of payment sent to obtain a telex release; the defences are credit insurance and the rule that documents are released against cleared funds, not against a payment screenshot. The wider list of warning signs is in 12 Red Flags When Dealing with a Dehydrated Onion Exporter.

Currency: euro, dollar or rupee

Indian exporters quote in US dollars by habit and in euros on request, and the choice decides who carries the currency risk between quotation and payment. A euro invoice puts it on the exporter, whose costs are in rupees; a dollar invoice puts it on a European buyer, who must buy dollars; a rupee invoice, which the Reserve Bank has allowed for export settlement since 2022, puts it on the buyer entirely and is rare in this trade. Over the six to eight weeks from order to balance the rupee moves one or two percent against either currency in an ordinary period, which is smaller than the raw-onion swing but not nothing on a thin margin. The practical arrangement is to invoice in the buyer's currency for small orders, where the exporter's bank conversion is a rounding error, and to agree the currency and, for large or repeat contracts, a rate band or a review clause for containers. The invoice currency should be stated in the quote, the proforma and the contract, and should not change between them.

Payment and quality disputes

A payment term should say what happens when the goods arrive and a parameter is out of specification, because that is the moment when the buyer holds both the goods and, under open account or D/A, the money, and the exporter holds neither. The workable arrangement is that the balance is paid against documents as agreed, and quality claims are handled under the contract's claims clause: notice within a set period, 14 to 30 days after arrival, joint sampling or a retained sample, an agreed referee laboratory whose result binds both, and remedies of replacement, credit note or price adjustment. Withholding the balance while a dispute runs is tempting and is the fastest way to end a relationship; an exporter facing a withheld balance on a lot that later proves conforming will not ship again. Where a buyer wants protection before paying, the pre-shipment inspection variant gives it: the third party's report on the lot before the balance leaves. The claims clause itself, with wording, is in B2B Contract Terms for Dehydrated Onion.

Contract wording that works

• Terms: "30 percent of the invoice value by telegraphic transfer within 5 banking days of order confirmation; 70 percent by telegraphic transfer within 5 banking days of the buyer's receipt of copy shipping documents (commercial invoice, packing list, shipped-on-board bill of lading, certificate of analysis, certificate of origin). Original documents or telex release to be sent on receipt of cleared funds."
• Price lock: "The price is fixed on receipt of the advance. If the advance is received later than 7 days after order confirmation, the seller may requote."
• Bank details: "The seller's bank details are those stated on the signed proforma invoice. Any change must be confirmed by the seller by telephone on the number stated in this contract before the buyer acts on it. The buyer bears no liability for payment made to the account stated on the signed proforma."
• Charges: "Bank charges in the buyer's country for the buyer's account; in India for the seller's account."
• Currency: "All amounts in euro. The seller bears the exchange risk between quotation and receipt."
• Claims: "Payment of the balance does not prejudice the buyer's right to claim under clause [claims] within 21 days of arrival."

Paying for samples and courier

Samples are the first money that changes hands and the first signal of how a supplier works. The trade norm is that samples of 250 to 500 grams per cut are free and the buyer pays the courier, 40 to 100 euros from Gujarat to Europe by DHL or FedEx, either on the buyer's own account number or reimbursed by a small transfer; a serious exporter sending to a serious buyer often absorbs the courier too. Larger trial quantities, 5 to 25 kilograms for a line trial, are charged at product price plus courier, and the charge is commonly credited against the first order. A supplier that wants payment for a 250 gram sample, or product price with no credit, is signalling a cash-flow problem or a lack of interest; a buyer that requests samples of ten cuts from six suppliers with no intention of buying is signalling something too, and exporters remember. Pay the courier promptly, since a sample invoice left unpaid for a month says more about the buyer than any later negotiation.

How big should the advance be? The arithmetic

The advance is not a round number chosen by habit; it can be reasoned from what it is for. On a 20-foot container of white flakes, ten tonnes at 1.65 euros per kilogram FOB, the invoice is 16,500 euros. The exporter's cash outlay before shipment is the raw onion, about 55 to 60 percent of the FOB value at ordinary yard prices, plus conversion at 25 to 30 percent, so some 85 percent of the invoice is spent before the bill of lading exists; the exporter's margin is the remainder. A 30 percent advance, about 5,000 euros, covers a little over a third of that outlay and, more to the point, exceeds the exporter's margin, so that a buyer who walks away after the lot is dried leaves the exporter with a saleable lot and no loss on the raw material it can recover by reselling. That is the logic of 30 percent: it is roughly the sum that makes the order worth producing and the default worth avoiding on both sides. A 50 percent advance is asked for when the cut or colour is unusual and the lot could not be resold easily, red minced or a custom band, or when the buyer is unknown and small; a 20 percent advance is offered to a buyer with a record. A 100 percent advance on a container transfers the entire outlay and the entire risk to the buyer and has no arithmetic justification once the supplier is vetted. The same reasoning gives the answer to a buyer's question about the balance: it is paid against documents rather than on arrival because the exporter's remaining exposure after shipment, 70 percent of the invoice for 25 to 30 days of transit, is the one exposure it cannot recover by reselling, since the goods are on the buyer's side of the ocean.

KlarHarvest's terms

KlarHarvest's standard terms for a first order are 30 percent advance and 70 percent against copy documents, with the balance against a third-party pre-shipment inspection report if the buyer prefers; for pallet orders under about 3,000 euros, payment in advance, since bank fees on two transfers exceed the exposure. Repeat buyers move to documents against payment or, with ECGC cover, to open account at net 30. Letters of credit are accepted for container orders and priced with the confirmation cost shown separately. Bank details are on the signed proforma and never change by e-mail; a change, should there ever be one, is confirmed by telephone from the numbers on the contact page. Invoices are in euro or US dollars at the buyer's choice, stated on the quote.

Frequently asked questions

What are the normal payment terms for a first container of dehydrated onion from India?

30 percent advance by bank transfer at order confirmation and 70 percent against copy shipping documents, with originals released on cleared funds. An irrevocable letter of credit at sight is the usual alternative.

Should I ever pay 100 percent in advance?

Only for very small orders, a pallet or a sample consignment, where bank fees on two transfers exceed the exposure, and only to a supplier that has passed vetting. Never for a container from an unverified supplier.

Is a letter of credit worth it?

For a large first order, or where your policy requires it, yes; it costs 0.5 to 1.5 percent and slows payment when documents carry discrepancies. For repeat orders, a transfer against documents is cheaper and faster for both sides.

When can I expect open account terms?

After three or four orders paid on time, usually with the exporter insuring the credit through ECGC or a private insurer. Expect to provide a credit reference for the rating.

What is the biggest payment risk in this trade?

A substituted bank account sent by e-mail. Exchange bank details once on signed letterhead and confirm any change by telephone on an independently obtained number before paying.

Can I withhold the balance if the goods arrive out of specification?

The contract should say no: pay against documents, claim under the claims clause with a referee laboratory. If you want protection before paying, use the pre-shipment inspection variant.

Which currency should the invoice be in?

Your own, for small orders; for containers, agree the currency in the quote and, for repeat contracts, a review clause. Whoever invoices in a currency not their own carries the exchange risk.

Next step

Request a quote and the terms come on the quote itself, with the price lock, the schedule and the bank details on the signed proforma; or request a sample first and settle terms once the product has passed your trial.