Importing Custom Steel Parts: What Payment Methods Are Available?

When I first imported custom steel parts, I wasn’t sure which payment method to use. I chose the wrong one and ended up with a delayed shipment and blocked cash flow. I never made that mistake again.

Importers can choose from several payment methods such as telegraphic transfer (T/T), letter of credit (L/C), documentary collections, and open account. Each method carries different risks, costs, and protections for both buyer and seller.

The right payment method balances trust, cost control, and risk management.

What Is T/T (Telegraphic Transfer) and How Does It Work?

T/T is a widely used and fast payment method ideal for trusted supplier relationships but offers limited buyer protection.

My first few payments were made through T/T. It was fast, easy, and accepted by nearly all suppliers—but I quickly learned it also carried risks if trust wasn’t established.

Telegraphic Transfer (T/T), also known as wire transfer, is a direct bank-to-bank transfer that typically takes 1–3 business days. It’s commonly used for international steel transactions due to its speed and global acceptance ¹.

How It Works:

• The importer instructs their bank to transfer funds to the exporter’s bank.
• Transfers can be done in full (Cash in Advance) or in stages (e.g., 30% deposit, 70% after shipment).
• Banks may charge transfer fees (usually \$20–\$50).

Risks:

• For Importer: High risk if paying before shipment—no goods, no refund.
• For Exporter: Low risk; receives funds before release of goods.

Can Letters of Credit (L/C) Secure International Steel Purchases?

Letters of credit offer maximum protection for both sides in high-value or high-risk steel deals—at a higher cost.

I once used a letter of credit for a \$100K custom steel order. It added paperwork, but the peace of mind was worth it—both sides felt protected.

A letter of credit (L/C) ² is a bank-issued guarantee ensuring payment to the exporter once specific documents are submitted, offering strong security for both importer and exporter.

Key Features:

• The importer’s bank guarantees payment.
• Exporter must present shipping documents, such as a bill of lading or mill test report.
• Payment is made only when all terms are met.

Should I Use PayPal or Western Union for Metal Parts?

PayPal and Western Union are fast but risky—suitable only for small, low-stakes transactions.

I’ve seen buyers try PayPal for small sample orders—it’s easy. But for bulk steel shipments, it just doesn’t offer the security or structure needed.

PayPal and Western Union ³ are quick and easy for small payments but aren’t suitable for large or complex steel part imports due to lack of security, limited documentation, and high fees.

Alternatives:

Use Escrow.com ⁴ for small orders with delivery confirmation. For bulk imports, stick to T/T, L/C, or documentary collection.

What Are the Pros and Cons of Bank Transfer vs Other Methods?

Each method comes with trade-offs in speed, cost, and security—match it to your deal size and trust level.

I used to prefer T/T for everything. But as my business grew, I realized that choosing the right method for each situation was smarter and safer.

Each payment method has trade-offs between cost, speed, and security ⁵. Importers must evaluate supplier trust, order size, and regulations carefully.

Is Open Account Suitable for Steel Imports?

Open account is only advisable when there is long-standing trust—otherwise, it poses major financial risk to exporters.

Open account terms allow the buyer to pay after receiving the goods—usually 30, 60, or 90 days later. While this method supports importer cash flow, it exposes the seller to default risk.

The U.S. Department of Commerce ⁶ describes open account as high risk for exporters and typically reserved for established partners.

What Is Documentary Collection and When to Use It?

Documentary collection balances control and cost—ideal when you trust the buyer but want shipping security.

In this method, the exporter ships the goods and instructs their bank to release shipping documents only when the importer accepts or pays. It costs less than an L/C and more than a T/T.

Documentary collection ⁷ offers moderate risk protection with simpler execution than a letter of credit.

Footnotes