Payment Terms for Leather Orders from India: TT, LC or D/P?
Updated: 24 hours ago
Most leather orders from India are paid by telegraphic transfer (TT): a deposit to start production and the balance before the factory releases the shipping documents. A letter of credit (LC) suits larger first orders, while documentary collections (D/P or D/A) and open account usually come later, once buyer and factory have a track record.
This guide compares the payment terms for leather orders from India that overseas brands, importers and wholesalers are most likely to be offered, and how to protect each payment. Updated October 2026.
Key Takeaways
A TT deposit to start production plus a balance before documents are released is the most common structure for first orders.
An LC issued under the ICC's UCP 600 rules shifts payment risk to banks, but every document must match the credit exactly.
As of October 2026, RBI rules give Indian exporters up to 15 months from export to realise payment (previously 9 months), so deferred terms are legally possible once trust exists.
Link the balance payment to a passed pre-shipment inspection and a copy of the bill of lading or airway bill.
Pay only into a bank account in the exporter's registered business name, and confirm any change of bank details by phone.
Which payment terms do Indian leather manufacturers accept?
Most Indian leather manufacturers accept TT and letters of credit, and some offer documentary collections or open account to established buyers. The right choice depends on order value, how well you know the factory and how much bank paperwork you want to handle.
The US International Trade Administration ranks the main methods from lowest to highest risk for the seller: cash in advance, letters of credit, documentary collections, open account and consignment (trade.gov, Methods of Payment). What is safest for the factory is riskiest for the buyer, so most leather orders settle on a compromise.
Payment term | How it works | Who carries the risk | Typically suits |
TT deposit + balance before shipment | Deposit by bank transfer starts production; balance is paid after inspection, before goods are released | Shared: buyer risks the deposit, factory risks custom-made stock | First orders and most repeat orders |
TT deposit + balance against B/L copy | Balance is paid once goods are loaded and the factory sends a copy of the bill of lading | Shared, slightly more balanced toward the buyer | Sea freight orders after an approved sample stage |
Letter of credit (LC) at sight | Buyer's bank pays when the factory presents documents that comply with the credit | Banks check documents; both sides pay bank charges | Larger first orders or buyers needing bank-backed terms |
Documents against payment (D/P) | Banks release shipping documents only when the buyer pays | Mostly the factory, if the buyer refuses the goods | Repeat buyers with a payment track record |
Documents against acceptance (D/A) or open account | Buyer accepts a bill or invoice and pays later, for example in 30 to 90 days | Mostly the factory | Long-standing, high-trust relationships |
How does a TT deposit and balance work on a leather order?
A TT order splits payment into a deposit that funds leather and materials and a balance that releases the finished goods. The split, the trigger for the balance and the bank details belong in the proforma invoice you sign before production starts.
Approve samples. With Sanwas International, you approve a first sample covering leather, fit and finish before any production payment.
Sign the proforma invoice. It should list style numbers, quantities, unit prices, the Incoterm, the delivery date, the payment split and the exporter's bank details.
Pay the deposit. The deposit lets the factory buy and cut leather in your colour and specification, which it cannot easily resell if the order is cancelled.
Inspect before the balance. Book a final random inspection at an AQL level agreed in writing. Our guide to AQL inspection for leather orders explains how sampling plans work.
Pay the balance and receive documents. Expect the commercial invoice, packing list, bill of lading or airway bill, and origin documents if you will claim a trade-agreement duty rate.
Incoterms decide where costs and risk pass, not when you pay. Under FOB or FCA the balance is usually settled before goods are handed to your forwarder, while under DDP the factory carries duty and delivery costs before it is paid in full. Our guide to Incoterms for leather orders from India compares each term.
When is a letter of credit worth the cost?
An LC is worth it when the order value is high relative to your trust in the supplier, or when your bank or financier requires one. It replaces the factory's exposure to you with a bank's undertaking to pay against compliant documents.
Most LCs are issued under the International Chamber of Commerce's UCP 600 rules, a set of 39 articles governing documentary credits (ICC Academy). Banks examine documents, not goods. An LC therefore protects you only if it calls for the right documents, such as an independent inspection certificate, a certificate of origin and a latest shipment date.
The trade-off is cost and rigidity. Both sides pay bank charges, and a small mismatch, such as a spelling difference between the invoice and the bill of lading, can trigger a discrepancy that delays payment and shipment. For a first order of a few hundred pairs or jackets, many buyers find a TT tied to inspection simpler.
Can overseas buyers get credit terms from an Indian leather factory?
Yes, but usually only after several successful orders. Indian exchange-control rules allow it: under RBI notification FEMA 23(R)/(7)/2025-RB dated 13 November 2025, exporters have up to 15 months from the date of export to realise payment, up from 9 months (EY India summary). The same change gives exporters up to three years to ship against advance payments received.
That regulatory room does not oblige any factory to offer credit. D/A or open-account terms tie up the manufacturer's working capital, so expect them to be discussed only once volumes are steady and the payment history is clean.
How do you protect a payment to a factory you have never visited?
Verify the company before the first transfer and tie every payment to a document or milestone. These checks take little time:
Confirm the exporter's legal name, GSTIN and Importer-Exporter Code (IEC), which Indian exporters obtain from the Directorate General of Foreign Trade.
Check that the bank account on the proforma invoice is held in the same legal name.
Treat any email asking you to change bank details as suspect until you confirm it by phone on a number you already hold.
Ask for a video walk-through of cutting, stitching and finishing lines, and check claimed certifications with the issuing body.
Start with a sample, then a modest first production order, before scaling volumes or relaxing terms.
How Sanwas International works with brands
Sanwas International is an LWG-certified OEM and private label leather manufacturer based in Jalandhar, Punjab, India, producing footwear, outerwear, furniture leather and hides for brands in India and worldwide. Payment terms are agreed per order in the proforma invoice. MOQs are under 500 units per style, and every order goes through AQL inspection before dispatch.
Sampling can take as little as 72 hours and bulk production from 30 days, depending on the style. See how our OEM leather manufacturing process works, or request a quote with your quantity, destination and preferred Incoterm.
Frequently Asked Questions
Can I pay an Indian leather factory the full balance after my shipment arrives?
Usually not on a first order. Most Indian leather exporters ask for the balance before they release the original shipping documents, because once goods leave India they have little leverage. Payment after arrival, through D/A or open account, is normally offered only to buyers with a record of on-time payments.
Does the Incoterm change when I have to pay for a leather order from India?
Not directly. Incoterms set where costs and risk pass from seller to buyer, while payment timing is agreed separately in the proforma invoice. In practice, FOB and FCA orders often tie the balance to loading or a bill of lading copy, and DDP prices include destination duty and delivery, so agree upfront how duty paid on your behalf is invoiced.
Is a letter of credit worth it for a first order of 300 leather jackets?
It can be, but compare the bank charges and paperwork with the order value first. For a few hundred units, many importers use a TT deposit with the balance due after a passed AQL inspection, which gives similar protection at lower cost. An LC makes more sense for larger orders or when your bank or financier requires one.
What documents should I get before paying the balance on a leather shipment?
Ask for the commercial invoice, packing list, final inspection report and a copy of the bill of lading or airway bill. If you plan to claim a preferential duty rate under a trade agreement such as the India-UK CETA, also request the origin documentation your customs authority requires, because without it you may pay the full duty rate.
Do I have to pay for samples before ordering from Sanwas International?
Yes. The sample cost is agreed in the quotation, and the sample lets you check leather, fit and finish before committing to production. Payment terms for the production order, including the deposit and what triggers the balance, are agreed in the proforma invoice for each order.
Planning Your First Order from India? Request a Quote
Brands, sourcing managers, retailers and importers: send us your product category, leather type, target quantity per style, destination country, preferred Incoterm and target delivery date, and tell us which payment structure you would like to use. Sanwas International supplies buyers across India and exports worldwide.
Include these details in your enquiry:
Product category and style (footwear, jacket, upholstery leather, hides or crust)
Leather type, finish and colour
Target quantity per style and colour
Delivery city in India or destination country, plus preferred Incoterm
Target delivery date and whether you need a sample before bulk
Contact Sanwas International
Mob: +91 8728858686
Address: 308 Leather Complex, Kapurthala Road, Jalandhar, Punjab 144002, India
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