{"id":712,"date":"2026-10-14T13:00:00","date_gmt":"2026-10-14T13:00:00","guid":{"rendered":"https:\/\/odmhome.com\/blog\/?p=712"},"modified":"2026-10-14T21:33:37","modified_gmt":"2026-10-14T13:33:37","slug":"payment-terms-and-contract-basics","status":"publish","type":"post","link":"https:\/\/odmhome.com\/blog\/payment-terms-and-contract-basics\/","title":{"rendered":"Payment Terms and Contract Basics for a First ODM Order"},"content":{"rendered":"

Commercial terms in manufacturing are less negotiable than newcomers expect and more standardised than they fear. Most of what looks like a hard-nosed demand is simply convention, and most disputes come not from the terms themselves but from the two or three points that were never written down. In short, Payment Terms Contract Basics is the deciding factor for most buyers.<\/p>\n

The usual shape of a first order<\/h2>\n\n\n\n\n\n\n\n
Stage<\/th>\nTypical payment<\/th>\nWhat it is for<\/th>\n<\/tr>\n<\/thead>\n
Order confirmation<\/td>\n30% deposit<\/td>\nMaterial purchasing and slot booking<\/td>\n<\/tr>\n
Production complete<\/td>\n60\u201370% balance<\/td>\nBefore shipment, often after inspection<\/td>\n<\/tr>\n
Sample or tooling stage<\/td>\nSeparately agreed<\/td>\nMoulds and engineering samples<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

The deposit exists because the manufacturer is buying components and booking capacity on your behalf, often months ahead. Asking for it to be smaller is normal; asking for it to be zero is asking your supplier to finance your inventory.<\/p>\n

For a first order with an unknown counterparty, a letter of credit or an escrow arrangement through a trade platform is a reasonable middle ground. Once you have history, the terms loosen by themselves \u2014 a relationship with ten orders behind it is a different negotiation from the first.<\/p>\n

Incoterms: the one term that moves the most money<\/h2>\n

EXW, FOB, CIF, DDP \u2014 these define who pays and who carries risk at each point of the journey, and they are the terms most often accepted without being understood. EXW<\/strong> means you collect from the factory gate and own the risk from that moment. FOB<\/strong> means the supplier delivers to the port and loads it; you own the sea leg. CIF<\/strong> adds insurance and freight to the destination port. DDP<\/strong> means delivered, duty paid, at your door \u2014 the most convenient and the most expensive, and the one where the supplier is pricing risks they cannot fully control.<\/p>\n

FOB is the common default for a reason: it gives you control of the freight and insurance, and it keeps the supplier’s responsibility clearly bounded. If you are new to importing, the practical advice is not to choose DDP for the convenience \u2014 it is to work with a freight forwarder who explains the landed cost, because duty and VAT are where a good-looking unit price becomes an uncompetitive one.<\/p>\n

What to write down, because it is otherwise assumed<\/h2>\n