Guides / Choosing a Factory
Structuring Payment and Incoterms on a Vietnam Wood Order
August 10, 2026
Payment structure is leverage. Incoterm is control. Buyers new to Vietnam often accept whatever the factory proposes on both, then discover during a problem that they have neither.
Neither topic is complicated. Both are worth thirty minutes before the first order.
The standard structure and what it is for
The common arrangement in Vietnamese furniture is 30 percent deposit with the purchase order and 70 percent against a copy of the bill of lading.
The deposit is not profit. It buys the timber, pays for the panels and covers the jigs. A factory that asks for it is behaving normally. A factory that does not ask for one on a first order is either very comfortable or very short of work.
The balance against bill of lading copy means you pay once the goods are loaded and the shipping document exists, before you receive the documents that let you collect the cargo. It is a reasonable midpoint: the factory is paid near shipment, you are not paying for goods that have not moved.
Variations you will meet: 50 percent deposit from a factory that does not know you, or on a highly customised product with no resale value. That is defensible on a first order. A letter of credit, which is expensive and slow and rarely worth it below a substantial order value. Open account terms of 30 to 60 days, which established buyers with repeat volume do negotiate, usually after several clean orders.
Where to put the inspection
This is the clause that matters most and it is often missing.
Make the balance payable against a passed final inspection and the bill of lading copy, not against the bill of lading alone.
The difference is everything. If the balance is due on bill of lading only, a failed inspection leaves you arguing with a factory that has already been paid on shipment. If it is due on inspection plus bill of lading, the factory has a direct reason to fix the problem in the week it is found.
Keep it fair. Define what a pass means, using the AQL levels and the inspection pack described in the inspection guide. An undefined inspection clause is a licence to withhold payment arbitrarily, and factories that have been burned by that will refuse it.
Some buyers hold a small retention, perhaps 5 percent, for a period after arrival. This is workable on a long relationship and it is a hard sell on a first order.
Incoterms, in plain terms
EXW, ex works. You take responsibility at the factory gate. You arrange export clearance, inland transport and everything after. Cheapest headline number and the most work, and it requires a capable agent in Vietnam. Most buyers should not start here.
FOB, free on board. The factory delivers the goods loaded on the vessel at the named port, cleared for export. You control the carrier, the rate and the booking. This is the default for furniture out of Vietnam and it is the right default for most buyers.
CIF, cost insurance and freight. The factory arranges and pays the ocean freight and insurance to your destination port. Convenient, and you are accepting their routing, their carrier and their margin. You also lose visibility when a vessel rolls, because you are not the booking party.
DDP, delivered duty paid. The seller handles everything to your door including duty. Rare from furniture factories and usually expensive when offered, because they are pricing a risk they do not understand well.
Name the port too. FOB Ho Chi Minh City and FOB Hai Phong are different, and a factory in the north quoting FOB from a southern port has inland trucking in the number.
Why FOB is usually right
Three reasons.
You control the schedule. In peak season the container booking can be the constraint, and you would rather be the one managing it.
You see the real freight cost. A CIF quote bundles freight into the goods price, which makes it hard to compare two factories and hard to tell when freight rates move.
You keep the relationship with the carrier. When something goes wrong in transit, being the booking party matters.
The exception is a buyer with no freight capability and a small first order. Then CIF is a reasonable way to get started, and you move to FOB once you have a forwarder.
Comparing quotes across Incoterms
An EXW quote, a FOB quote and a CIF quote are three different numbers for the same goods. Comparing them directly is the most common quoting error buyers make.
Normalise to one term before you compare. For FOB against EXW, add export clearance, inland trucking to the port and terminal handling. For CIF against FOB, subtract the ocean freight and insurance at the rate you could get yourself.
Do the same normalisation on what is included in the goods price: carton, inner packing, drop test, labelling and pallets. The MOQ and quoting guide lists the other five things that make two quotes incomparable.
Currency, banking and small practicalities
Quote and pay in US dollars. It is the working currency of the export sector and every factory is set up for it.
Pay to the company account named on the contract and the invoice, matching the legal entity you contracted with. Payment instructions that arrive by email late in the process, naming a different beneficiary, are the standard shape of a supplier payment fraud. Confirm any change of bank details by phone to a number you already had, not one from the email.
Expect bank fees on both sides and agree who absorbs them, since it is a small number that generates a disproportionate amount of correspondence.
A workable first order package
30 percent deposit on purchase order. 70 percent against passed final inspection plus bill of lading copy. FOB from a named port. Inspection standard and AQL defined in the contract. Payment in US dollars to the contracted legal entity.
That structure is normal enough that a good factory will accept it without much discussion, and it keeps your leverage exactly where the risk is.
Frequently asked questions
What are normal payment terms for a Vietnamese furniture factory?
A 30 percent deposit with the order and 70 percent against the bill of lading copy is the common structure. Newer relationships sometimes see 50 percent, and established buyers with volume negotiate open account terms. Anything asking for full payment before production is a reason to stop.
Should I buy FOB or CIF?
FOB for most buyers, because it gives you control of the carrier, the rate and the schedule. CIF is convenient if you have no freight relationships, but you are accepting the factory's routing and margin on the freight, and you lose visibility when a vessel slips.
Can I pay the balance after the goods arrive?
Rarely on a first order. What you can do is hold the balance against a passed final inspection and a bill of lading copy, which gives you leverage at the point where it matters and still pays the factory before the goods leave.
Need a quote for this product?
Send the specification. We match you with up to 3 Vietnamese wood factories and reply within 24 business hours.
Get matched with a Vietnam wood factory