Ferrous Scrap Insights
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    Payment Terms in Scrap Metal Trading: TT vs LC Explained

    Complete guide to payment terms in international scrap metal trading. Understand TT (telegraphic transfer), LC (letter of credit), and how to structure payments for ferrous and non-ferrous scrap.

    Published: March 14, 2026Updated: March 31, 2026

    Payment Terms in Scrap Metal Trading

    Payment structure is one of the most critical elements of any international scrap metal transaction. For ferrous scrap and non-ferrous metals alike, the choice between TT (Telegraphic Transfer) and LC (Letter of Credit) determines risk allocation between buyer and seller.

    This guide explains both payment methods, their advantages, risks, and the standard industry practices used by professional scrap suppliers worldwide.

    TT (Telegraphic Transfer)

    What is TT Payment?

    Telegraphic Transfer (TT) — also called wire transfer — is a direct bank-to-bank electronic funds transfer. In scrap trading, TT is typically used for the advance payment portion of a transaction.

    How TT Works in Scrap Trade

  1. Buyer and seller agree on contract terms
  2. Buyer transfers the agreed advance (typically 30%) via TT
  3. Seller confirms receipt and begins processing/loading
  4. Balance is paid per agreed mechanism (usually LC or balance TT)

    5. Advantages of TT

  5. Speed:: Funds typically received within 1–3 business days
  6. Low cost:: Bank charges are minimal ($25–$75 per transfer)
  7. Simplicity:: No complex documentation requirements
  8. Flexibility:: Can be sent from any bank worldwide

    9. Risks of TT

  9. Buyer risk:: Advance payment sent before goods are shipped — risk of non-delivery
  10. Seller risk:: If full payment is TT, risk of buyer dispute after delivery
  11. No bank guarantee:: Unlike LC, TT offers no independent payment guarantee

    12. LC (Letter of Credit)

    What is an LC?

    A Letter of Credit is a bank-issued guarantee that the seller will receive payment upon presenting compliant shipping documents. The buyer's bank (issuing bank) commits to pay the seller's bank (advising/confirming bank) when specified conditions are met.

    Types of LC in Scrap Trade

  12. Irrevocable LC at Sight: — Most common; payment upon document presentation
  13. Deferred Payment LC: — Payment after an agreed period (60–90 days)
  14. Confirmed LC: — A second bank adds its guarantee (reduces country risk)
  15. Transferable LC: — Can be transferred to a third-party supplier

    16. LC Process Flow

  16. Contract signed between buyer and seller
  17. Buyer instructs their bank to issue LC
  18. LC transmitted to seller's bank
  19. Seller reviews LC terms for compliance with contract
  20. Seller ships goods and collects documents
  21. Seller presents documents to their bank
  22. Banks verify document compliance
  23. Payment released to seller

    24. Standard LC Documents for Scrap Metal

  24. Full set (3/3) clean on-board Bills of Lading
  25. Commercial Invoice
  26. Packing List (detailed weight per container/hold)
  27. Certificate of Origin
  28. Pre-shipment Inspection Report (SGS/Bureau Veritas)
  29. Weight Certificate
  30. Radiation Certificate
  31. Insurance Policy/Certificate (for CIF terms)

    32. Advantages of LC

  32. Buyer protected:: Payment only released when documents prove shipment
  33. Seller protected:: Bank guarantee ensures payment upon compliance
  34. International standard:: Governed by UCP 600 (ICC rules)
  35. Dispute mechanism:: Independent document examination by banks

    36. Costs of LC

    |-----|-------------|

    Standard Payment Structure: 30% TT + 70% LC

    The most common payment structure in international scrap trading combines both methods:

  36. 30% TT Advance: — Transferred upon contract execution; demonstrates buyer commitment
  37. 70% LC at Sight: — Irrevocable LC opened within agreed timeframe; balance paid upon document presentation

    38. Why This Structure Works

  38. For sellers:: The 30% advance covers procurement and processing costs; the LC guarantees the balance
  39. For buyers:: Only 30% is at risk before shipment; the LC provides document-verified delivery assurance
  40. For banks:: Reduced exposure compared to 100% LC

    41. Alternative Structures

    |-----------|----------|

    Best Practices for Buyers

  41. Start with LC-heavy structures — 100% LC for first orders, then shift to 30/70
  42. Use confirmed LC — If seller's country has banking risk
  43. Review LC terms carefully — Ensure they match contract exactly
  44. Allow adequate validity — LC should be valid 30+ days beyond laycan
  45. Minimize amendments — Each amendment costs time and money

    46. Best Practices for Sellers

  46. Verify buyer's bank — Ensure issuing bank is reputable
  47. Review LC immediately — Request amendments before starting processing
  48. Prepare documents meticulously — Any discrepancy risks delayed payment
  49. Use experienced document preparers — LC documentation is technical
  50. Insist on irrevocable LC — Revocable LCs offer no protection

    51. Frequently Asked Questions

    What is the standard payment term for scrap metal?

    30% TT advance + 70% irrevocable LC at sight is the global industry standard for international scrap metal trade.

    Why do sellers require a TT advance?

    The advance covers procurement, processing, and logistics costs incurred before shipment. It also demonstrates buyer commitment.

    How long does LC payment take?

    After document presentation: 5–7 banking days for examination, then immediate payment (at sight) or per agreed deferred terms.

    Can I pay 100% by TT?

    For small orders with established suppliers, yes. For new relationships or large volumes, LC protection is strongly recommended.

    What happens if documents have discrepancies?

    The bank notifies both parties. Minor discrepancies can be waived by the buyer. Major discrepancies may delay or prevent payment.

    ---

    *Ready to trade? We accept standard 30% TT + 70% LC terms.*

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    payment termsTT vs LCletter of creditscrap metal tradingtrade finance

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