Choosing the wrong payment method in an international commodity deal can cost you everything. This guide explains exactly how DLC, SBLC, T/T, Escrow and CAD work — when to use each, what they cost, and where to get them.
In international commodity trading, you rarely know your counterparty in person. The payment mechanism is the legal and financial safety net that ensures neither party can cheat the other — the buyer gets the goods they paid for, and the seller gets paid for the goods they shipped.
The wrong payment terms create massive risk: sellers can ship goods and never receive payment; buyers can release funds and receive substandard goods or nothing at all. Every commodity trade contract must specify the payment method, conditions for release, and the banking instructions with precision.
This guide covers the five most common payment methods used in international commodity transactions, in order of the buyer protection they offer.
| Method | Security Level | Typical Cost | Best For |
|---|---|---|---|
| DLC (Documentary Letter of Credit) | ⭐⭐⭐⭐⭐ Highest | 0.75%–1.5% of value | New buyers, large shipments |
| SBLC (Standby Letter of Credit) | ⭐⭐⭐⭐ High | 1%–3% per annum | Performance guarantee |
| Escrow | ⭐⭐⭐⭐ High | 0.5%–1.5% + flat fees | SME transactions, online deals |
| CAD (Cash Against Documents) | ⭐⭐⭐ Medium | 0.1%–0.5% (collecting bank) | Established relationships |
| T/T (Telegraphic Transfer / Wire) | ⭐⭐ Lower | £15–£50 flat fee | Trusted partners, small amounts |
Click any method below to expand the full guide including the step-by-step process, pros & cons, costs and key clauses to include in your contract.
A bank's unconditional undertaking to pay the seller, provided they present compliant documents. The gold standard of trade finance — governed by ICC UCP 600.
A bank guarantee that serves as a backstop — only called upon if the applicant (buyer) fails to fulfil their contractual obligation. Used as a performance or payment guarantee.
A direct bank-to-bank electronic transfer of funds using the SWIFT network. The simplest and fastest payment method — but with the least protection for both parties.
A neutral third party holds the buyer's funds and only releases them to the seller once agreed conditions are verified. Provides strong protection for both sides without the complexity of a bank LC.
Shipping documents are held by a bank and only released to the buyer against payment (D/P) or against a signed acceptance of a bill of exchange (D/A). Governed by ICC URC 522.
Verified trade finance and payment service providers used in international commodity transactions. Always conduct your own due diligence before engaging any financial services provider.
The most widely used independent escrow service for online and B2B transactions. Licensed and regulated. Used for commodity, domain, software and services transactions globally.
Visit Escrow.com →Independent UK-based platform connecting businesses with DLC, SBLC, invoice finance and trade finance solutions. Resources, broker network and educational guides for SME traders.
Visit TFG →The global backbone for international bank-to-bank messaging. All T/T wire transfers, LCs and guarantees flow through SWIFT. Verify bank SWIFT/BIC codes before sending any funds.
Verify BIC Codes →Publisher of UCP 600 (DLC rules), ISP98 (SBLC rules), URC 522 (CAD rules) and Incoterms 2020. The ICC arbitrates international trade disputes and sets the global standards your contracts reference.
Visit ICC →HSBC offers Letters of Credit, SBLCs, trade guarantees and supply chain finance solutions globally. One of the most widely used trade finance banks in commodity sectors.
HSBC Trade Finance →Leading trade finance bank with strong presence across Africa, Asia and the Middle East — key regions for commodity origin countries. Specialises in structured commodity finance and LCs.
Standard Chartered Trade →UK-based trade finance solutions for import and export LCs, guarantees and documentary collections. Strong SME support and UK export focus.
Lloyds Trade Finance →The UK's official export credit agency. Provides government-backed guarantees, insurance and direct lending to help UK exporters access trade finance. Free to apply.
Visit UKEF →Use these scenarios to quickly identify the right payment structure for your deal.
Our Sales & Purchase Agreement (SPA), LOI, BCL and 9 other professional templates are pre-drafted to accommodate DLC, SBLC, T/T, Escrow and CAD payment terms — with the correct clauses for each method already built in.