When purchasing an automated forklift fleet from China, payment structure is one of the most important commercial risks to address before production begins. Unlike buying a standard warehouse product from local inventory, an AGV project may involve engineering customization, software configuration, factory testing, international shipping, installation, and site acceptance.
For this reason, experienced buyers usually try to connect payments to measurable project milestones rather than simply paying a large deposit and the remaining balance before shipment.
A structure such as 40/50/10 can be used in some B2B automation transactions, but it should not be treated as a universal Chinese AGV payment standard. The more important question is whether each payment is connected to a clearly defined deliverable that the buyer can independently verify.
Key procurement principle: A strong AGV payment schedule should reduce the buyer's exposure as the project progresses. The supplier receives funding to manufacture the equipment, while the buyer retains enough contractual leverage to address failed FAT, incomplete documentation, shipment delays, or unsuccessful SAT.
A 40/50/10 structure is commercially possible, but there is no single payment ratio that applies to all Chinese automated forklift projects.
The first 40% might be requested as a production deposit, the next 50% before shipment after factory acceptance, and the final 10% after installation or site acceptance. However, another supplier may propose 30/60/10, 30/50/20, 20/60/20, or another milestone arrangement.
The percentage itself is less important than the timing of the payment and the conditions attached to it.
| Example Milestone | Example Payment | Buyer Protection |
|---|---|---|
| Contract signing / production start | 20–40% | Funds initial procurement and production |
| FAT completion | 40–60% | Buyer verifies equipment before shipment |
| Shipment | Potentially part of balance | Links payment to export readiness |
| SAT / final acceptance | 5–20% | Retains leverage until the system performs on site |
For a customized fleet, retaining some payment until successful SAT can be particularly important because passing a factory test does not necessarily prove that the AGVs will perform correctly in the customer's warehouse.
FAT and SAT serve different purposes. Factory Acceptance Testing verifies that the equipment meets agreed specifications before shipment. Site Acceptance Testing verifies that the delivered system works under the actual operating conditions at the customer's facility.
For an automated forklift fleet, FAT may cover navigation, lifting, pallet handling, safety functions, fleet dispatching, charging, alarms, and agreed software functions. SAT can additionally verify warehouse-specific conditions such as rack locations, floor conditions, Wi-Fi, traffic rules, WMS interfaces, elevator interfaces, and representative pallet loads.
Do not define “FAT passed” as simply “machines powered on and moved.” The contract should identify measurable acceptance criteria, test procedures, permitted exceptions, retest procedures, and the consequences of a failed test.
Potentially, but the availability and structure of an escrow arrangement depend on the banks, jurisdictions, transaction structure, currencies, and willingness of both parties to participate.
A buyer should not assume that a normal corporate bank account automatically provides escrow protection. A genuine escrow arrangement normally requires a third-party structure in which funds are held under agreed release conditions.
For an international AGV transaction, the buyer may explore options involving a bank or other professionally structured escrow service. The exact mechanism should be reviewed by the buyer's bank, legal counsel, and trade-finance team before money is transferred.
Exact amount held in escrow
Party responsible for escrow fees
Specific release conditions
Documents required before release
FAT acceptance requirements
SAT acceptance requirements
Procedure for disputed test results
Deadline for responding to a payment-release request
Procedure if the supplier fails to meet a milestone
Procedure for returning or reallocating disputed funds
The escrow mechanism should support the commercial contract rather than replace it. The purchase agreement still needs to define what constitutes successful delivery and acceptance.
For a custom AGV fleet, payment should ideally be linked to observable project milestones rather than dates chosen solely by the supplier.
Before major production begins, the buyer can approve the final technical specification, vehicle configuration, lift height, payload, navigation method, safety architecture, battery configuration, and software requirements.
This prevents the supplier from manufacturing equipment based on an outdated quotation or preliminary specification.
The buyer or appointed inspection party can verify that the agreed number of vehicles has been assembled and that major mechanical components correspond to the approved specification.
The fleet should demonstrate the agreed functions, including traveling, lifting, pallet handling, safety functions, charging, fleet dispatching, alarms, and other project-specific requirements.
The supplier should provide the agreed FAT records, equipment list, serial numbers, software version, drawings, manuals, inspection records, and other required documentation before the corresponding payment is released.
Before shipment, the buyer can verify packaging, quantities, serial numbers, accessories, spare parts, documentation, and the final packing list.
A retained amount can remain unpaid until the fleet satisfies the agreed SAT criteria at the customer's facility.
A useful rule: Every payment milestone should answer three questions: What has the supplier delivered? How will the buyer verify it? What happens if the milestone is not achieved?
Late-delivery provisions are usually negotiated rather than determined by one universal industry standard. The contract should clearly identify the contractual delivery date, permitted extensions, supplier-caused delays, buyer-caused delays, force majeure provisions, and the consequences of missing the agreed date.
A common commercial approach is to establish a daily or weekly liquidated-damages mechanism subject to a negotiated maximum amount. The actual rate should be commercially and legally reviewed for the transaction rather than copied blindly from another contract.
| Contract Element | What to Define |
|---|---|
| Contract delivery date | Specific date or clearly defined delivery milestone |
| Grace period | Whether any delay period is permitted before damages begin |
| Liquidated damages | Negotiated daily or weekly amount/rate |
| Maximum liability | Agreed cap where appropriate |
| Long-stop date | Date after which termination or other remedies may apply |
| Excusable delay | Clearly defined events outside the supplier's reasonable control |
This is an important distinction for an AGV project. “Shipment completed” does not necessarily mean “project delivered.”
If the commercial objective is to have a functioning automated fleet in the warehouse, the contract should distinguish between equipment completion, shipment, arrival, installation, commissioning, and final acceptance.
Otherwise, a supplier could technically ship the equipment on time while the customer continues waiting for software commissioning, integration, troubleshooting, or site acceptance.
Define the milestone carefully: If your project depends on the AGVs being operational in the warehouse by a particular date, consider defining the contractual completion milestone around successful commissioning or SAT rather than shipment alone.
The contract should establish the procedure before the problem occurs. A failed FAT should not automatically create a dispute over whether the buyer is entitled to withhold the next payment.
A practical procedure can include:
Document the failed acceptance criteria.
Identify whether the failure is a supplier responsibility or a buyer-caused condition.
Define a corrective-action period.
Repeat the failed test after correction.
Require updated documentation where the correction changes the system.
Release the milestone payment only after the agreed acceptance condition is satisfied.
This is particularly important for customized vehicles because a failed test may involve hardware changes, software changes, navigation adjustments, or safety-system revalidation.
There is no single correct structure, but the following model illustrates how a buyer can align commercial exposure with project progress:
| Stage | Illustrative Share | Release Condition |
|---|---|---|
| Contract and engineering approval | 30% | Final technical specification approved |
| Production completion / FAT | 50% | Agreed FAT successfully completed |
| Shipment readiness | 10% | Packing, documentation and shipment conditions satisfied |
| SAT retention | 10% | Agreed site acceptance criteria achieved |
This is only an example, not a universal market standard. For a large fleet, a buyer may negotiate a different structure depending on the supplier's financial strength, project size, customization level, installation responsibility, and relationship between the parties.
For an international Chinese AGV purchase, the commercial contract should address more than the payment percentages.
Exact equipment configuration
Quantity and serial-number requirements
Engineering deliverables
FAT procedure and acceptance criteria
SAT procedure and acceptance criteria
Payment-release conditions
Escrow mechanism where applicable
Shipping and delivery responsibilities
Late-delivery liquidated damages
Long-stop delivery date
Warranty start date
Spare-parts obligations
Software licensing and support
Documentation requirements
Procedure for failed acceptance tests
Termination and refund provisions where appropriate
The strongest payment structure is measurable, not merely conservative. Holding back 10% is not automatically better than holding back 5% or 20%. The value comes from defining exactly what must happen before that money is released.
A buyer does not necessarily need to demand an unusually low deposit. A better strategy is to distribute commercial risk across engineering approval, manufacturing progress, FAT, shipment readiness, and SAT.
The supplier should have enough funding to manufacture the equipment, while the buyer should retain meaningful leverage until the equipment has demonstrated compliance with the agreed technical and operational requirements.
For higher-value AGV projects, buyers should also consider having the payment terms, escrow arrangement, liquidated-damages language, governing law, dispute-resolution mechanism, and import responsibilities reviewed by qualified legal and trade professionals familiar with the transaction jurisdictions.
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