The goods are still at the factory. An inspection report has arrived, and the supplier is asking for the balance so it can arrange dispatch. You do not want to lose the shipment slot. You also do not want to discover, after transferring the money, that the report left an important test unfinished.
My starting point is to put the complete report next to the payment clause. A screenshot of the word PASS leaves too much out. So does the sentence "we always pay after inspection" if the signed documents say something different. The immediate task is to establish what this payment requires, not to reopen every term of the order.
Read what passed, not just the result
Start with the order number, models, quantities, production location and inspection date. Then look at the approved specification or sample used for comparison. If the inspector worked from an older drawing, a favourable result against that drawing does not answer whether the goods meet the revised order.
A pre-shipment inspection (PSI) commonly involves sampling. QIMA's Acceptable Quality Limit (AQL) guidance describes a sampling plan using sample sizes and acceptance or rejection thresholds. Passing that plan does not mean every unit was examined, every unit is defect-free, or the actual defect rate of the whole shipment has been established. The chosen checks and defect classifications matter.
I would read the remarks before authorising payment: were all ordered models available? Was a functional test completed? Were packaging or labelling checks deferred? A test marked "not performed" needs an explanation. Where the report says nothing about an important requirement, ask the inspector whether it was checked and where the result is recorded. Silence is not confirmation, but neither is it proof that no check occurred.
QIMA's Conditions of Service, Annex 1, describe sampling limitations and expressly distinguish a pre-shipment report from evidence that shipment took place. These are that provider's terms, not a universal description of every inspection engagement. They illustrate why the actual scope of work belongs in the buyer's file.
Keep three records separate: the inspection report, the contract's payment trigger, and the evidence of dispatch. A report dated Tuesday does not establish which cartons were loaded on Friday. Where the order warrants it, discuss batch identification and loading checks with the inspector or forwarder. If payment is against shipping documents, identify the exact documents and their required status. A booking confirmation and an on-board transport document answer different questions. Do not demand a post-shipment document as a new condition under an unchanged pre-shipment payment term.
A factory audit is different again. An earlier review of the production site is not inspection of this consignment.
Is the balance actually due?
Suppose the contract makes the balance payable after an independent inspection meeting an identified specification, with listed failures corrected and reinspected. The question is whether those conditions have been satisfied. A supplier's summary of the result cannot replace the agreed evidence. Equally, an unimportant remark does not necessarily defeat a condition that has otherwise been met.
The position is less comfortable where the pro forma invoice (PI) says only "30% deposit, 70% before shipment". Those words do not tell you what tests were promised, whether inspection approval is a condition, or how long the buyer has to review the report. Read the rest of the agreement and the correspondence. You cannot simply add "after arrival and testing by my customer" because you now prefer that arrangement. If the balance is due and no defence applies, withholding it may itself be a breach.
That does not mean a buyer must ignore an actual defect. Where Chinese domestic sales law governs, Civil Code Articles 525 and 526 address corresponding refusal of performance where reciprocal or prior obligations remain unperformed or non-conforming. The agreed sequence and affected obligation matter; a defect does not automatically justify holding back the entire balance. Articles 626 and 628 also require attention to the agreed payment arrangements. Civil Code, published by the Supreme People's Court.
A different issue arises if credible evidence suggests the supplier cannot perform. Under Articles 527 and 528, a party required to perform first needs definite evidence of qualifying insecurity to suspend. Notice must be timely, and performance must resume if appropriate security is provided. Suspending without that evidence can attract breach liability. I recommend a written, reasoned notice with delivery evidence; the statutory requirement is timely notification, not invariably a particular written form.
For international sales, first check whether the United Nations Convention on Contracts for the International Sale of Goods (CISG) applies. Do not combine it indiscriminately with domestic rules. Article 58(3) provides an examination opportunity before payment, subject to incompatible agreed payment or delivery procedures. Article 71 permits suspension on specified grounds indicating substantial non-performance, with immediate notice and resumption upon adequate assurance. Neither provision is a general right to delay payment until the buyer feels reassured. CISG text, reproduced by Canada's Department of Justice.
Paying without treating every issue as settled
Payment and acceptance need separate attention. I would look for wording that treats inspection approval, a release-to-ship instruction or payment as final acceptance. A buyer should not click "approved" in a portal without checking what that approval means under the agreed documents. Conversely, payment alone should not casually be described as a waiver of every possible quality claim.
If payment is to proceed with issues still open, write to the contractual seller before or with the transfer. Identify the report and order, the particular defect or uncompleted test, the supplier's promised corrective action and the point that remains disputed. Ask for confirmation of the arrangement. Copying the inspector may be useful, but notifying the inspector is not a substitute for notifying the seller.
A bare "all rights reserved" is not much of a record. A more useful message identifies, for example, the affected batch and the report page describing the issue, then explains what the buyer requires. Do not describe an unperformed test as a proven defect. If payment or shipment is to proceed only on revised terms, obtain agreement rather than assume a one-sided letter changes the contract.
That letter has limits. It cannot automatically undo an agreed acceptance term, revive rights already lost or excuse overdue payment. A general reservation concerning hidden defects is also not a substitute for a specific notice once a defect is discovered. Keep the complete report, attachments, photographs and exchanges; preserve the connection between the inspected goods and the delivered batch.
Under Chinese domestic law, Articles 620 to 622 govern inspection and notice. An agreed inspection period, or otherwise timely inspection and notice within a reasonable period, matters. Article 621's two-year rule is not permission to wait two years after discovering a defect; guarantee periods and seller knowledge can affect the rules. Article 622 addresses periods too short for comprehensive inspection. Civil Code, Articles 620-622.
Where the CISG governs, Articles 38 and 39 likewise distinguish examination from notice specifying the non-conformity. The two-year limit runs from actual handover, subject to an inconsistent contractual guarantee; reasonable-time notice is still required. Article 40 addresses defects known to the seller, or of which it could not have been unaware, and not disclosed. These are not interchangeable with the domestic rules or with litigation limitation periods. CISG, Articles 38-40.
The real supplier court-case guide shows why the quality evidence and the buyer's response need to be considered together. For this payment decision, the practical point is narrower: arrange arrival checks now, and do not leave a known issue unreported while waiting for the whole shipment to be unpacked or resold.
Agree what happens to the unfinished items
The useful response to an incomplete test is specific. Ask what prevented it, what is needed to complete it, who will do it and when the result will be available. For a confirmed defect, agree the correction and how it will be verified. Then address the payment consequence expressly: does the due date move, is an agreed amount retained, or does payment proceed with a documented remedy? None of those arrangements should be assumed from a friendly message saying "we will fix it".
For a future order, the short phrase "70% before shipment" can be developed into a workable sequence. This deliberately incomplete example illustrates the drafting approach, not a term to send as if it already binds the supplier:
Illustrative wording for negotiation, not an existing right to withhold:
"The balance is due within [agreed number] business days after the buyer receives the complete report from [agreed inspector], identifying this order and confirming compliance with the pre-shipment criteria in Schedule [X]. Items listed in Schedule [Y] must be corrected and verified by [agreed method] before that payment becomes due. The seller will dispatch within [agreed period] after receipt of the balance. Pre-shipment approval and payment do not replace the separate arrival-inspection, defect-notice and warranty provisions in Clause [Z]."
The schedules must do real work: identify the goods, tests, sampling plan, defect criteria and any exceptions. The remaining terms should address a failed inspection, disagreement over results, reinspection costs, delay and remedies if correction fails. For an existing order, any amendment needs the necessary agreement and formalities under the contract and applicable law. A buyer cannot attach this paragraph to a payment email and retrospectively create a retention right.
Payment against specified documents or a negotiated staged release may suit some transactions. Neither is a substitute for defining conformity and notice. The broader supplier contract-review guide covers the rest of that drafting; here, I would keep the review focused on the payment now being requested.
Sometimes the conclusion will be that the balance should be paid on time, with a properly recorded outstanding issue. Sometimes a contractual condition remains unsatisfied. Sometimes the evidence calls for urgent advice on suspension. The report's front page cannot make that decision for you.
Questions before the transfer
Does a passed inspection automatically make the balance due?
Not by itself. Read the agreed payment trigger and any other conditions. If the balance is already due and there is no valid basis to suspend payment, withholding it may put the buyer in breach.
Can I pay while reserving my rights over defects?
A specific written notice can record unresolved defects and the buyer's position. It does not rewrite an agreed acceptance clause, restore expired rights or replace the notices required by the contract and applicable law.
What should I send for a review before paying the balance?
Send the full contract or pro forma invoice, specifications, complete inspection report, supplier's payment request and deadline, payment instructions, and correspondence about unresolved items. I can then confirm the scope, fee and available timing of a focused review.
Sources
- QIMA Conditions of Service: service scope and Annex 1 inspection limitations. Provider terms, not legislation.
- QIMA: Acceptable Quality Limit: sampling, sample sizes and acceptance thresholds.
- Supreme People's Court: Civil Code of the People's Republic of China: Articles 525-528, 543-544, 620-622, 626 and 628.
- Department of Justice Canada: CISG treaty text in the Schedule to the International Sale of Goods Contracts Convention Act: Articles 6, 29, 38-40, 58-59 and 71. Cited for the treaty text, not as a statement that Canadian law governs the transaction.
Sources checked September 11, 2026. The relevant legal framework and any contractual variations must be assessed for the particular sale. This article contains no client case; the drafting example is illustrative.