The short answer

In trade escrow, buyer and supplier agree the terms, the buyer deposits the payment into a secure escrow account, the supplier ships the goods or provides the agreed documents, and once the release conditions are confirmed, the money goes to the supplier. It suits first orders, large orders and any deal where you can't inspect goods before paying. Good release conditions are specific and checkable — for example, a bill of lading, an independent inspection report or confirmed delivery. Escrow is usually simpler than a letter of credit and far safer than paying in advance. Vita Capital's Trade & Import/Export Escrow holds funds in regulated escrow accounts until release conditions are fulfilled, and can handle the currency exchange in the same transaction.

The importer's dilemma

Every cross-border deal faces the same problem. The supplier doesn't want to ship goods and then chase payment from a buyer in another country. The buyer doesn't want to send money and then chase goods from a supplier in another country. Someone has to go first.

If the buyer pays first, the buyer carries the risk of non-delivery, the wrong goods, poor quality or outright fraud. If the supplier ships first, the supplier carries the risk of late payment or none at all. And if both wait for the other, nothing happens and the deal is lost.

Escrow breaks the deadlock by putting a trusted, neutral party in the middle. The buyer's money is committed, so the supplier is confident; the money is protected, so the buyer is confident.

How trade escrow works

1. Agree the terms — buyer and supplier agree the goods, price, currency, shipping terms and the exact conditions for releasing the money.
2. Buyer deposits the funds — into the secure escrow account. The supplier is told the money is there.
3. Supplier delivers — ships the goods, or provides the agreed documents such as a bill of lading or inspection certificate.
4. Funds are released — once the conditions are confirmed, the escrow holder pays the supplier.

These are the four steps Vita Capital describes for its escrow service, with funds "held in regulated escrow accounts, protected until release conditions are fulfilled". If something goes wrong — the goods don't ship, or the documents don't match — the money stays protected while the issue is resolved under the agreement.

Setting good release conditions

The release conditions are the heart of the deal. They should be specific, documented and checkable by a third party. Common conditions for imports:

A general guide. Release conditions are agreed between buyer and supplier and set out in the escrow agreement.

Worked example: a first order from a new supplier

A Bangkok retailer wants to place a first order of US$150,000 with a manufacturer it found at a trade fair. The supplier asks for 30% up front. The retailer is keen, but US$45,000 is a lot to send to a company it has never worked with.

Instead, they agree to use escrow. The terms are US$150,000 for the agreed goods, shipped within 45 days, with 70% released on presentation of the bill of lading and an independent inspection report, and the remaining 30% on customs clearance in Thailand. The retailer deposits US$150,000 into escrow, converting baht to dollars at a quoted rate in the same transaction. The supplier ships and provides the documents, the inspection passes and 70% is released; when the goods clear customs in Thailand, the final 30% follows.

The supplier was paid promptly against clear conditions, and the retailer never had money at risk before the goods were shipped and inspected. Next time, with trust established, they may agree simpler terms.

Where to start

Escrow and currency in one place — and cover for your goods in transit.

Escrow, letters of credit and other payment methods

How escrow compares with the other ways of paying an overseas supplier.

A general guide. Letters of credit operate under the ICC's UCP 600 rules and are paid against documents that comply exactly with the credit.

Escrow or a letter of credit?

Both protect buyer and supplier, but they work differently.

Letter of credit

Your bank promises to pay the supplier when the supplier presents documents that comply exactly with the credit. It's a long-established tool for large trade, but it involves strict documentary requirements, bank fees on both sides, and a credit facility with your bank. Small discrepancies in documents can delay payment.

Escrow

The money itself is held by a neutral party and released when agreed conditions are met. Conditions can be documents, inspections or delivery, and can be tailored to the deal. It's often simpler and quicker to set up, especially for first orders, one-off deals and mid-sized orders — and with Vita Capital, the currency exchange can be handled in the same transaction.

Many businesses use escrow for new or one-off suppliers and letters of credit for very large, regular trade with established partners.

When to use trade escrow

Escrow is most useful for first orders from new suppliers, before trust is established, and for large orders where a deposit alone would put a big sum at risk. It suits suppliers you found online or at trade fairs and know little about, and purchases of machinery and equipment, where inspection or acceptance matters. Exporters use it with new buyers to be sure the buyer's money is committed before they ship. It also helps with deals in unfamiliar countries, where recovering money would be difficult, and with milestone projects, releasing money in stages as work is completed.

Escrow for Thai exporters

Escrow protects sellers too. A Thai exporter selling to a new overseas buyer can ask the buyer to deposit the payment into escrow before production or shipment begins. The exporter knows the money is committed; the buyer knows it won't be released until the goods ship as agreed. For exporters, the key release condition is usually the bill of lading or proof of shipment, so payment follows promptly once goods leave Thailand.

Currency and escrow

Most trade escrow is in the supplier's currency — usually US dollars, but also euros, yen or yuan. That raises two questions: what rate will you convert at, and what if the rate moves between agreeing the deal and paying?

You can convert when you deposit, at a quoted rate, so the escrowed amount is fixed in the supplier's currency, or fix the rate in advance with a forward contract if the deposit will be made later. On larger deals, compare the rate, because a specialist rate can save more than the escrow costs.

With Vita Capital, the currency exchange and the escrow can be handled together. Our guide to forward contracts explains how to fix a rate in advance.

Escrow and shipping terms

International trade uses standard shipping terms — the ICC's Incoterms rules — to say who pays for transport and insurance, and when responsibility for the goods passes from seller to buyer, and your escrow release conditions should fit the terms you've agreed. If the supplier's job ends when the goods are loaded, a bill of lading showing the goods on board is a natural release point. If the supplier delivers to your door, confirmed delivery or customs clearance in Thailand makes more sense. If quality matters most, use an independent inspection before shipment, whatever the shipping terms. And make sure someone is insuring the goods for every stage of the journey.

Getting the shipping terms and release conditions aligned avoids the classic dispute: the supplier says its job is done, while the buyer says the goods haven't arrived.

What happens if something goes wrong

The great advantage of escrow is that, while a problem is sorted out, the money stays safely in the escrow account rather than with one side or the other.

The supplier doesn't ship

The conditions aren't met, so the money isn't released. The escrow agreement sets out when and how the buyer can recover it.

The documents don't match

The release is paused until the discrepancy is corrected or both sides agree how to proceed.

The goods arrive damaged or wrong

If release depends on delivery or acceptance, the money stays in escrow while the parties resolve it — and your goods-in-transit insurance may cover damage.

Buyer and supplier disagree

The agreement should set out a dispute process — for example, an independent inspection, a set period for negotiation, or mediation. Agreeing this at the start avoids deadlock later.

Escrow for milestone and project payments

Escrow isn't only for single shipments. For projects — a fit-out, a custom production run, software development or equipment installation — funds can be deposited up front and released in stages as each milestone is completed and confirmed. The supplier knows the full budget is committed; the buyer pays only for work that's been delivered. Our guide to business and trade escrow fundamentals explains milestone escrow in more detail.

Checking a new supplier before you order

Escrow protects your payment, but it's still worth checking a new supplier before you commit. Confirm the company is registered and that its details match the contract, find out how long it has been trading and who its customers are, and ask for buyers you can speak to as references. Order samples before a large order, arrange a factory visit or audit, in person or through an inspection company, and check that the bank account name matches the company name.

Our guide to international supplier payment risk covers supplier checks in more depth.

What trade escrow costs

Escrow fees are usually quoted per deal and depend on the amount, the complexity of the conditions and the currencies involved; Vita Capital quotes its escrow fees for each transaction. When comparing costs, look at the escrow fee itself and who pays it — under Thailand's Escrow Act, for escrow agents licensed in Thailand, the fee is split equally unless the parties agree otherwise, while for international escrow you agree the split in the contract. The exchange rate is often a bigger cost than the escrow fee, and if an independent inspection is a release condition, that has a cost too. Weigh all this against the alternatives: letter of credit fees, or the money at risk with a deposit.

For a first order where tens of thousands of dollars would otherwise be at risk, escrow is usually well worth the cost.

Setting up trade escrow

Raise escrow with the supplier early, when you're negotiating, and explain that it protects them too. Agree the commercial terms — goods, price, currency, shipping terms and dates — and the release conditions, naming specific documents, inspections or delivery milestones, along with what happens if things go wrong, from delays to disputes and returns. Both parties then provide identification and company documents to open the escrow, and you deposit the funds, converting currency at a quoted rate if needed. Track the shipment, providing or checking documents as they arrive, and once the conditions are confirmed, the funds are released.

Common mistakes

The most common mistake is vague conditions: “goods received in good condition” invites disputes, so name the documents and checks. Never use the supplier's own “escrow”, because an account controlled by the supplier or their agent isn't neutral. Don't ignore the currency, since a poor rate can cost more than the escrow fee, and don't forget insurance — escrow protects your money, not the goods in transit. Agree in advance how disputes will be resolved, and never accept changed bank details by email; always confirm by phone.

Three real-world examples

These are illustrations, not real businesses.

A Chiang Mai café chain buying roasting equipment

The chain ordered €60,000 of roasting machines from a European maker. Escrow released 80% on shipment and 20% after installation and acceptance in Thailand.

A Bangkok electronics importer testing a new factory

For a first US$90,000 order from a new factory, the importer used escrow with release on the bill of lading and an independent inspection. After three smooth orders, they moved to a deposit-and-balance arrangement.

A Phuket exporter selling to a new buyer

Selling furniture to a new buyer overseas, the exporter asked the buyer to deposit the full amount into escrow before production, with release on shipment. Production started with confidence.

Your trade escrow checklist

• Escrow agreed with the supplier during negotiation.
• Goods, price, currency and shipping terms agreed.
• Specific, checkable release conditions written down.
• Dispute process agreed.
• Escrow holder independent of both parties.
• Currency rate quoted or fixed in advance.
• Goods-in-transit insurance in place.
• Documents tracked as the shipment progresses.
• Bank details confirmed by phone.

Questions to ask an escrow provider

Ask any escrow provider how funds are held and protected, which release conditions it can work with and whether funds can be released in stages. Find out what happens if there's a dispute, what the fees are and who pays them, whether it can handle the currency exchange, how long setting up takes, and who your contact will be.

Top tips

Propose escrow early, because it reassures both sides, and make the conditions specific — documents and checks, not opinions. Use a truly neutral holder, release money in stages on larger orders, and handle the currency together with the escrow. Insure the goods as well as protecting the money, move to simpler terms as trust builds, and always confirm bank details by phone.

How we researched this guide

This guide draws on Vita Capital's published escrow solutions (October 2026); ThaiLawOnline on Thailand's Escrow Act B.E. 2551 (2026); MGR Online on Thailand's trade in the first half of 2026 (August 2026); and Krungsri's International Payment tariff (effective 1 July 2026). Our guide to business and trade escrow fundamentals covers business sales and milestone payments. Checked 20 October 2026. This guide is general information, not legal or financial advice; take legal advice on contracts.