/ Glossary
China Sourcing Glossary
The B2B terms buyers actually run into when sourcing from China — in plain English, from a buyer's point of view. Bookmark it for your next RFQ.
- MOQ — Minimum Order Quantity
- The smallest quantity a factory will accept for one order, set so the run covers setup, tooling and material costs. Stock items have low MOQs; custom OEM products carry higher ones.
- OEM — Original Equipment Manufacturer
- A factory that makes a product to your own design and spec, which you sell under your own brand.
- ODM — Original Design Manufacturer
- A factory that designs and makes a product itself, which you can rebrand and order with minor tweaks — faster and cheaper than OEM, but less differentiated.
- Incoterms
- ICC-standardized trade terms that define who pays for and controls shipping, insurance and customs at each stage between seller and buyer.
- EXW — Ex Works
- Buyer takes cost and risk from the factory door onward, including export clearance and all freight. Lowest commitment for the seller.
- FOB — Free On Board
- Seller delivers goods, export-cleared, onto the vessel at origin port; buyer pays ocean freight onward. The most common term for China sea shipments.
- CIF — Cost, Insurance and Freight
- Seller pays freight and insurance to the destination port; risk still passes to the buyer once goods are loaded at origin.
- DDP — Delivered Duty Paid
- Seller delivers to your door with all freight, duties and customs paid. Most convenient, but most expensive and least transparent on the cost breakdown.
- T/T — Telegraphic Transfer
- A bank wire. The standard China arrangement is a deposit by T/T (often 30%) with the balance before shipment.
- L/C — Letter of Credit
- A bank guarantee that pays the seller once documented shipping conditions are met. Protects both sides on larger orders, but adds fees and paperwork.
- RFQ — Request for Quotation
- A structured brief specifying product, materials, tolerances, quantity and packaging so quotes come back comparable rather than guesswork.
- BOM — Bill of Materials
- The itemized list of every component and material in a product, used to cost, source and control quality of an OEM build.
- QC — Quality Control
- Inspection against agreed standards. Common checkpoints: during production (DUPRO) and pre-shipment (PSI) before the balance is released.
- AQL — Acceptable Quality Limit
- An ISO 2859 sampling standard for how many defects are tolerable in a batch, e.g. AQL 2.5 for major defects on consumer goods.
- Lead time
- Time from order confirmation and deposit to goods being ready to ship — tooling, production and QC. It excludes ocean or air transit.
- Tooling / Mould
- The custom moulds, dies or jigs built to manufacture a specific part. Usually a one-off upfront cost owned or amortized by the buyer.
- HS Code
- The Harmonized System code that classifies a product for customs worldwide and sets the import duty you pay at destination.
- Trading company vs Factory
- A factory manufactures in-house; a trading company resells other factories' goods. Trading firms add flexibility but also margin and a layer between you and production.
- Pre-production sample
- A sample made on the actual production line and materials before mass production, approved as the quality benchmark for the full run.
- Greater Bay Area (GBA)
- The Pearl River Delta cluster — Shenzhen, Foshan, Dongguan, Guangzhou, with Hong Kong as the finance and logistics endpoint — China's densest supply chain for electronics, furniture, display and consumer goods.
Want these terms in context? The Journal has full guides on payment terms, Incoterms, factory verification and more.
Read the Journal →