Stepping into the world of international trade can feel like learning a new language. Acronyms, shipping jargon, and manufacturing terms are thrown around constantly. If you don’t know the difference between an OEM and an ODM, or EXW and FOB, you could face costly misunderstandings.
To help you navigate these waters, SourcePilot Global has compiled this comprehensive China sourcing glossary. Bookmark this page as your ultimate cheat sheet for supply chain communication.
Manufacturing & Production Terms
- OEM (Original Equipment Manufacturer): A factory that manufactures a product entirely according to the buyer’s custom specifications and designs.
- ODM (Original Design Manufacturer): A factory that has pre-designed products that buyers can purchase and rebrand (white-label) as their own with minimal modifications.
- MOQ (Minimum Order Quantity): The lowest number of units a factory is willing to produce or sell in a single order.
- Tech Pack: A detailed document containing all specifications for a product, including materials, dimensions, CAD drawings, and packaging requirements.
- Golden Sample: The final, approved prototype that serves as the benchmark for all subsequent mass production.
- Lead Time: The total time it takes from placing an order to having the goods finished and ready for shipment.
Quality Control & Compliance
- QC (Quality Control): The process of inspecting products to ensure they meet the agreed-upon standards before they are shipped.
- AQL (Acceptable Quality Limit): A statistical measurement used during inspections to determine the maximum number of defective units allowed in a batch before the entire order is rejected.
- PSI (Pre-Shipment Inspection): An inspection conducted when production is 80-100% complete, right before the goods are packed for shipping.
- NNN Agreement (Non-Disclosure, Non-Use, Non-Circumvention): A legally binding contract drafted for Chinese jurisdiction to protect a buyer’s intellectual property from being stolen or copied by the factory.
Shipping & Logistics (Incoterms)
- EXW (Ex Works): The buyer is responsible for all shipping costs and risks from the moment the goods leave the factory doors.
- FOB (Free on Board): The supplier pays for transportation to the port and loading the goods onto the ship. Once on the ship, the responsibility transfers to the buyer.
- CIF (Cost, Insurance, and Freight): The seller pays for the freight and insurance to deliver the goods to the buyer’s destination port.
- DDP (Delivered Duty Paid): The supplier handles everything—shipping, insurance, and import duties—delivering the goods directly to the buyer’s warehouse.
- Bill of Lading (B/L): A legal document issued by a carrier to a shipper that details the type, quantity, and destination of the goods being carried. It serves as a receipt of shipment.
Financial & Payment Terms
- T/T (Telegraphic Transfer): A standard international bank wire transfer, commonly used to pay Chinese suppliers (typically 30% upfront, 70% before shipment).
- L/C (Letter of Credit): A secure payment method where the buyer’s bank guarantees payment to the supplier once specific shipping documents are presented.
- PI (Proforma Invoice): A preliminary bill sent to buyers in advance of a shipment or delivery of goods, outlining the terms of the sale.
Conclusion
Understanding this China sourcing glossary is the first step toward becoming a savvy importer. Clear communication reduces errors and builds stronger relationships with your suppliers. If you need expert guidance navigating your next import order, the team at SourcePilot Global is here to help.
