Trade terms, in plain words

Buying and ordering

MOQMinimum order quantity#: The smallest quantity a factory accepts for one product. It depends on materials, colours and customization; a trial order often starts above it.
RFQRequest for quotation#: Your request for a price: product, quantity, specifications, packing and destination. The clearer it is, the more accurate the quotation.
PIProforma invoice#: The document that fixes the order before production: product, specifications, quantity, price, payment and delivery terms. You pay the deposit against it.
POPurchase order#: The buyer's written order. Many importers send a PO; others simply sign the proforma invoice.
OEMOriginal equipment manufacturer#: The factory makes the product to your design or with your brand. You own the design; the factory supplies production.
ODMOriginal design manufacturer#: The factory's own design, sold under your brand with small changes such as colour, logo or packaging. Faster and cheaper to start.
Golden sampleApproved sample#: The sample you approve before production, signed or sealed. Production and inspection are checked against it.
Lead timeProduction time#: Days from deposit (and approved sample) until the goods are ready to ship. Shipping time comes on top.

EXWEx Works#: You collect the goods at the factory and handle everything else, including export clearance in China. Rarely practical for a first import.
FCAFree Carrier#: The seller clears the goods for export and hands them to your carrier at an agreed place, such as a warehouse in China.
FOBFree On Board#: The seller delivers the goods on board the ship at the port in China, export-cleared. You pay sea freight, insurance and everything after that.
CFRCost and Freight#: Like FOB, but the seller also pays the sea freight to your port. The risk still passes to you once the goods are on board in China.
CIFCost, Insurance and Freight#: The seller pays freight and basic insurance to your port. You handle unloading, customs, taxes and delivery inland.
DAPDelivered At Place#: The seller delivers to an agreed place in your country, ready for unloading. You pay import duties and taxes.
DDPDelivered Duty Paid#: The seller delivers to your door with duties and taxes paid. Simple for you, but it needs a partner able to import in your country, so it is not always possible.
IncotermsInternational Commercial Terms#: Standard rules from the International Chamber of Commerce that say who pays for what and where the risk passes. Always write the version, e.g. FOB Shanghai Incoterms 2020.

FCLFull container load#: A whole container for your goods only. Usually cheaper per m³ than LCL from roughly 15 m³ upwards.
LCLLess than container load#: Your goods share a container with other shippers and are charged per m³. Good for small first orders; handling at both ends adds a few days.
20GP / 40GP / 40HQContainer sizes#: 20-foot and 40-foot standard containers, and the 40-foot high cube, about 30 cm taller. In practice they load about 28, 58 and 68 m³.
CBM / m³Cubic metre#: The unit for cargo volume: length × width × height of a carton in metres, times the number of cartons.
Freight forwarderFreight agent#: The company that books space on ships, arranges pickup and documents, and coordinates with the shipping line.
B/LBill of lading#: The shipping line's document for the cargo. Whoever holds the original (or a telex release) can collect the goods.
Telex releaseReleased bill of lading#: The originals are surrendered in China and the goods are released at destination without paper. Usually done once the balance is paid.
ETD / ETAEstimated departure / arrival#: The planned dates the ship leaves China and arrives at your port. Shipping lines may change them.
Demurrage / detentionContainer overtime charges#: Daily charges when a container stays in the port (demurrage) or outside it (detention) beyond the free days. Have your documents ready before arrival.

HS codeTariff classification#: The international code for a product. The first six digits are shared worldwide; your country adds more. It sets the duty and any permits.
Import dutyTariff#: The tax on imported goods, usually a percentage of the CIF value. It depends on the HS code and on any trade agreement.
VAT / IVAValue-added tax#: Charged on imports in addition to the duty, usually on CIF plus duty. In most countries a registered company can recover it.
Certificate of originOrigin certificate#: Proves the goods were made in China. Under a trade agreement it can lower your duty, sometimes to zero; it must be issued before the goods arrive.
FTAFree trade agreement#: A treaty that lowers duties between countries. China has agreements with Chile, Peru, Costa Rica and Ecuador, among others.
Customs brokerCustoms agent#: The licensed company that classifies your goods, pays duties and clears them through customs in your country. Talk to them before you order.
CI / PLCommercial invoice and packing list#: The invoice states the value; the packing list states cartons, weights and volumes. Customs checks both against the goods.
Landed costTotal cost in your warehouse#: FOB price plus freight, insurance, duty, taxes, port charges, broker and inland transport. The number to compare with a local supplier.

AQLAcceptable quality limit#: A sampling standard (ISO 2859-1) that says how many pieces to check and how many defects are acceptable. Common levels: 0 critical, 2.5 major, 4.0 minor.
PSIPre-shipment inspection#: Inspection when production is finished and at least most goods are packed. You pay the balance after seeing the report.
DUPRODuring-production inspection#: A check when part of the order is made, to catch problems while they can still be fixed.
Critical / major / minorDefect classes#: Critical: unsafe or illegal. Major: the product fails or would be returned. Minor: a small flaw that does not stop use.
Third-party inspectionIndependent inspection#: An inspection company that works for you, not for the factory, and sends you its own report.

T/TTelegraphic transfer#: An international bank transfer, the usual way to pay a supplier in China. Allow one to three working days.
Deposit / balanceSplit payment#: A typical first order: 30% deposit to start production and 70% balance after inspection, before shipment.
L/CLetter of credit#: Your bank promises to pay the supplier once the agreed documents are presented. Secure but slower and more expensive; mostly used for large orders.
SWIFT / BICBank code#: The international code of the receiving bank. Check that the account name matches the supplier's company name exactly.
Bank-detail fraudBusiness e-mail compromise#: Fraudsters copy a supplier's e-mails and send new bank details. Never pay to new details received by e-mail without confirming by phone or video.