Sourcing & Shipping Glossary
Plain-language definitions for the terms you'll hear from suppliers, freight forwarders, and customs brokers.
Bill of Lading (B/L)
A legal shipping document issued by the carrier that serves as a receipt for your cargo, a contract of carriage, and (for an original B/L) a document of title needed to release the goods at the destination port.
Certificate of Origin
An official document certifying which country your goods were manufactured in. It's often required by customs to determine the correct duty rate and to confirm eligibility for any applicable trade agreements.
CIF (Cost, Insurance, and Freight)
An Incoterm where the seller pays for the cost of goods, marine insurance, and freight to deliver the shipment to your destination port. It's convenient for smaller or first-time importers, though it typically costs more than arranging your own freight under FOB terms.
DDP (Delivered Duty Paid)
An Incoterm where the seller handles everything — freight, insurance, customs clearance, and import duties — and delivers the goods to your door. It's the simplest option for the buyer but usually the most expensive per unit, since all logistics costs are built into the price.
EXW (Ex Works)
An Incoterm meaning the buyer is responsible for collecting the goods directly from the factory and handling all transport, export clearance, and duties from there. It gives you the most control over logistics but requires more coordination, usually through a freight forwarder or sourcing agent.
FCL (Full Container Load)
A shipping method where you book an entire container for your shipment, whether or not it's completely full. FCL is faster and safer than LCL for larger orders, since your goods aren't handled alongside other shippers' cargo.
FOB (Free On Board)
An Incoterm meaning the seller's responsibility ends once goods are loaded onto the shipping vessel at the origin port. As the buyer, you arrange and pay for ocean freight, insurance, and import duties from that point forward. FOB is the most common term used for sourcing from China.
Freight Forwarder
A company that arranges the transportation of your goods from the factory to your destination, handling booking, customs documentation, and coordination between shipping lines, ports, and customs brokers.
HS Code (Harmonized System Code)
A standardized numerical code used internationally to classify traded products for customs purposes. Your HS code determines the import duty rate and any regulatory requirements in your country, so getting it right avoids customs delays and unexpected fees.
Incoterms
A set of internationally recognized trade terms (like FOB, CIF, EXW, and DDP) published by the International Chamber of Commerce that define exactly where the seller's responsibility ends and the buyer's begins for cost, risk, and logistics.
L/C (Letter of Credit)
A payment method where your bank guarantees payment to the supplier once specific shipping documents are presented, reducing risk for both sides on larger orders. L/Cs are more complex and costly to set up than T/T, so they're typically used for high-value first-time transactions.
LCL (Less than Container Load)
A shipping method where your goods share a container with other importers' cargo, rather than filling a container yourself. It's cost-effective for smaller orders but takes longer than FCL, since your goods are consolidated and deconsolidated at each end.
Lead Time
The total time from placing a confirmed order to the goods being ready for shipment, covering production and any pre-shipment inspection. Lead time doesn't include ocean or air freight transit time, which is calculated separately.
MOQ (Minimum Order Quantity)
The minimum quantity a supplier is willing to manufacture or sell in a single order. MOQs vary widely by product complexity, from as low as 50 units for simple accessories to several thousand for custom electronics. A sourcing agent can often negotiate a lower MOQ for a first-time or trial order.
ODM (Original Design Manufacturer)
A factory that designs and manufactures a product which you then brand and sell as your own. ODM is common for standardized product categories where the factory already has a proven design, letting you launch faster with lower development cost.
OEM (Original Equipment Manufacturer)
A factory that manufactures products to your specifications and branding, without designing the product itself. Most sourcing from China for private-label or branded products goes through OEM factories.
QC Inspection (Quality Control Inspection)
A physical check of your goods, usually performed at the factory before shipment, to verify quantity, specifications, and workmanship match your order. A pre-shipment inspection catches defects while there's still time to fix them, before goods leave the factory.
Sourcing Agent
A representative based in the manufacturing country who finds suppliers, negotiates pricing and MOQs, oversees quality inspection, and manages logistics on your behalf, without you needing to visit factories yourself.
T/T (Telegraphic Transfer)
A bank-to-bank wire transfer, the most common payment method for sourcing from China. A typical arrangement is a 30% deposit by T/T before production starts and the remaining 70% by T/T before shipment, once goods pass inspection.
Trade Assurance
An order protection service (most commonly associated with Alibaba) that holds your payment in escrow until the supplier ships goods meeting the agreed specifications, giving buyers a way to dispute and recover payment if something goes wrong.