Common Sourcing Terms

The shorthand you'll see constantly in supplier communication, quotes, and contracts — defined plainly.

MOQ — Minimum Order Quantity

The smallest quantity a factory will accept for an order, often tied to the minimum run size that makes production efficient for them.

OEM — Original Equipment Manufacturer

In sourcing context, a factory that manufactures a product to your specifications and branding, as opposed to selling you their own pre-existing design.

ODM — Original Design Manufacturer

A factory that designs and manufactures a product which you then brand and sell as your own — you're buying an existing design, not commissioning a custom one.

RFQ — Request for Quote

A formal inquiry sent to one or more suppliers asking for pricing and terms on a specified product and quantity.

T/T — Telegraphic Transfer

An international bank wire transfer, the most common payment method in China sourcing, typically structured as a deposit before production and a balance before or against shipping documents.

L/C — Letter of Credit

A bank-issued payment guarantee that releases funds to the seller only once specified documentation (proving shipment occurred as agreed) is presented. More secure than a straight wire transfer but more complex and costly to set up.

AQL — Acceptable Quality Level

A statistical sampling standard used in quality inspections, defining how many defects in a random sample are tolerable before a shipment is considered to have failed inspection.

FCL — Full Container Load

An ocean freight shipment that fills, or rents the entirety of, one shipping container — as opposed to sharing container space with other shippers.

LCL — Less than Container Load

An ocean freight shipment that shares container space with other shippers' cargo, more economical at lower volumes but slower and with more handling.

Lead Time

The time between placing an order (or paying a deposit) and the goods being ready for shipment — distinct from transit time, which is the additional time for the shipment to actually arrive.

Tooling

The molds, dies, or jigs custom-made to produce your specific product, usually paid for separately from unit price and a common point of dispute over ownership if not addressed in writing.

Chargeback

A cost deduction a buyer applies against payment owed to a supplier, typically to cover the cost of correcting a quality or compliance failure — should be defined explicitly in the purchase agreement, not improvised after the fact.

Trading Company

A company that sources from one or more factories and resells to buyers, rather than manufacturing directly. See how to find a manufacturer for why this distinction matters.