Pricing and payment terms
FOB (Free On Board): price covering goods and delivery to the export port, not including freight onward. CIF (Cost, Insurance, Freight): price including freight and insurance to your destination port. EXW (Ex Works): price covering only the goods at the factory door — buyer arranges everything else.
Order and production terms
MOQ (Minimum Order Quantity): the smallest order size a factory will accept per design. OEM: factory produces to a buyer-supplied design. ODM: buyer customizes an existing factory design. Lead time: the time from confirmed order to finished production, not including freight.
Shipping and customs terms
LCL (Less than Container Load): shared container space, priced by volume. FCL (Full Container Load): a dedicated container for one buyer's order. HS code: the international code classifying goods for customs and determining duty rate. Bill of lading: the shipping document serving as proof of the freight contract and title to the goods.
Quality and compliance terms
AQL (Acceptable Quality Limit): a statistical sampling standard used to define how many defects in an inspected sample are acceptable before a shipment fails. Pre-shipment inspection: a final quality check before goods are loaded. Chain of custody: the documented trail proving a material's certified origin, relevant to certifications like FSC.
Commercial and payment terms
Purchase order (PO): the buyer's formal instruction to supply, which together with the specification forms the contract. Proforma invoice (PI): the factory's document setting out price, terms and banking details before an order is placed. Telegraphic transfer (TT): an international bank wire, the most common payment method on Chinese furniture orders. Letter of credit (LC): a bank undertaking to pay against compliant documents, offering more protection at more cost and complexity. Validity period: how long a quoted price stands before the factory may revise it.
Container and loading terms
CBM (cubic metre): the unit of volume used to price LCL shipments. Chargeable volume: the greater of a shipment's actual volume and a weight-to-volume conversion, which is what an LCL invoice is calculated on. High cube (HC): a container around 30 cm taller than standard, often decisive for tall furniture. Dunnage: loose packing material used to brace cargo and stop it shifting. ISPM 15: the international standard requiring solid-wood packaging to be heat-treated and stamped to prevent pest transfer. Desiccant: a moisture-absorbing material hung in a container to control condensation.
Origin, duty and destination charges
Certificate of origin: the document evidencing where goods were produced, used to claim preferential duty rates. Form E: the certificate of origin for the ASEAN–China Free Trade Area, which can reduce or remove duty on Chinese-origin goods entering ASEAN markets. CIF valuation: the customs value based on goods plus insurance and freight, commonly the base for calculating duty. VAT / GST: the consumption tax applied by the destination country, normally on the duty-paid value. Free time: the number of days a container may sit at the terminal before charges begin. Demurrage: the daily charge once a container overstays inside the terminal. Detention: the equivalent charge for holding the container outside it.
Production and inspection terms
Pre-production sample: a full sample made before bulk production begins, approved in writing as the standard every subsequent unit is measured against. Mid-line inspection: a check during production, while problems can still be corrected cheaply. Critical / major / minor defect: the standard grading of findings, from a safety or structural failure down to a cosmetic mark. Rework: correcting non-conforming goods, normally at the factory's cost when the fault is theirs. Attic stock: spare units held back at order time to replace damaged items after installation — particularly relevant to hospitality projects.
Which terms actually matter most
Most of this vocabulary is useful background, but a handful of terms decide money. The Incoterm determines where cost and risk transfer. The specification determines what you receive. The certificate of origin determines what you pay in duty. Free time and demurrage determine what a delay costs you at the port, and the inspection standard determines whether a shipment was acceptable or not.
If you establish those five explicitly, on paper, before placing an order, you have removed most of the ground on which sourcing disputes are normally argued.