Sourcing Terms Glossary

These terms appear on quotations, inspection reports, freight offers, and customs documents. Read them with the named place, product specification, and payment trigger. A short acronym does not replace the rest of the agreement.

AQL

Acceptance Quality Limit. It is used with a sampling plan to set acceptance and rejection numbers for a lot.

CBM

Cubic meters of cargo. Sea quotes are often priced on CBM or weight, whichever is greater.

DDP

Delivered Duty Paid. Under this Incoterms rule, the seller handles import clearance and duties at the named destination.

EXW

Ex Works. You take the goods at the factory door and own export and freight.

FOB

Free On Board. The seller delivers onto the vessel; you own ocean freight and insurance.

HS code

Harmonized System number that drives duty. Get it wrong and the entry is delayed or re-rated.

Incoterms

ICC rules that split cost and risk between buyer and seller at a named place.

L/C

Letter of Credit. A bank promise to pay if documents match. Common on larger first orders.

MOQ

Minimum order quantity the factory will run. Often negotiable after a paid sample.

ODM

Original Design Manufacturer. The buyer starts from a supplier design and may add branding or agreed changes.

OEM

Original Equipment Manufacturer. The supplier builds to the buyer design or tooling.

T/T

Telegraphic transfer. Typical pattern is deposit, then balance against documents or inspection.

Terms that affect the quote

MOQ describes the smallest run the supplier will accept, but it may change with material, color, decoration, or packaging. EXW, FOB, and DDP describe different delivery obligations. Always write the named factory, port, or destination beside the Incoterm.

CBM and packed weight affect freight. The HS code and declared product details affect customs treatment. Put those items into the landed cost calculator rather than comparing a factory unit price with an incomplete delivered quote.

Terms that affect release

AQL belongs to the inspection plan. It does not mean that every unit was checked or that the lot has no defects. T/T and L/C describe payment methods, but the order should also state when the balance becomes due and which documents or inspection result control that payment.

Read the quality control guide for AQL and sampling. The sourcing agent guide explains how these terms appear in an actively managed order.