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General terms you should know

China Sourcing & Manufacturing Services

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General terms you should know

Baseline terms for international bulk purchases.



If you want to purchase from China, you need to know some basics.

Here are some of them.

B2B vs B2C

  • B2B is an acronym for Business-to-Business. A B2B company is one that sells products (or services) to other businesses, not individual consumers. Popular Chinese B2B sites are: Alibaba, Made-in-China, DHgate, Globalsources, eWorldTrade, HKTDC...
  • B2C stands for Business-to-Consumer. A B2C company only sell products (or services) to customers for their personal use. Popular B2C websites: AliExpress, DHGate, Banggood, DX, Gearbest...

 

OEM (Original Equipment Manufacturer)

OEM service refers to the supplier’s ability and willingness to make products according to the buyer’s design.
An OEM product is made according to the buyer’s product specification.
For example, any product with a customized design, material, dimensions, functions or even colors can be classified as OEM.
Basically, every supplier in Alibaba and Globalsources can make OEM products.


ODM (Original Design Manufacturer)

An original design manufacturer (ODM) is a company which designs and manufactures a product which is specified and eventually branded by another firm for sale.
Such companies allow the brand firm to produce (either as a supplement or solely) without having to engage in the organization or running of a factory.


FCL (Full Container Load) & LCL (Less than Container Load)

FCL is short for Full Container Load. This means you have enough goods to stuff an entire container.
LCL is basically the opposite.
It is short for Less than Container Load and means you do not have enough goods to stuff an entire container.

FOB Price

FOB stands for Free On Board and means that the seller will pay also costs associated with getting the product to the marine port (the cheapest way to ship products from Asia) and the buyer pays the cost of actually transporting the goods across the ocean to the final destination.

 

EXW Price

EXW stands for Ex Works and indicates that the buyer is responsible for all subsequent costs and risk, including all export procedures, starting with loading the goods onto a transport vehicle at the seller’s premises.

 

MOQ

The minimum order quantity (MOQ) is the smallest order the manufacturer is willing to accept. It's the lowest number of units a wholesale supplier allows buyers to purchase at one time. However, it’s important to note that this is almost always negotiable.

 

Bill of Lading

The Bill of Lading is a legal document issued by a carrier to a shipper including shipment details such as the type of goods, quantity, freight rate, and destination.
It represents the agreement between the parties involved and helps guarantee that exporters receive their payment and importers receive their goods.
The bill of lading also serves as a shipment receipt.

 

Payment options

1. Upfront TT (Bank Transfer)
Risk Level For Buyer: Risky
With a bank transfer, the supplier will receive full payment before production starts. This payment method bears a high level of risk to the buyer and generally is not recommended when dealing with an unknown supplier. There is little if any recourse to get your money back if something goes wrong. 

2. Letter of credit
Risk Level For Buyer: Fairly Safe
A Letter of credit is fairly safe for both parties, however a letter of credit carries some complex procedures and is generally only recommended for larger purchases ($20,000 and above).

3. Western Union
Risk Level For Buyer: Very Risky
A risky payment method for the buyer that's not recommended when it comes to paying suppliers if the payment is not protected by escrow. Western Union generally should only be used when dealing with people you know very well. There is no recourse if something goes wrong. 

4. PayPal
Risk Level For Buyer: Fairly Safe
Paypal is a popular payment method for buyers as it presents a much lower risk, ease of use and generally pretty good buyer protection. Although it's a popular option with buyers, it's less popular with suppliers due to difficulties in withdrawing money, high tax rates and potential charge backs from less than honest buyers.

5. Escrow
Risk Level For Buyer: Fairly Safe
When using an Escrow service, the buyer's money is held by a 3rd party and is only paid to the supplier after the buyer confirms satisfactory delivery of their order. Escrow is a fairly safe payment method for buying and selling online because Escrow protects both the buyer and supplier.

Generally, when you are just starting, you’ll probably want to look for or negotiate with suppliers to either accept PayPal or some type of Escrow service to give you the highest level of protection.