Plain-language explanations of Incoterms, AQL, MOQ, FOB and other international trade and sourcing terms.
A
AQL (Acceptance Quality Limit)
A statistical defect limit used in sampling inspection to decide whether a production lot is accepted.
C
CIF (Cost, Insurance and Freight)
An Incoterms rule under which the seller pays freight and minimum insurance to the destination port, while risk passes to the buyer at the port of shipment.
Consolidation
Collecting goods from different suppliers at one location and sending them as a single shipment.
D
DDP (Delivered Duty Paid)
An Incoterms rule under which the seller delivers the goods to the destination cleared for import with duties paid.
E
EXW (Ex Works)
An Incoterms rule under which the seller delivers by making the goods available at its own premises, placing the most obligations on the buyer.
F
FOB (Free On Board)
An Incoterms rule under which the seller delivers by loading the goods on board the vessel nominated by the buyer at the port of shipment.
H
HS Code
The international Harmonized System code used to classify products for customs purposes.
I
Incoterms
Delivery rules published by the International Chamber of Commerce (ICC) that define how delivery, risk and costs are shared between buyer and seller.
M
MOQ (Minimum Order Quantity)
The lowest order quantity a manufacturer accepts for a product or model.
O
ODM (Original Design Manufacturer)
A production model in which a product designed by the manufacturer is adapted to the buyer's needs and sold under the buyer's brand.
OEM (Original Equipment Manufacturer)
A production model in which goods are made to the buyer's design and specifications and sold under the buyer's brand.
P
Pre-Shipment Inspection (PSI)
A quality inspection in which finished and packed goods are checked by sampling before shipment.