China Sourcing Terms, Read from the Chinese-Law Side

This page covers twelve terms that come up in almost every deal with a Chinese factory. Each entry below says in two or three sentences what the term is and where buyers lose out. The full entry, with the usual situations and wording for your contract, is one click away.

Contents

• PI (proforma invoice)
• PO (purchase order)
• MOQ (minimum order quantity)
• 30/70 payment
• T/T (telegraphic transfer)
• FOB (Free On Board)
• EXW (Ex Works)
• Golden sample (sealed sample, 封样)
• 定金 and 订金 (earnest money and advance payment)
• Business licence and unified social credit code
• Company seal and contract seal (公章, 合同专用章)
• Legal representative (法定代表人)

PI (proforma invoice)

The supplier’s quotation in invoice form. Once you sign it back or pay the deposit against it, it is very often the contract a Chinese court looks at first. Read the full entry

PO (purchase order)

Your document ordering goods at a price, on a date. It binds the supplier once accepted, in writing or by starting production, and conflicts with the supplier’s PI are where the trouble starts. Read the full entry

MOQ (minimum order quantity)

The smallest order a factory will accept. Its legal side is the overrun: extra units made from your designs or molds, which need a clause saying where they go. Read the full entry

30/70 payment

30% before production, 70% before shipment. Whether the 30% can be doubled depends on the Chinese word for it, and the 70% should be tied to an inspection you accept, not to a date. Read the full entry

T/T (telegraphic transfer)

A bank wire, and the way most China sourcing is paid. The beneficiary must be the company that signs the contract, under its registered Chinese name. Read the full entry

FOB (Free On Board)

The seller clears export and loads the goods on the vessel at a named port, where risk passes to you. Loading is not acceptance, so the contract still needs an inspection step. Read the full entry

EXW (Ex Works)

The seller makes the goods available at its premises and does nothing more. Risk and export clearance are yours from the gate, which is why FOB is usually cleaner for a first order. Read the full entry

Golden sample (sealed sample, 封样)

The approved sample both sides sign or seal and each keep. Under the Civil Code the goods must match it, which only helps if it was actually sealed. Read the full entry

定金 and 订金 (earnest money and advance payment)

定金 is earnest money under the Civil Code: capped at 20% of the price; where a breach defeats the purpose of the contract, the defaulting payer loses it and a defaulting recipient returns double. 订金 is only an advance on the price. Read the full entry

Business licence and unified social credit code

The licence shows the registered Chinese name and the 18-character unified social credit code. Put both in the contract and check that the seal and the payee carry the same name. Read the full entry

Company seal and contract seal (公章, 合同专用章)

The physical seals a Chinese company signs with: the company seal and the contract seal. Ask for one bearing the registered Chinese name, plus an authorized signature. Read the full entry

Legal representative (法定代表人)

The one person registered on the business licence to act for a Chinese company. Anyone else who signs needs written authority, sealed by the company. Read the full entry

Other free tools: before you pay a new supplier · before you sign with a factory · when the factory holds your molds