The four-point system assigns penalty points to defects in fabric based on defect size, with a maximum of 4 points per linear meter. Defects over 3 inches receive 1-4 points depending on size. Continuous or severe defects receive 4 points per meter. Inspection involves examining a minimum 10% of each style for defects and determining total points per 100 square meters, with a maximum of 15 points for finished fabrics and 10 for greige fabrics. Inspectors must be graduates with 2+ years' textile experience and knowledgeable in the 4-point system.