Key points
- Agency import and export involves two layers of contract: the agency agreement between the principal and the agent, and the foreign trade contract between the agent and the overseas counterparty.
- The agent recognises its agency fee net and treats the value of the goods as amounts collected and paid on the principal’s behalf; the export tax refund on agency exports is claimed by the principal.
- Agents often advance payments for goods, duties and taxes, or open letters of credit, on the principal’s behalf, so funding and credit risk need to be managed separately.
In practice
Agency business may look as though it simply earns a fee, but it is not easy to manage. The agent must perform the foreign trade contract externally while settling with the principal under the agency agreement, so two bases coexist within the same shipment: externally, the contract, customs declaration, payments and receipts are for the full value of the goods; internally, only the agency fee is revenue.
Common problems include advances not being recovered on time, agency fees calculated on a different basis from the agreement, unclear responsibility for import VAT and duties, and late issue of agency export certificates delaying the principal’s refund. Good practice is to set out fees, advances, deposits and settlement points clearly in the agency agreement and to track amounts collected and paid on the principal’s behalf shipment by shipment.
How Tranexio supports it
Tranexio distinguishes agency from own-account trade in the commercial model dimension and provides management of advances, agency fee settlement, foreign exchange collected on behalf of principals and agency deposits, with balances of amounts collected and paid tracked per shipment. See Agency import and export and Treasury, settlement and credit.