How to Determine A Reasonable Agency Fee? Leave a comment

Case

In general, the company requires 1.5% to 3% of the agency fee for the agency business. But the reality is more complex. Some businesses are small, such as sample delivery, only 500 to 1000 US dollars. So, and the 3% agency fee is too low. Some order amounts are relatively large, such as $3 million, and customers will always ask for lower agent fees. How to determine the reasonable foreign trade agency under normal circumstances?

Analysis

The pure agency rate is generally between 1% and 3%, depending on the actual situation. The level of agency fees varies according to the actual services provided, the complexity of the operation, whether there are advances in tax refunds and the amount of the agency contract. There is no absolute comparability.

For example, a foreign trade company basically signs an agency contract at a 1.5% agency rate. After delivery, it will receive the foreign exchange and a VAT invoice from the manufacturer, and make a partial refund. This agency fee is to deduct the interest on the refund, so the actual agency fee was less than 1.5%.

If the agency rate is low, such as 0.9%, some foreign trade companies will not pay the tax refund. They will run the tax refund formalities and pay the tax refund to the manufacturer after receiving it.

If the manufacturer and a foreign trade company have a large number of businesses, maybe a total of 1 million to 5 million dollars in the whole year, there are several possibilities. One is to follow a fixed agency rate, such as 1.5%. The second is to follow in principle 1.5%. However, for orders with a small amount, each charge is at least 500 yuan. The third is to determine the agent rate, such as 1.5%. However, the total amount for one year is RMB 300,000. After the fee has accumulated to 300,000 yuan, no fee will be charged. Also, some companies will pay a total of 300,000 yuan in agency fees regardless of the actual amount of export. And they will agree to settle once or several times in a certain period.

Tips

There are also some changes in practice. If the agency fee rate is high, the foreign trade company will be more generous. Express fee, certificate of origin fee, etc., are included in the agency fee. If the agency fee is low, the foreign trade company may be more realistic. Any advance fee, such as a certificate of origin and courier fees, is to be taken by the factory or the client. If the document requirements are high, like L/C operation, the agency may charge some additional fees.

Some import agents sometimes ask foreign trade companies issue certificates and bear some risks. They generally ask the client to pay some extra fees or increase the agency rate. In some case, that agency fee is relatively high. For example, within the group, the business of all subsidiaries must be exported through the parent company’s foreign trade agency. Foreign trade companies not only undertake the function of agency service but take the function of management supervision and assessment. Of course, the agency fee is higher, even exceeding 5%. Or the factory does not understand foreign trade. It needs the help of the foreign trade company or directly participates in many works. The workload of foreign trade companies is large, so the agency fee should be higher.

The agency fee rate and price calculation method of an agency contract are more complex in practice, many of which have to be decided by both sides.

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