Our company is a chemical company established two years ago with a registered capital of 20 million yuan. Recently, our business has developed rapidly and has established business links with some international companies. When negotiating with a famous Japanese trading company, Japanese customers suggested that although they had confidence in our ability to execute contracts, they could not immediately give us such a large order.
According to their company’s system, the registered capital of our company cannot reach the minimum of the transaction with them, and the amount of this order is large. But they suggested that we can export through a large international trading company in Shanghai. This company has abundant registered capital and has accumulated good trade credit on the Japanese company. It’s possible to deal with this order through them. I don’t understand these complex relationships. We can export by ourselves. Why should we make use of the platforms of other foreign trade companies?
Some large Japanese companies, such as Mitsui and Mitsubishi, not only focus on low prices when choosing partners. For them, the reliability is also important. Therefore, when they choose partners, they are generally not willing to let new suppliers enter their systems. But once suppliers enter, cooperation will last long. They care about the qualification of the enterprise, such as the certification system, credit status, registered capital, bank loans, business reputation, etc. They will only choose enterprises that fully meet their requirements as partners.
For large orders, they require that the registration amount of the other party must be higher than the order amount to ensure security. Moreover, the credit of new suppliers also has a cumulative process. For example, the number of orders in the first year should not exceed $3 million. After 2~3 years, the annual order quantity can reach the amount of 20 million US dollars. They control the risk by controlling the quantity and amount of orders.
If they think some suppliers are good, but unwilling to violate the company’s rules, they may take an approach. That approach is to bring in a middleman who has long and good cooperation with them. Although the cost will increase through the middleman, the Japanese buyer will have more assurance and less risk. Even if there are some difficulties in the execution of this contract, the large domestic trading company will have a better effect of negotiating directly with the supplier than with Japanese customers. If the new partner does not perform well through cooperation, he will not enter the scope of the official supplier. But if he does well, the client will consider a direct deal when the opportunity matures.
For the involving foreign trade company, there is a lot of business with the Japanese trading company. It is not bad to add some businesses this time. Of course, it also takes some risks. It is just that it tries to pass the risk on to the suppliers.
Sometimes, customers place large orders to suppliers through foreign trade companies, while small orders directly to suppliers. In this way, it does not affect the execution of large orders. Meanwhile, suppliers can also slowly accumulate credit and have plenty of time to increase capital to their business license.
I have also made some agency contracts. Some international companies are more demanding for direct contracting suppliers. Therefore, they will even find some suppliers and talk directly about the price with them. Then they gave the order to our company and indicated the supplier on order. After receiving the order, we will sign the export agency agreement with the supplier. I generally do not participate in technical matters, mainly involving in contract execution, shipping, foreign exchange collection, payment, etc.
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