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Establishing a relationship with an export agent can be an easy way for international business owners to launch their exporting. Export agents act as middlemen between the business that exports products and the foreign company that purchases them.
"It's a good way to get your feet wet without doing a lot of work or taking a lot of risk," says Jerry Hingle, executive director of the Southern United States Trade Association (SUSTA).
Here are some considerations for export businesses to take into account when drafting an agreement with an export agent.
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Every export agent agreement is different, and each should include certain details:
· The product price
· Selling rights
· Time limits
· Payment terms
Export agent deals can be outright purchase agreements, in which the agent buys the product directly from an export business and sells it overseas, keeping any additional profit. Or the export agent can act as an international sales representative for the exporter, marketing those products overseas on the exporter's behalf, Hingle says.
Regardless, "it's important to note that with every level of ownership you give up, your risk-return ratio will be affected," Hingle says. "If you sell your goods to the agent outright, the onus is on them to make the sale, but you probably won't reap the full rewards of participating in the international marketplace."
Along with ownership, there are two key components to include in an agreement with an export agent:
The agent's territory rights: If the exporter doesn't want the agent to be the sole global market representative, he or she needs to state that clearly in the agreement, Hingle says. "You may think they are only representing you in China, but unless you specifically define that territory, you may be giving them exclusive rights to all of Asia or even the world, and that's a big mistake."
International payment terms: Whether the agent takes full ownership of the goods, or works on commission, the terms of payment for both sides should be laid out. An exporter should include details around the timing of the payment, the payment method and the currency of the deal. "And be specific," Hingle says.
International payment terms can also include details such as which currency will be used, along with who assumes the risk for foreign exchange fluctuation. To minimize the impact of currency fluctuation the business can sign up for email market-rate alerts through a trusted online foreign exchange service.
Before signing any agreement regarding sales - international or domestic - a business owner should consult with local trade association representatives to obtain guidance on choosing an export agent and making the best deal, says Bob Newman, senior area manager for the U.S. Small Business Administration (SBA) in mid-Missouri, and District International Trade Officer (DITO) for SBA across Eastern Missouri.
The SBA, SUSTA and the International Trade Administration are all happy to offer guidance, training and introductions to market representatives to help companies build their export business, Newman says. "The government has invested a lot of money into helping small businesses get started with exporting, and we are here to help," he says. "A wealth of information may be obtained at Export.gov or Trade.gov, two Web pages managed by the International Trade Administration, an agency of the U. S. Department of Commerce, a federal agency which is part of the National Export Initiative (NEI)."
Example: 1USD = xx INR
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