It is mentioned that the company is engaged in re-export trade business, purchasing from abroad and selling directly to other overseas customers without passing through China. The company is unsure whether to include re-export trade income in operating revenue, other business revenue, or other accounts. The best answer indicates that if re-export trade is the company's main operating business, it should generally be included in "operating revenue," which complies with accounting principles and financial and tax treatment requirements. If it occurs occasionally, it can also be considered to be included in "other business revenue."
How to Define Revenue from Agency Exports? Please Help!
Resolved
Our company plans to engage in agency export business and has no prior experience in this area. We are not clear about how to define revenue from agency exports. Is it calculated based on the sales value of exported goods, or are there other calculation methods? Additionally, what factors need to be considered when defining revenue? For example, what role do agency fees and handling fees play in revenue definition? We hope someone knowledgeable can provide a detailed explanation so we can have a clear understanding.
Trade Expert Insights Answers
Revenue from agency exports is generally defined primarily by the agency fees collected. Agency fees are usually charged based on the agency agreement signed with the principal. They can be calculated as a certain percentage of the export goods value, for example, 1%-5%, with the specific percentage determined by the business situation and negotiation between both parties; or a fixed fee may be agreed upon.
When defining revenue, the following factors should be considered: First, the scope of services. If, in addition to basic export agency procedures, additional services such as market research and optimized logistics arrangements are provided, the agency fee may be higher. Second, market conditions. If the industry competition is fierce, the agency fee percentage may be relatively low; conversely, if the services provided have unique advantages, the agency fee can be appropriately increased. Third, the nature and risks of the goods. For example, for high-value, high-risk goods, due to greater responsibility, agency fees will also increase. Regarding handling fees, if they are included in the agency fees, they do not need to be considered separately; if charged separately, they should be included in the agency export revenue. In summary, based on the agency agreement and comprehensively considering various factors, accurately define agency export revenue.
In general agency export business, your revenue is the agency fee you negotiate with the principal, and this fee is essentially your income. Expenses incurred for handling customs declaration, transportation, and other procedures, if you advance them and then seek reimbursement from the principal, are not considered revenue, but rather are simply collected and paid on behalf of the principal.
In addition to agency fees, if the agency agreement stipulates any additional rewards, such as bonuses for reaching certain export volume targets, this portion should also be included in the agency export revenue. At the same time, pay attention to the timing of revenue recognition, which is generally recognized when the main obligations of agency export are completed and the collection of payment is reasonably assured.
In some cases, a portion of the export tax rebate may be obtained as revenue. However, this is only the case if it is clearly stipulated in the agency agreement and operated in compliance. Do not overlook this potential income when defining revenue.
If, during the agency export process, there are any gains from exchange rate fluctuations, and these gains belong to the agent, then they can also be included in the revenue. However, attention should be paid to exchange rate volatility and accurate calculation.
When defining revenue, it is also necessary to check if there are any related cost deductions. For example, office costs incurred due to agency exports, while not directly affecting revenue definition, do impact the final profit.
If there are any ancillary services in the agency export business, such as providing product quality inspection reports, the fees charged for these services should also be included in the revenue and not be overlooked.
To clearly define agency export revenue, one must also look at the payment settlement method. Whether it is a lump-sum payment or installment payments will affect the recognition of revenue in different accounting periods.
If it is agreed with the principal to share profits based on the profit of the exported goods, then this profit sharing is also part of the agency export revenue, and the profit proportion should be accurately calculated.