The company plans to expand its overseas business, is unfamiliar with export procedures, and asks about the differences between direct export and agency export, wanting to understand the differences in terms of processes, costs, and risks. The best answer points out that for processes, direct export requires building a team to handle complex steps, while agency export is handled by an agency company; for costs, direct export has high fixed costs, while agency export charges based on business volume; for risks, direct export is prone to risks due to lack of experience, while agency export can better control risks.
What is the Difference Between Agency and Exported Goods? A Comprehensive Guide!
Resolved
I've been quite interested in international trade recently and would like to understand the specific differences between agency and exporting goods. It's like this, a friend of mine plans to engage in foreign trade related business, and he is not very clear about the differences between agency and exporting goods, for example, in terms of process, risk bearing, etc. I hope someone can explain in detail, so that he can determine which method to adopt to carry out his business and avoid detours.
Trade Expert Insights Answers
There are differences between agency and exporting goods in multiple aspects. In terms of process, exporting goods means that manufacturing enterprises directly sell goods abroad and need to handle all the links such as cargo transportation, customs declaration, and foreign exchange collection by themselves; while in agency, enterprises entrust professional agency companies to handle export matters, and the agency company is responsible for handling the relevant procedures, and the manufacturing enterprise only needs to focus on production.
In terms of risk bearing, when exporting goods, the manufacturing enterprise bears all the risks, including losses during cargo transportation, foreign exchange collection risks, etc.; in the case of agency, although the main risks are still borne by the principal, if the agency company incurs losses due to its own mistakes, it also needs to bear corresponding responsibilities.
In terms of costs, companies exporting goods need to bear various export costs themselves; while agency requires paying a certain agency fee to the agency company. When choosing, one should comprehensively consider their own capabilities, resources, and other factors.
There is a difference in profit distribution between agency and exported goods. For exported goods, the profit goes entirely to the manufacturing enterprise; in agency business, the agency company will charge an agency fee, which will reduce the profit of the principal enterprise by a portion.
From the perspective of customer resources, companies exporting goods can directly accumulate customer resources, which is conducive to long-term development; in the agency model, customer resources may be held by the agency company, and it is more difficult for the principal enterprise to directly obtain them.
In terms of tax refund handling, companies exporting goods handle tax refunds themselves; for agency exports, the principal declares the tax refund, and the agency company provides relevant certificates. If the operation is improper, the tax refund may be affected.
Companies exporting goods need to have professional foreign trade knowledge and a talent team to handle various matters; the agency model can leverage the professional capabilities of the agency company, and the enterprise's own foreign trade knowledge requirements are relatively low.
In terms of brand promotion, companies exporting goods can better promote their own brands directly; in agency, the strength of brand promotion may depend on the agency company, and the enterprise's own control is weaker.
In terms of obtaining market information, companies exporting goods directly access the market and can quickly obtain information; in the agency model, information may be transmitted through the agency company, which may have timeliness and deviation.
If the enterprise is small-scale and has limited resources, agency may be more suitable; if the enterprise is strong and wants to have a deep understanding of all aspects of foreign trade, exporting goods can better meet the needs.
Agency contracts are strongly restrictive, and if the principal enterprise and the agency company do not cooperate well, disputes are likely to arise; companies exporting goods have strong autonomy and more flexible operations.
Regarding fund occupation, companies exporting goods need to prepare a larger amount of funds in advance for production, transportation, etc.; in agency business, the enterprise's capital pressure is relatively small, and the payment of agency fees is relatively flexible.