What is the difference between entrusted export and agency export? Have you really understood it?

On the grand stage of international trade, there are various ways to conduct export business. Among them, entrusted export and agency export are models that many companies get involved in. But what exactly are the differences between the two? This has left many foreign trade practitioners, like Mr. Hong and Mr. Hong, a bit confused. Today, let's delve into the differences between entrusted export and agency export to give you a clear and thorough understanding.

I. Vastly Different Concepts

Entrusted export, simply put, is when a manufacturer or other principal entrusts the export-related matters of their manufactured goods to an enterprise with export operating rights. For example, a factory that produces high-quality crafts, lacking export operating rights itself, can entrust its products to a qualified enterprise to help export them to overseas markets.

Agency export, on the other hand, refers to the business activity where a foreign trade enterprise accepts the entrustment of another entity to handle its export business on its behalf. Here, the emphasis is on the agent leveraging its foreign trade business capabilities and resources to provide a series of services to the principal in the export process, such as finding customers, negotiating orders, and handling customs declaration procedures.

II. Distinct Main Responsibilities

In entrusted export, although the principal entrusts export matters to the entrusted party, they still bear the main responsibility for key aspects such as product quality and delivery dates. After all, the goods are produced by the principal, and if there are quality issues, the principal will ultimately be responsible for resolving them.

In agency export, the agent is mainly responsible for accurately handling various export procedures and related businesses according to the principal's requirements. For issues related to the quality of the goods themselves, the responsibility primarily lies with the principal. The agent mainly plays a role in assisting with the export process. Of course, if problems arise due to the agent's own procedural errors, the agent will also bear corresponding responsibility.

III. Differences in Financial Processing

Under the entrusted export model, manufacturers and other principals must conduct their accounting according to the financial accounting methods for self-operated exports. For example, the confirmation of sales revenue and the calculation of costs must be operated in accordance with their actual production and operating conditions.

In agency export, the agent typically charges a certain agency fee as income. For the principal, their sales revenue and other financial data will be based on the actual transactions with foreign customers. The agent merely assists in the (xiánjiē - connection/transition) of relevant financial processes, such as collecting and paying for goods on behalf of the principal, but it does not change the original financial substance of the principal.

IV. Tax Refund Processing Varies

For entrusted export, if it meets relevant tax refund policies, the principal generally applies for and handles the export tax refund. Since the principal is responsible for the production and other aspects of the goods, the subject of the tax refund naturally falls on the principal.

The tax refund situation for agency export is slightly more complex. Typically, the principal provides relevant tax refund certificates and other materials to the agent, and the agent then declares the tax refund to the tax authorities according to the prescribed procedures. However, in actual operations, specific tax refund arrangements will also be adjusted according to the agreements in the entrusted agency contract.

Understanding the Differences Paves the Way for Smoother Foreign Trade

Understanding the differences between entrusted export and agency export is crucial for individuals engaged in foreign trade business, like Mr. Hong and Mr. Hong. Only by clearly understanding the characteristics of each model, the division of responsibilities, and the differences in financial and tax refund processing can one make more informed choices in actual business operations and avoid unnecessary troubles and risks. You are welcome to combine your company's actual situation and carefully consider these two export modes, which may open up broader horizons for your foreign trade business! We also welcome everyone to share their experiences and insights on these two export modes in the comment section.