Points to be covered by an agency agreement (Export marketing)

1. Type of agreement—exclusive or not exclusive.
2. Geographic coverage – country, region, etc
3. Product coverage – which of the existing products are covered whether any new products would be covered.
4. Exporter’s obligations: dispatch of pricelists, brochures, samples, selling aids etc., training of agent’s sales staff; provision for sales promotion and advertising and for after sales service including repairs and warranties.
5. Agent’s obligations: Sales coverage, strength of sales staff, regular dispatch of sales reports, whether warehousing and financing to be provided.
6. Remuneration to be given to the agent
7. Duration and termination clauses
8. Which country’s law would prevail and provision for arbitration in case of dispute.

Motivating and Controlling the Agents:

Identifying a good export agent is a difficult task but retaining him is still more difficult. The agent should be thoroughly informed about what he has to offer be an extensive discussion with the agent. The exporting firm must also develop a system for motivating the agent. One way to motivate the agent is through granting exclusive agency rights in a particular territory. This means that he will be solely responsible for the development of particular market and will receive commission on all orders which the firm will get from that market. Another method is to provide incentives to the agent in the form of variable commission rates. In the beginning of the year a target may be set. If the agent is able to surpass the target, he may be given the higher rate of commission. Supplying promptly the ample orders is also one way to keep the agent happy. Providing promotional and published material is an important instrument to motivate the agent. It may also be desirable to invite the agent periodically to the head office so that he can see the company’s operation firsthand and also participate in the formulation of the marketing strategy. Finally prompt payment of the commission due to him obviously is extremely important in maintaining good and sustained relationship with the agent.

The export firms must also have a system to evaluate the performance of the agent. One criterion of evaluation can be the share of the market that the company has secured and how the market share is changing over time. The annual rate of growth in sales is another criterion. Number of new customers developed by the agent can be another factor in the evaluation process.

Payment of Agency Commission in India:

Payment if commission to overseas agents is allowed either by remitting the amount or by deducting it from the invoice value. The application indicating the participants, such as, exporter’s code number, customs/shipping bill number and date, name of commodity, name and address of the buyer/agent and export value should be submitted to the authorized dealer together with an attested copy of invoice and documentary evidence in support of the amount to be remitted. Ordinarily the authorized dealer allows remittance of the commission provided:

1. The shipment of goods has been made.
2. The amount/rate of commissioner has been declared on the GR form and has been accepted by the Customs Authorities.
3. The rate of commission does not exceed 12.5 per cent of the invoice value.
4. The commission is not on export of canalized items.

If any of these conditions is not satisfied, the application has to be referred to the Reserve Bank which may consider relaxation in bonafide cases.

For remitting the agent’s commission, the exporter will have to purchase foreign exchange from the free market. Alternatively, he can maintain a foreign exchange account to the extent of 25 per cent of the f.o.b value of his export earnings. This foreign exchange account could also be utilized for foreign travel for business purpose or for advertising and publicity abroad.