The exporting businessman can adopt the strategic decision to position his products and/or services in foreign markets by resorting to hiring third parties, who generally act on their own account, managing the business on behalf of the principal.
This is a business model that significantly reduces the risks inherent in international sales and the resulting international positioning of the company. However, the various forms of outsourced exporting limit the ability to directly control actions taken in those markets.
The reality of international trade indicates that indirect exporting is the most frequently used instrument by exporting SMEs. This is due, among other factors, to: 1) The progressive increase in the complexity of businesses operating in this area; 2) The high cost of carrying out direct commercial activities in non-domestic markets (e.g., new elements such as logistics come into play); and 3) A lack of knowledge about the destination country and the values that underpin its negotiating culture.
The intermediary collaborates with the client operator, helping them overcome new commercial, cultural, and bureaucratic barriers in the geographical area of operation, which are difficult to address otherwise. Therefore, the correct selection of this third party is crucial to ensuring the operational success of sales in the medium to long term.
Once again, the professional intervention of the foreign trade consultant is a key element in the strategic decision regarding the export method, as he not only advises on the direct choice of intermediary, but also advises on the quality and limits inherent to his professional activity.
The two basic contractual forms that constitute indirect exporting are: 1) International Agency Agreement 2) International Distribution Agreement. This time we will briefly discuss the first legal form.
International Agency Agreement
The international agent is characterized as an autonomous intermediary, independent of the principal. They have their own business structure and represent one of the simplest ways to penetrate and market products in foreign markets.
In the case of Spain, this type of contract is regulated by Council Directive 86/653 of 18 December 1986, incorporated into national law by Law 12/1992 of 27 May. This greatly facilitates the interpretation of its content, as it has led to the necessary unification of legislative criteria within the EU member states.
The agent is a third party who has absolute freedom to develop the business proposed by the exporting entrepreneur, being able to have their own premises and trade name, as well as independent accounting and freedom of schedules to carry out their commercial task.
This intermediary acts on behalf of another party, and their professional activity ranges from promotion and negotiation to the signing of sales contracts related to the principal's business. In return for their work, they receive a commission, which, if they assume the risk and profit of the transaction, is increased by the percentage agreed upon by the parties.
In carrying out their duties, agents must comply with the principal's instructions, communicating any information relevant to the smooth operation of the business. They may also require the exporter to provide all data pertaining to the business in which they are involved, including accounting records. Whether a purchasing or sales agent, they are entitled to compensation upon termination of the contract, in addition to their own commission for building goodwill.
This type of contract allows for exclusivity and non-compete agreements, whether unilateral or bilateral. Its duration can be limited or indefinite, depending on the agreement between the agent and the principal. It is typically established for a period of one to five years, with the possibility of automatic renewal.
If the agreement is for an indefinite period, either party may terminate it by giving notice. The notice period is stipulated as one month for the first year of the contractual relationship, two months for the second, and three months for the third and subsequent years.
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