Who should bear the exchange rate difference in the agency import business?
Our company intends to find an agency to import a batch of goods. Now we are worried about the issue of exchange rate difference caused by exchange rate fluctuations. We would like to know in the agency import business, whether the exchange rate difference is usually borne by the consignor or the agent? Are there any relevant industry practices or laws and regulations to define it? If the two parties do not stipulate the bearing party of the exchange rate difference in the contract in advance, how should it be handled later? We hope to get a professional answer. Thank you!
Professional consultant answers
Elizabeth LiYears of service：3Customer Rating：5.0
Compliance and risk managerConsult
In the agency import business, the bearing entity of the exchange rate difference usually depends on the contract signed by both parties. If the contract clearly stipulates that it is borne by the consignor, then the consignor shall be responsible for the difference caused by exchange rate fluctuations; if it is stipulated that it is borne by the agent, the agent shall bear this part of the risk.
From the perspective of industry practices, if the agent only provides agency services, charges a certain percentage of agency fees, and does not participate in the actual buying and selling and profit and loss of the goods, then generally the consignor bears the exchange rate difference, because the consignor is the ultimate beneficiary of the imported goods.
If it is not stipulated in the contract in advance, the two parties can negotiate to solve it. During the negotiation, various factors in the trading process should be considered, such as market conditions, the roles of both parties in the business, etc. If the negotiation fails, it may be necessary to determine it according to relevant laws and regulations and trading habits, and it is likely to be borne by the consignor who has the ownership and main interests of the goods.
Jennifer WangYears of service：4Customer Rating：5.0
Market development consultantConsult
Generally, it is the consignor who bears the exchange rate difference. After all, the consignor is the direct demander of the imported goods, enjoys the benefits brought by the goods, and it is reasonable for the consignor to bear the exchange rate difference.
Emily LiuYears of service：10Customer Rating：5.0
Settlement and payment expertConsult
I think it depends on the negotiation status of both parties. If the consignor is powerful, maybe it can make the agent bear part of the exchange rate difference. But if it is not stipulated, according to the convention, it is mostly borne by the consignor.
Sarah ZhangYears of service：8Customer Rating：5.0
Document expertConsult
If the agent wants to solicit business, it is also possible to take the initiative to bear the exchange rate difference, but this situation is relatively rare.
David LiYears of service：6Customer Rating：5.0
Senior customs declaration consultantConsult
If the agency contract does not stipulate it and the two parties are deadlocked, if it really doesn't work, you can ask a third-party organization such as an industry association to mediate.
Andrew HuangYears of service：7Customer Rating：5.0
Supply chain optimization expertConsult
In some long-term cooperative relationships, the two parties may jointly share the exchange rate difference to maintain good cooperation.
William YangYears of service：5Customer Rating：5.0
International logistics consultantConsult
If it is not stipulated, from the perspective of matching risks and benefits, since the consignor makes profits from the goods, it is more appropriate for the consignor to bear the risk of the exchange rate difference.
Robert ChenYears of service：6Customer Rating：5.0
Customer service consultantConsult
Some agents, in order to control costs, will clarify with the consignor in advance that they will only settle according to a fixed exchange rate, and the consignor shall bear the part exceeding the fixed exchange rate.
Amanda YangYears of service：3Customer Rating：5.0
Cost control consultantConsult
If the exchange rate fluctuates greatly and the agent bears the exchange rate difference, it may affect the agent's profit, so it is mostly borne by the consignor.