You want to start importing. How will you go about it? Will you be buying products directly from a foreign supplier to sell or resell? Or do you want to act as an intermediary for a foreign client, finding and negotiating with potential customers? In the first case, you are an importer. In the second, an agent.
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As an importer, you buy products from a foreign supplier. You are their end client. You may import for your own use. For example, because you manufacture goods and need certain raw materials or half-fabricates from abroad. You can also import products to sell them on. In that case, you are an importer and reseller, or dealer. A reseller is also referred to as a distributor.
As an agent, you do not buy products yourself. You act on behalf of a foreign supplier. You contact potential customers on behalf of them in your home market (for instance, the Netherlands or the Benelux region). The supplier (also known as the client or principal) does not supply you with the goods. They send and invoice the products directly to the end customer. If you are an agent, you are not an importer. The end customer of the foreign supplier is the importer.
Note: if you work on behalf of one principal, the Tax Administration may consider your relationship one of employment. In that case, the Tax Administration does not view you as an entrepreneur for income tax purposes. To establish yourself as an independent agent, make sure you work with more than one principal.
Importer vs. agent: the differences
These are the main differences between the importer (acting as reseller/distributor) and the agent.
- Builds stock (usually), so needs more capital. Fast delivery possible.
- Buys at their own cost and risk.
- Sets their own profit margin.
- Product liability for goods imported from outside the EEA.
- Is responsible for pricing and marketing of the product to their customers.
- Foreign supplier does not know what the Dutch market is, and who the customers are.
- Often offers maintenance or repair service as an option.
- No protection by EU legislation (regulation 86/653/EEG).
- No large starting capital required.
- Mediates between principal and customer.
- Receives a commission on sales they have negotiated.
- Not a party in claims for damages due to product liability.
- Foreign supplier keeps track of (customers on) the market.
- Usually does not offer maintenance and repair themselves.
- Is protected by European legislation (regulation 86/653/EEG) and may claim a compensation when collaboration with principal is ended. This is referred to as goodwill or customer remuneration.
A commission agent is neither an importer, nor a ‘regular’ agent. The commission agent (in Dutch) acts on their own behalf and closes the sales contract with the customer themselves. The customer does not know who the principal – the supplier – is. The commission agent receives a commission from the principal, just like the agent.
Reach an agreement with your foreign supplier
The supplier will have their own preferences when it comes to marketing their products on a new market. Do they want to know who the customers are on the target market, or do they want to influence the sales price on the market? In that case, they will prefer working with one or more local agents. Are they looking for a collaboration with a business that can offer customer service and keep stocks? Then a distributor is the better fit. If you wish to build a long-term relationship with your supplier, make sure you reach an agreement about the role you will play. Also discuss the options for exclusivity. The supplier may award you exclusivity for a certain geographical area or customer base.
No matter which role you choose or agree on with a foreign supplier: make sure you document your agreements in writing. An oral agreement is legally valid, but harder to prove in case of a conflict. There are model contracts available at the International Chamber of Commerce (ICC), the International Trade Centre (ITC), and at the VNHI (the Dutch sector organisation for importers and agents):
- An importer uses an importer contract or a distribution agreement.
- An agent uses an agency contract.
- A commission agent uses a commission agreement.
Have your agreement checked by a lawyer who specialises in international contracts.
Dropshipping is a term often used in online sales. It works like this: a customer orders a product in your online shop. You then place the order with your supplier, who sends the product directly to your customer. The supplier may be located in the Netherlands or abroad. In the latter case, it is called international dropshipping. It is important to make clear agreements with your foreign supplier and your customer. For example, who is responsible for customs clearance, if the product is from outside the EU? You or the foreign supplier? Dropshipping has advantages as well as disadvantages.