Distribution agency relationships are usually less complicated than distribution relationships, as they are much more suspected of the client`s expenses and are not returned to the sales agent. With the increase in the number of companies seeking such relationships, we have developed the following first questions to get to the heart of the matter and allow our lawyers to find the bases to establish a China-centric sales agency contract for our clients. I read these questions below, as they should prove to be a good starting point for those who wish to bring their product (or even services) to China through a sales agency agreement. Manners, practices, adherence to business processes and the evaluation of different positions in the market conceal many risks that can lead either to an increase in costs or even to the cessation of the activity. The STM Group not only advises on the establishment of the first commercial contacts, but it successfully leads them to the conclusion of a commercial transaction. In the past, a lack of know-how, erroneous approaches and misunderstandings have led to the disruption of many product developments. The agency contract opens doors to successful imports from China. A sales agency is generally defined as a “contractual agreement in which an agent acquires the right to negotiate the sale of a principal`s goods or services, usually for a commission or royalty calculated as a percentage of the turnover generated”. This relationship may — but not necessarily — be exclusive.
In a distribution agency relationship, the proceeds of the sale are paid directly by the purchaser of the product or services to the company that manufactures the product or provides the services. In other words, the money would have to leave China and go to the foreign company, and the foreign company, in turn, withdraws some of that money as a commission to its sales agent or the buyer separates a separate payment to the Chinese seller. Despite the intensification of capital flows into China and the increasing difficulties in obtaining money from China, it is still rare for the sale of a product worth less than $250,000 million to experience such problems. If the distribution contract is deemed to have been concluded for an indefinite period, the distribution contract may be terminated only exceptionally or by mutual agreement between the parties. . . .