This is international trade in the traditional sense of the word where a business is marketing its products or services across the borders without being directly present. It is a good way of testing the market before you potentially commit to setting up there. The main options available are as:
Export. The main issues to address are your contractual documentation and getting to know your customers. In international relationships it is even more important to clarify the parties’ rights and obligations in writing. This can be done by operating with a set up tailor-made terms and conditions but do make sure that they are agreed with your customer. And if the value of your export is significant do obtain a credit search on your customer.
Appointing a local agent or a distributor. These terms are often used interchangeably. The distinction is that an agent is paid a commission based on the sales generated by it to the principal whereas a distributor’s remuneration is based on the profits made from buying the products from the manufacturer and selling them on at a margin. Agency in Europe is highly regulated by an EU directive on commercial agents. As for distributors there is generally freedom of contract to agree what you like. Having said this some European countries also regulate distributors so beware.
Franchising. If you have a product with a service concept you may also appoint a local franchisor. Generally, you should enter into a detailed franchising agreement setting out the obligations and responsibilities of the parties.
Once you have decided to trade with a country, as opposed to trading in a country, the next step is ensure that your contracts etc. work and protect you internationally.
Additional issues you have to take into account include where and how to litigate if things go wrong, but also local legislation which may provide the other party unforeseen protection.
Steen Rosenfalck - Partner