From Supply Chain Management Encyclopedia
Broker or, in the context of international logistics, an import/export broker  is the individual or organization who brings together buyer and seller for a fee, eventually withdrawing from any transaction. The chief function of a broker is to bring a buyer and seller together. Thus the broker is a specialist in performing the contractual function, and does not actually handle the products sold or bought. For its services the broker is paid a commission by the principal (client) – sometimes, there is a monthly fee plus the commission depending on a total sum of the deal done. The broker commonly specializes in particular products or classes of products, usually staple primary commodities such as grains, lumber, rubber, fibers. Being a commodity specialist, there is a tendency to concentrate on just one or two products. Because the broker deals primarily in basic commodities, for many potential export marketers this type of agent does not represent a practical alternative channel of distribution.
The distinguishing characteristic of export brokers is that they may act as the agent for either the seller (main term – “to sell not cheaper than X”) or the buyer (main term – “to buy not more expensively than Y”). For example, an export broker in the lumber business may be contacted by a sawmill and asked if he or she can dispose of a quantity of lumber of a size and grade not readily salable domestically. The broker will then get in touch with potential foreign buyers with whom he or she is acquainted and either offer the lumber to them at a predetermined price or ask them to make an offer. When several foreign offers are received, the broker accepts the best offer or relays the information to the sawmill to ascertain whether the price is acceptable. When the transaction is successfully concluded the sawmill pays the broker's fee. Alternatively, the broker may be contacted by a foreign buyer and asked to secure quotations on a quantity of a certain size and grade of lumber. Quotations are then sought from sawmills with which he or she is also acquainted. If the broker is not authorized to place the order with the mill making the best quotation, the prices are sent to the foreign buyer for determination whether the price is acceptable. When the transaction is concluded successfully, the foreign buyer pays the broker's fee.
The Brokerage Agreement or Agency Contract is one of the most commonly used mechanisms to generate sales in overseas markets. In this type of contract, a relationship is established whereby a person or company acts as a sales agent on behalf of the exporting company (principal), introducing its products to potential buyers in the external market, in exchange for a commission based on the value of the business deals arranged and paid to the principal.
As with the Distributor, this relationship does not imply a formal interdependence between the principal and the agent intermediary, unless the laws of the country of destination state otherwise. The mechanism of using such commercial intermediary is therefore very useful to facilitate export operations. This type of contract is ideal for small companies with little or no experience in international trade and logistics management, as it allows them to access international markets without having to make large investments. Everything is left in the hands of the brokers, who “manage” the companies’ exports.
- ↑ Zoldac, A. How to Become an Import/Export Broker - http://www.ehow.com/how_6976589_become-import_export-broker.html
- ↑ Ventura, L.C. International trade contracts: a practical guide for exporters. – San Salvador, Inter-American Institute for Cooperation on Agriculture (IICA). 2007 - http://www.iberglobal.com/files/International_trade_contracts.pdf