21 Feb International Business Advice – 5 Ways to Evaluate an International Trading Company
Businesses worldwide often hire intermediaries called “trading
companies” to import or export products for them.
Trading companies are paid with a success fee (usually a
commission, sometimes a flat fee). Businesses hire them mainly
because they have customer access in other countries.
In our example, let’s refer to a Malaysian trading company, which
helps American firms purchase toys from factories in Malaysia. Why
would you hire this company? Because a trading company can simplify
the process, saving the buyer time and money.
So beyond making the usual obvious reference and legal background
checks, how else should you evaluate a trading company? These 10
tips will help buyers decide if they’re choosing the right trading
– Are you being educated about the process involved?
Importing products across borders can present many difficulties,
including quality control of products ordered, timing of
deliveries, insurance, product specifications and claims. When
importers tell you to simply “leave it to them,” then your
organization isn’t learning. And if it keeps you in the dark, you
have less freedom to change or negotiate with suppliers.
– How can you lodge a complaint against your trading company (and
collect if awarded damages)?
Does it have a legal presence in the United States? Does this firm
work strictly out of Malaysia (you probably won’t win a judgment in
Malaysia, and if you did, wouldn’t collect). Are you able to
withhold their success fee until you’re satisfied with your
– Are you able to meet and develop a relationship with your
The trading company should be facilitating that for you, instead of
the American model of ensuring that the buyer and seller never
meet. You need to be able to understand your ultimate supplier’s
business, and the supplier needs to understand its customer (you).
– Are you getting a full and open disclosure of the toy maker’s
When your trading company guarantees that “everything is possible,”
then usually nothing is. All businesses have constraints, and your
intermediary needs to be brutally honest with you about its
– Who does the trading company work for? You may know who’s paying
it (you), but you may not be aware of the alliances. How many
factories do they represent? When you hear the “the seller pays my
commission” line, remember you’re the one putting all the money
into the deal. You may not be cutting the check to the trader, but
you’re paying them.
– Exactly how does the trading company get compensated?
You have a right to know the amounts, the conditions and timetables
involved in its remuneration. Does it get paid for an introduction,
and then a deal? Do they make more if you buy more? For example,
selling 5,000 stuffed bears requires the same amount of a broker’s
work as 50,000 stuffed bears, yet you’re paying 10 times the
commission if it’s the same percentage. Is there a “customer
satisfaction” payment to be made after several months?