An export broker or agent is a person who acts as an intermediary between buyer and seller in the international market. An export broker enables both parties to execute internal transactions. An export broker brings the two interested parties together and facilitates the transaction. She charges a commission for brokering the transaction.
There are many types of export brokers or agents who facilitate exports and imports. They are listed below:
- Traditional Agents – Traditional agents acts on behalf of their principals. In international trade, they negotiate terms for the purchase and sale of products on behalf of principal.
- Brokers – Brokers are persons who facilitate business transactions, but they do no represent any principal or company. This relives the broker from many of the fiduciary duties inherent in an agency relationship. Brokers find export opportunities for their clients in international markets and charge a commission for the services they provide to clients.
Brokers are broadly divided into two types:
- Merchandise Broker – A merchandise broker is a broker who facilitates their clients to set terms and conditions such as price, quantity, delivery time, and purchase return etc. They mainly negotiate the contract but do not send or receive products on behalf of clients.
- Customs Broker – A Customs broker provides clearance services for the goods that are exported to international markets. Custom broker is also known as customs clearance agents. A customs broker must have a customs-broker license.
Export/Import commission: The export or import broker can make money by using different areas to facilitate exports and imports. The commission varies from product to product and volume of trade.
- Sales Commission – Export brokers often earn money through sales commissions. Brokers charge a commission on each transaction. The commission amount largely depends on the way transaction is negotiated. Those brokers who are in the market for a long time and have a lot of experience will probably charge higher rates than those who are new or less experienced. 10 to 15 percent is normal commission rate.
- Broker Commissions – Broker commission is different from sales commission in that it depends upon the deal rather than sale. Broker commissions are charged on the deal negotiated between buyer and seller. It is predetermined amount or rate. For instance, if a manufacturer has excess inventory and he wants to export products at a discounted price, he may hire a broker who will find potential buyers, negotiate a deal, and charge commission for his services.