Appointment of Overseas Agents and

Remittance of Commission
A
Presentation
By
Dr. P. K. Chugan
Institute of Management
Nirma University
Ahmedabad
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 Appointment of Overseas Agents

Overseas Agents
If an exporter finds it necessary to take the
assistance of an overseas agent, either in the
country of import or in a third country, for
securing orders, obtaining market
information, follow-up of the bid and liaison
with the buyers in order to ensure smooth
execution of the contract and prompt
payment of bills, he can appoint such agents
on certain percentage of commission.
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 Appointment of Overseas Agents
Generally there are two types of agents:

• One who locates the end user (importer) of

exporter’s products, informs him and asks him to
execute the order in his name and the exporter
remits him his commission directly.
•Another agent imports the goods in his own name
maintain the stocks and sell them from time to time
into their appointed territories. These type of
agents are known as distributors.

In addition, representatives are also appointed.

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 Difference between Commission
Agents and Distributors

Commission Agent Distributor

• Solicits orders & • Buys the goods from
passes on to the exporters and
exporters sells
• Neither title to the • Maintains adequate
goods nor credit risk stock, fixes prices
• Gets an agreed rate • Earns much higher
of commission profit than agents
• Does not provide any • Provides services
sales services after sales
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 Appointment of Overseas Agents
Sources of Information in Selecting
Overseas Agents
• Various Export Promotion Councils &
Commodity Boards
• Banks dealing in foreign exchange
• Federation of Indian Chambers of Commerce
& Industries (FICCI)
• Indian Trade Missions & Representatives
abroad & foreign countries’ Trade Missions
• Manufacturer’s/Exporter’s Associates abroad
• Advertisements in Newspapers, Trade
Magazines
• Websites of various organisation
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 Appointment of Overseas Agents
Selection of agent/distributor
How to approach an Agent- what to write
First approach to be made to a prospective
agent / distributor through impressive
correspondence to be followed by
personal visit, if necessary. Your letter /
message to an agent must contain the
following information
• Type of your Organisation
• Range, specifications and standards of product (s)
• Any international standard certification
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 Appointment of Overseas Agents
• Types of the consumers
• Sales outlets, turnover including export sales and name
of major export markets
• Information about your bankers
While conveying the information about
your organization to agent it is also
worthwhile to call from the overseas agent
the following information preferably by
sending a questionnaire.
• When was the Agency established
• Name and address of the senior executives
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 Appointment of Overseas Agents
• Whether the agent is on the Government
approved list in his country.
• Whether the agent is buying similar or
any other product from the exporter’s
country.
• Which territories are covered by him
• What is his total turnover and the
turnover of the product similar to the
exporters, if he is already handling.
• What are his sales outlets - wholesalers,
retail chains, his own showrooms, etc. 8
 Appointment of Overseas Agents
• How he proposes to enter into and
capture the market.
• What promotional methods he proposes
to employ.
• What servicing as well as after-sales
service arrangement are available with
him.
• Whether he has suggestions for any
modification / change in the product to
suit the local condition.
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 Appointment of Overseas Agents
• Size of the order he can place on the
exporter and expectation of repeat orders
- frequency of orders if the product is
accepted in the market.
• Whether it will be necessary for him to
stock the product
• Name and address of his bankers
• Any other information he would like to
know about exporter’s product,
organization, operations, etc.
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 Appointment of Overseas Agents
While appointing agents/distributors,
various factors like, rules and regulations
in the importing country, manner in
which other local firms deal with the
same agent and the percentage of
commission payable are to be taken into
consideration.
Exporters are also advised to see the
sample draft agreement for the
appointment of overseas agents /
representatives.
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 Appointment of Overseas Agents
Declaration of Commission to Customs

Remittances of commission are permissible

only if the commission is declared to
Customs on the relative
GR/SDF/PP/SOFTEX form. Exporters
must, therefore, declare the commission
on the concerned form, if the exports
involves payment of commission to
Overseas Agent /Distributor /
Representative.
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 Appointment of Overseas Agents
Remittance of Commission
• Reserve Bank has delegated powers to authorized
dealers (ADs) for the remittances of commission.
However, remittance of commission in advance is
not permitted.
• No remittance of commission is allowed in respect
of exports financed under credits extended by
GOI to any Govt.
• Commission paid can be either from their
current account or from EEFC account
maintained by them with ADs.
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 Appointment of Overseas Agents
Procedure for Remittance of Commission
For the remittance of commission, the
exporter should submit his application by
letter to his bankers, giving particulars
such as Importer-Exporter Code Number,
Customs Shipping Bill No. and date, name
of commodity, name and address of
buyer/agent, and export value supported
by an attested copy of invoice, Form A2
and documentary evidence in support of
the amount to be remitted.
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 Appointment of Overseas Agents
• Exporter must clearly indicate in his letter
whether the commission is payable on
FOB, C&F or CIF or any other value.
• Normally, commission will be remitted
through the AD through whom the relative
bills were negotiated/sent for collection.
• However, if exporter desires to remit it
through some other AD, he is required to
obtain a certificate on statement of export
from the AD through him the bills were
negotiated along with the bill realization
certificate of the remittance.
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 Appointment of Overseas Agents
• On the strength of documents submitted
by the exporter the AD will remit the
commission in any of the authorized mode
such as TT, DD, etc. in favour of the
agent / distributor as the case may be, by
debiting the equal amount in Rs to
exporters current/usual account or will
remit the commission debiting his EEFC
account with them.

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 Appointment of Overseas Agents

Verification by authorized dealers

While dealing with applications for
remittance of commission, authorize
dealers will ensure/verify that:

• The particulars mentioned in the letter,

Form A2 and invoice are in order.

• The remittable amount has been correctly

arrived at.
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 Appointment of Overseas Agents
• The commission payable has been
declared on the relative
GR/PP/SDF/SOFTEX form at the time of
shipment and has been accepted by
customs / concerned authorities.
• Commission sought to be remitted is not
on export of project exports or exports
financed under the lines of credit extended
by Government of India or Exim Bank or
exports made by Indian partners towards
equity participation in an overseas venture
/ wholly owned subsidiary company.
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 Appointment of Overseas Agents
• Payment of commission is prohibited on
exports made by Indian partners towards
equity participation in an overseas joint
venture/wholly owned subsidiary.
• The relative shipment has already been made.

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 Appointment of Overseas Agents

There is no monetary limit on amount of

remittance, provided it is within and up
to the terms and conditions with the
overseas agent.

The commission amount must pertain to

the actual value of export documents.
The amount should be correctly arrived
at in conformity with the provisions of
credit.
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 Appointment of Overseas Agents
Agency Commission on Export under Rupee
Credit Route –

Payment of commission is not payable on exports

under rupee credit route with some exceptions.

Remittance / Deduction
The payment of commission to overseas agent on
exports covered by an irrevocable L/C can be
made by way of either remittance or deduction
from the bill proceeds. Such cases fall within
the delegated powers of the banks.

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 Appointment of Overseas Agents
What if commission is not declared on
GR,PP, etc?

It can still be remitted if the bank (AD) is

satisfied about the reasons adduced by
the exporter for not declaring the amount
of commission on the relative Export
Declaration Form, provided a valid
agreement/written understanding
between the exporter and overseas
agent /beneficiary for payment of
commission subsists.
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 Appointment of Overseas Agents

Commission of Project Exports,

Services Exports on Deferred
Payment
• Special rules are applicable to remittances
of commission on exports on Deferred
Payment Terms, Turnkey Projects and
Construction Contracts abroad.
• While clearing the proposal, the total
foreign exchange outgo including
commission will be taken into account by
the working group of RBI, EXIM Bank,
ECGC.
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 Appointment of Overseas Agents
• Actual remittance of commission will
require specific approval of RBI.
• Applications for remittance of commission
should be made in the usual manner,
together with documents as mentioned
above under the head of Procedure of
Remittance of Commission.
Services Export
• Exporters of services will need prior
approval of RBI for engaging agents
abroad for securing service contracts of
different types.
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 Appointment of Overseas Agents
• Rate of commission – There is no
restriction with regard to rate of agency
commission on services exports.
• Payment – The remittance of commission
shall be made in the same manner as for
usual payment of commission.

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Appointment of Overseas Agents

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