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When you want a stable presence in a market, you sign a contract with a local partner. The distributor buys and resells; the agent mediates and earns a commission. Each arrangement splits inventory, collection and control differently.
Goal: Tell a distribution contract from an agency contract, choose the one that suits a company and calculate which option leaves more money.
Selling abroad is almost never a single sale. When you want a stable presence in a market, you need a contract that defines the relationship with your local partner. The most common are the distribution contract and the agency contract. They look alike, but they split risks differently. How to choose the way to enter a market is covered in topic 3-1.
A distributor buys your goods, resells them in its own name and on its own account, and earns the difference between the purchase price and the selling price. It holds inventory, serves customers and bears the risk of not selling or not collecting. Each of its purchases is an international sale, so the ideas in topic 4-1 apply. The usual practice is to sign a framework agreement and then issue purchase orders. In general, the CISG reaches each specific sale; the framework agreement is governed by the law you choose.
An agent, or commercial representative, looks for customers and handles orders for you, and earns a commission on each sale achieved. It does not buy the goods. The sales contract is signed between you and the end customer. That is why you bear the inventory and the collection risk, but you keep control of the price and of the relationship with the customer. Define in writing whether the agent can sign in your name. In several countries the law protects the agent, for example with compensation when the contract ends, and those rules may apply even if your contract says otherwise.
The same clauses matter in both contracts: the territory where it can sell, exclusivity (whether only it can sell there), minimum targets for purchases or sales, the term and renewal, the notice to terminate and what happens at the end with the inventory, the customers and the brand. Grant exclusivity only in exchange for minimum targets. Otherwise, you can block your own market with a partner that does not sell. The competition authorities of the country where the contract applies (in Peru, INDECOPI) may review exclusivity and the rules on resale price.
There are other useful contracts. Consignment: you send the goods to a third party who sells them and pays you when it sells; you keep ownership and risk (covered in the Exports course). Franchise: you grant your brand, your method and your support in exchange for periodic payments. Brand or technology license: you authorize its use in exchange for royalties. Contract manufacturing (maquila): another company makes goods to your specifications. The confidentiality agreement: signed before sharing sensitive information. Before granting a brand, register it in the partner's country. Some countries also require registering the license contract.
| Aspect | Distributor | Agent |
|---|---|---|
| Who buys the goods | The distributor, in its name and on its own account | No one in the relationship: the end customer buys from the exporter |
| How it earns | Margin between the purchase price and the resale price | Commission on each sale achieved |
| Who signs the sale to the end customer | The distributor | The exporter (the agent only if it has power of attorney) |
| Inventory risk | The distributor's, once it buys | The exporter's |
| Risk of collecting from the end customer | The distributor's | The exporter's, unless agreed otherwise |
| Control of the final price | Lower: the distributor sets its price, within the limits of competition law | Higher: the exporter sets the price |
| When it works | Market that requires stock, after-sales service and local logistics | New market or made-to-order product, with little local fixed cost |
Result: The agent leaves US$ 4,800 more a year, but the exporter chooses the distributor because it cannot store, deliver or collect in Mexico. It protects its position with limited exclusivity, a target of US$ 36,000 and clear rules for the end.
10/2026
The International Chamber of Commerce (ICC) catalog of model contracts includes, among others, a Commercial Agency model, a Distributorship model, an International Franchising model and a confidentiality and non-circumvention agreement for occasional intermediaries. The fact that separate models exist for agency and for distribution confirms that they are different relationships, with different clauses. An SME without a lawyer in every market can start from these texts.
Start from a recognized model for your type of relationship and adapt it with a lawyer from your partner's country.
18/12/1986
The Council of the European Communities adopted on 18/12/1986 Directive 86/653/EEC on self-employed commercial agents, which appears in EUR-Lex, the official portal of Union law. It is a Community rule that harmonizes the laws of the member states on this type of contract. For a Peruvian exporter, appointing an agent in an EU country does not depend only on what the contract says: local law may grant rights to the agent.
Before appointing an agent abroad, ask a local lawyer what rights the law of its country gives it.
Source: EUR-Lex – Directiva 86/653/CEE sobre agentes comerciales independientes
2008
Decision 689 of the Andean Community allows member countries to make optional the requirement to register the license contract for the use of a trademark. That is, the rule on registering licenses does not have to be identical in all Andean countries. Whoever licenses its brand must check, at the industrial property office of the partner's country, whether registration is mandatory or voluntary.
Before licensing your brand in a country, confirm at its industrial property office whether you must register the contract.
Practise with the calculators, the COMEX Simulator and the review questions on the main page.
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