Methods of Foreign Trade, страница 3

Trade fairs and exhibitions are also very important tools of promoting goods in international trade. They usually attract thousands of visitors and many prospective buyers among them. A great deal of profitable business is done in commercial centers at the exhibitions as they provide a great variety of services, such as stands to display, warehouses, etc. It is here where new contracts can be made, new transactions concluded, new orders placed and new markets established.

Usually trade fairs and exhibitions are held in the world centers of international trade. They are held in order to:

·  demonstrate new products and goods, promote them to new markets or launch them in the already developed markets;

·  see innovations;

·  find investors for the production of novelties;

·  conclude new contracts and involve partners into cooperation as buyers have an opportunity to familiarize with a product as well as to estimate its positive qualities and shortcomings;

·  analyze the activities of rivals.

A large amount of international trade is carried out not by direct contact between a buyer and a seller, but by intermediaries that are usually placed in the buyer’s country. Large enterprises are able to establish a manufacturing subsidiary or sales company and have their own network of distributive organizations to sell their goods at home and abroad. But this is beyond the means of smaller companies because it implies enormous capital outlay. That is why a great volume of business is handled through middlemen: agents and distributors.

Selling firms turn to commercial agents for their services mostly when they try to develop a new market for their goods in a foreign territory. Agents are instrumental in distributing the principal's product as they know the commercial conditions and changes in the market of their country. They have their own storehouses, showrooms, repair workshops, or service stations for providing after-sales services.

However, sales through agents have certain disadvantages as sellers are not in a direct contact with the market. They also completely depend on agents' diligence, efficiency and experience in handling business. Therefore, sellers always treat the matter of selecting an agent very seriously.

Any overseas agency agreement should include in detail all the duties and obligations to be undertaken by both parties. The main purpose of an agent is seeking out customers and contracting with them on the principal's behalf for the sale of the principal's products in their country. The main provisions included in an agency agreement should clearly define the territory in which the agent is entitled to act, time of the agreement validity, quantities an agent undertakes to sell annually and an agent's remuneration.

The relations between commercial agents and their principals can be determined by agency agreements either on a commission or a consignment basis. Concluding an agency agreement on both a commission and a consignment basis means that the goods sent remain the absolute property of the principal until delivered to the buyers.

The commission agent buys and sells goods in the principal's name and for the principal's account and charges a commission for their work. The consignment agent also sells goods in the principal's name and for the principal's account and operates like a commission agent but the consignment agent performs a wider range of functions. In many cases the consignment transactions are concluded on a sale or return basis in which case the agents are to dispose of the goods within an agreed and limited period of time. If the agents fail to sell the goods within the stipulated time, they are to return the unsold goods to the principals. In addition, the consignment agent pays duties and taxes and for obtaining the import license, if necessary, as well as often for advertising and for keeping the goods in a consignment warehouse and such an agent gets a higher commission accordingly. Also, a consignment agent may have to provide technical advice and after-sales service to customers. Under this type of an agency agreement, payment to the principals can be effected by agents by remittance either per each item or for the whole lot sold.