Includes typical use of agents and distributors and how to find a good partner, e.g., whether use of an agent or distributor is legally required.

China’s fast-growing economy attracts international participation, including exports from U.S. small and medium-sized enterprises (SMEs).  Unlike large international or multinational companies that establish operations for branding, marketing and various business activities in China, SMEs with limited budgets usually start with fostering a sales network through regional agents or distributors. Sales agents and distributors can assist in keeping track of policy and regulatory updates, both locally and nationally, collect market data, and quickly respond to changes.

However, there are some drawbacks to agents.  Employing a third-party results in additional costs and firms may also lose some control and visibility over sales/marketing.  Agency has implications for intellectual property rights protection and using an agent can increasing the risk of products being copied or counterfeited.
Given the above considerations, companies need to select agents and distributors carefully.  Companies should conduct due diligence, verify any information that is provided, and act on red flags.  There is no specific standard for international due diligence; however, some of the frequently asked questions in the following checklist may be useful in a company’s investigation of a potential business partner:

  • Do they represent any competing companies/products?
  • Can you communicate effectively with your counterpart?
  • Are they legitimately registered?
  • Who are the shareholders?
  • Are they financially sound?
  • Is it possible to arrange a site visit to their office/facility?

Once they have an agent(s) in place, U.S. companies should:

  • Insist that all permits and approvals (especially critical approvals such as trademark filings or deeds) are translated or reviewed by a reputable third party.
  • Hold frequent phone calls to review performance and problems and visit in-person at least once a year.
  • Monitor the U.S. and third country markets for possible IPR infringements originating in China.

Prepared by our U.S. Embassies abroad. With its network of 108 offices across the United States and in more than 75 countries, the U.S. Commercial Service of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the U.S. nearest you by visiting http://export.gov/usoffices.