Sourcing commission: rate, basis and how it works

Sourcing commission is a percentage charged on the value of the goods purchased. It pays the agent for research, negotiation and follow-up work. This pay model is widespread among agents based in China. The buyer pays nothing upfront: the commission tracks the order, and its amount varies with what you buy.

The model also exists in reverse: some intermediaries are paid by the factory. This setup creates a conflict of interest, since the person advising you is paid by the person selling to you. A serious agent takes their commission on the buyer's side and states it clearly. Transparency shows from the first exchange: ask who pays them, and on what basis.

The basis is the sum the percentage is applied to. In practice, it almost always matches the value of the goods alone: the ex-factory price, known as ex-works, or the FOB price, meaning up to loading on the vessel. International freight, insurance, customs duties and VAT are not, in principle, part of the calculation.

This detail changes the amount billed. An 8% commission on an ex-factory price is not the same sum as the same commission applied to a value that includes freight and insurance. Get the basis written into the agreement, along with the billing rhythm: per order, or grouped over a month. Specify the currency too, since the exchange rate on the payment date shifts the amount.

Rates charged in China sit, as a rough range, between 5 and 10% of the order value. Around this range, several factors come into play. A high, regular volume pulls the rate down. A small order, a technical product or uncertain sourcing pushes it up, because the work does not shrink with the amount.

On small orders, many agents turn down the percentage model and propose a flat fee instead. The reason is simple: full follow-up takes the same work on two thousand euros as on twenty thousand. At the other end, a buyer who orders every month often gets a reduced rate, or a commission cap. Everything is negotiable, provided you compare equivalent services.

An agent's commission generally covers a set of ongoing services. The exact list varies from one agent to another, which is precisely why it needs to be put in writing. Here is what it usually includes.

Third-party expenses stay outside it. A laboratory test, a certification, a factory audit or an inspection carried out by an independent body are billed separately, at real cost or with a stated margin. Freight, insurance and customs duties follow the same logic. Keep one rule in mind: the commission pays for the agent's work, everything else should appear as an itemised cost.

Commission suits buyers whose purchases repeat and whose agent works with them over time. You only pay for what you buy, the agent stays involved throughout production, and their interest aligns with yours: an order that succeeds. Fixed fees, on the other hand, pay for a defined assignment, with a deliverable set in advance.

The two models combine. A buyer can pay a flat fee for an audit, then hand ongoing orders over on commission. In the other direction, an agent may turn down a commission on a small volume and propose a single flat fee instead. The decision criterion stays the same: how regular your purchases are, and how much work is expected between two orders.

The main risk is a hidden margin. An agent may quote a low commission while having the factory pay them a rebate on every order, or inflate the factory price you see. The buyer believes they are paying 5% and actually bears more. The safeguard is one requirement: obtain the factory invoice, in Chinese, matching the real ex-factory price.

One last point concerns the flow of money. If you pay for the goods through the agent, that agent takes on two roles at once: cashier and controller. Many buyers prefer to pay the factory directly and settle the commission separately. This choice makes things easier to prove in a dispute: everyone can see who paid what, and for which goods.

Sorva is a sourcing and brokerage house. Our Chinese-speaking team in Guangzhou speaks the factory's language, reads invoices in Chinese and negotiates directly with manufacturers. You open a file, we search, compare and negotiate on your behalf, then follow production through to loading.

In most cases you pay no fees: you open a file, we negotiate the goods on your behalf, and we take a commission on their ex-factory value, adjusted for volume. The rate, the basis and the services included are set out in the file, in writing, before the first order.