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Consignment agreement

Exporters sometimes arrange for their products to be sold on consignment meaning they give the goods to a customer and let them do the selling.

Selling on consignment is risky and leaves exporters open to exploitation. The customer may not really want the goods and has little incentive to market them effectively. In addition, they may not have the money to pay for them and may refuse to return them.

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However, selling on consignment is sometimes the only way an exporter can gain distribution of their products. In those instances, drawing up a robust consignment agreement can provide protection.

Issues to be considered include:

  • Due diligence on the consignee
  • Distinguishing consignment stock from other stock
  • Storage and insurance
  • Risk of loss or damage
  • Security for consignment stock
  • Record keeping and reporting
  • Physical stock takes
  • Draw down procedure
  • Replenishment procedure
  • Payment terms
  • Audit and inspection rights
  • Termination of the arrangement and removal rights

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