INTERNATIONAL AGENT AND DISTRIBUTOR ARRANGEMENTS
Submitted by: Steven J. Dickinson
Iowa exporters have many choices for market entry into other countries. These include “do it yourself” options like establishing a subsidiary to act as a sales office. They also include “partnering” options like using local sales representatives (agents), distributors, third party platforms (Amazon and its equivalents in other countries), licensing and joint ventures. Different approaches may be appropriate in different countries, based on cost, timing, availability of the “right” local partners, tax considerations and other factors.
Legal issues also should be part of your decision-making process. Laws in some countries protect sales representatives, distributors, or both, which may make it difficult or expensive to terminate the relationship. Other countries protect agents or distributors through court-developed doctrines rather than statutes, or through general legal principles like good faith. Many countries have more employee-friendly laws than the United States, including protections against termination, mandatory benefits, and vacation and leave requirements. It is not unheard of for an independent contractor to claim they were an employee, attempting to take advantage of these employee protections.
Whatever arrangement is selected should be documented with an appropriate written agreement. The agreement should specify the type of arrangement, whether it is exclusive (and what “exclusive” means), key economic terms, performance standards (quotas, etc.), other sales management and training issues, and non-compete provisions. In the international context, even “boilerplate” provisions have major consequences and should be carefully considered.
IEDA’s Trade Talk Series will host Steve in a webinar to discuss international agent and distributor agreements on July 21 at 9:00 a.m. CDT. Participants will receive the presentation slides and a 3-page issues checklist for agent and distributor arrangements.
Steve Dickinson is Co-Chair of the International Practice at the international law firm Cozen O’Connor and can be reached at firstname.lastname@example.org.