Apparel sourcing agent or buying house in Bangladesh: what each does and how agents are paid

What a sourcing agent in Bangladesh does

A sourcing agent in Bangladesh is someone on the ground who can find a factory that suits the product, get samples made, follow the order through production and see it shipped. HMRC's customs guidance describes buying agents in those terms, as intermediaries who act for the buyer, represent the buyer and help it find and purchase goods. US Customs and Border Protection (CBP) lists the services it regards as characteristic of a buying agent, summarised below, and says the list is not exhaustive.

In Bangladesh the labels overlap. A clothing sourcing agent, a garments sourcing agent, a buying house and an apparel sourcing company may all offer the same kind of service, and the Bangladesh Garment Buying House Association describes itself as an intermediary organisation of the ready-made garment sector. The name on a website tells you little. What matters is who chooses the factory, who pays the intermediary and how, and what you receive in writing.

• Compiling market information and locating suppliers
• Gathering samples and telling the factory what the buyer wants
• Placing orders on the buyer's instructions and helping with negotiation
• Translating between buyer and factory
• Inspecting and packing the goods
• Arranging shipment and payment

How a sourcing agent is usually paid

An agent is paid a commission, and CBP's guidance describes its usual form: an agreed percentage of the price of the goods. The questions that matter are whom the agent works for, who controls it, and who pays it. A buying agent works for the buyer, under the buyer's control, and is paid by the buyer. A selling agent works for the factory and is usually paid by it; HMRC notes that where the seller pays the commission it is usual for it to be included in the invoice price, so the buyer does not normally see it as a separate line. If the buyer pays a selling agent's commission itself, the commission is still added to the customs value. A third arrangement is not agency at all: an intermediary buys from the factory and sells to you at its own price, and what it keeps is a mark-up inside that price rather than a commission.

None of these is wrong in itself. The risk is not knowing which one you are in. An intermediary that says it works for you but is also paid by the factory is serving two parties, and CBP looks at that arrangement more closely. CBP says this does not rule it out as a buying agent if its services are primarily for the buyer, its services to the factory are limited, and it tells the buyer what those services are and how much it is paid for them.

When you compare an agent's offer with a price per piece, add any commission you pay to the factory's price, and ask each party what sampling, testing and freight cost on top.

Why the payment model matters at customs

In the United States, the European Union and the United Kingdom, the customs value of imported goods starts from the transaction value, the price actually paid or payable, and all three treat commissions the same way in outline. A selling commission paid by the buyer is added to the value if it is not already in the price. A genuine buying commission is left out. In the US the rule sits in 19 U.S.C. 1401a(b)(1)(B), which adds selling commissions incurred by the buyer and does not list buying commissions among the additions. In the EU, Article 71 of the Union Customs Code adds commissions and brokerage except buying commissions, and Article 72 lists buying commissions among the elements not included. HMRC's guidance for the UK says buying commissions can be excluded when they are shown separately from the price of the goods, on the documents accompanying the import declaration or in the importer's accounts.

The exclusion is not automatic. CBP puts the burden of proof on the importer: without proof of a bona fide buying agency, the commission is treated as part of the value, and declaring it as a non-dutiable buying commission without the evidence can lead to penalties. CBP also notes that a buying commission paid through the factory, inside the factory's invoice, stays in the value even when the agency is genuine, because nothing may be deducted from the price actually paid. CBP says the easiest way to show a buying agency is a factory invoice for the goods and a separate agent invoice for the commission, each paid separately; a written agreement helps but is not decisive if the agent in fact chooses the factory. This is general information, not advice on your import: confirm how to declare any commission with your customs broker before the first shipment.

What an agent controls, and why that decides what it is

CBP's test for a genuine buying agent is control. The buyer makes the purchasing decisions and the agent carries them out: a buying agent usually does not choose the manufacturer or decide what is bought, does not control how and when the factory is paid, and generally neither bears the risk of loss nor absorbs the cost of shipping. The more discretion the intermediary has, the less likely it is to be a buying agent in customs terms. An intermediary that runs an independent business for its own benefit, takes title to the goods and keeps buyer and factory apart looks more like a seller.

That leaves a brand without staff in Bangladesh with a real choice. If you want someone who will choose the factory for you, that is exactly the discretion a buying agent in the strict sense does not have. If you want to keep control, choose the factory yourself, sign a buying agency agreement and pay the commission separately. If you want the intermediary to choose and manage the factory, judge the offer on what you receive in writing: the factory's name, the samples you approve, the inspection report and the shipping documents.

What CMB does as a buying house

CMB Sourcing Ltd. is a buying house in Narayanganj, Dhaka. It does not own factories or sewing lines. Orders are made in audited partner factories, and CMB names the factory making your order in writing before production, with its address, certificates and audit reports. CMB manages the sampling, the fabric and trim sourcing, the production follow-up and the shipping. Bulk fabric is tested against the approved swatch before cutting, quality is checked on the line, and an AQL final inspection is run and its report sent to you. You approve a sample or a report at each stage.

You receive a price per piece from CMB for your style and quantity. Starting prices for a basic style are published for 15 product categories, and your own price depends on fabric, weight, decoration, quantity and shipping term.

Goods ship FOB, CIF or DDP from Chattogram sea port or Dhaka airport, and CMB prepares the export documents and certificates of origin. CMB's own orders start at 500 pieces per style and colour, higher in some categories, and every enquiry gets a reply within one working day, from a founder. Ask CMB the questions below as you would any agent, and show the answers to your customs broker.

Questions to put to any sourcing agent or buying house

Whichever arrangement you choose, ask these in writing before you send a tech pack. The answers show which of the three payment models you are in, and they are the papers your customs broker will want to see.

• Who will be the seller on the commercial invoice for the goods?
• How are you paid, by whom, and will any commission appear on an invoice?
• Is your company financially independent of the factory, and if not, what is the link?
• Which factory will make the order, and will you name it in writing, with its address and audit reports, before production?
• Who checks quality on the line, is there a final inspection to a stated AQL, and will I receive the report?
• Which shipping term will you quote, FOB, CIF or DDP, and from which port or airport?
• What do sampling, testing and freight cost on top of the price per piece?
• How many pieces per style and per colour must I order for this product?