Consignment agreement

A consignment agreement is an agreement between a consignee and consignor for the storage, transfer, sale or resale and use of the commodity. The consignee may take goods from the consignment stock for use or resale subject to payment to the consignor agreeably to the terms bargained in the consignment agreement. The unsold goods will normally be returned by the consignee to the consignor.

Consignment and distribution agreements

It may be accompanied by a consignment agreement (Franchising, distributorship or OEM). Goods are stored at the premises of the distributor, or premises of a third party^{[disambiguation needed ]}, at distributor`s disposal but belongs to the exporter.

This agreement decreases the exporter`s risk because he remains the owner of the commodities in storage. The distributor does not need to pay until has resold commodities, so he improves his cash flow. Both parties must ensure that the consignment agreement is formulated very carefully, so that there remains no room for doubt with regard to third parties, specifically the distributor`s creditors in case of his bankruptcy. The distributor and the exporter have incompatible interests. The distributors’ interest will be to raise the size of the stock in consignment because this has no effect on his cash situation. Because of that the parties should agree on reasonable stock rolling adapted to the market demand, taking into account of how quick the exporter may produce and deliver additional goods to fill up the stock in order to avoid disruption to the stock.

There is requested the fulfillment of conditions by the custom and VAT authorities. Due to the European VAT rules, it is easier to have a consignment stock between EU countries. The distributor is required to keep accurate accounts, but dispensable to have a bonded warehouse.^[1]

See also

• Consignment stock

References

1. ^ Rigault, Didier (2010). International Business Agreements. Oslo: The International Business Law Group. p. 83. ISBN 978-82-991430-9-7. 

Further readings

• Rigault, Didier (2010). International Business Agreements. Oslo: The International Business Law Group. ISBN 978-82-991430-9-7. 
• "Commission Notice on the Definition of Relevant Market. Summaries of EU Legislation.". 20 April 2011. http://europa.eu/legislation_summaries/competition/firms/l26073_en.html. Retrieved 8 October 2011.