Quick Answer
How a sourcing agent is paid decides whose side it is on, and you can only confirm that in writing. A fee paid by your brand keeps the agent working for you. A commission from the factory, a margin hidden in the unit price or a rebate means the factory pays the agent too. Before you sign, get the factory's own quote and invoice, pay the factory directly, and get a written statement of anything the agent receives from the seller. US customs draws a similar line: a selling commission the buyer pays is added to the customs value of the goods.
A good sourcing agent can save a first-time founder months of emails, translation and factory hunting. The same agent can also sit between you and the factory and get paid by both. The quote sheet looks the same either way.
This guide covers the three ways agents get paid, what US customs law says about buying and selling commissions, and five questions to get answered in writing before you sign. It uses public rules and names no companies.
Key Takeaways
- Pay structure, not job title, tells you whose interests an agent represents.
- The three common models are a brand-paid fee, a factory-paid commission or margin, and platforms that are free to brands because suppliers pay.
- Under US law, a selling commission the buyer pays is added to customs value. A bona fide buying commission is not.
- The factory's original quote and invoice, plus direct payment to the factory, are the simplest proof of who is paid by whom.
- Settle formula rights with the manufacturer in the same round of paperwork.
Who Pays Your Sourcing Agent, and Why Does It Matter?
Whoever pays the agent is the agent's client. If the factory pays, even in part, the agent has a reason to steer you toward that factory, that price and that schedule.
A sourcing agent is a person or firm that finds manufacturers, relays your brief and manages orders for a brand. The title does not tell you who pays it. US customs guidance makes the same point: calling someone a buying agent does not make them one (CBP guidance on buying and selling commissions).
The conflict is quiet. A factory-paid agent can still answer fast and know good labs. What matters is the moment your interest and the factory's split, on price, a reformulation or a failed batch.
Three Ways a Sourcing Agent Gets Paid
Agent pay comes in three structures. Your brand pays a fee, the factory pays a commission or margin, or a platform is free to brands because suppliers pay it. Each one creates a different incentive.
| Model | Who pays the agent | What you usually see | What to ask for |
|---|---|---|---|
| Brand-paid fee | Your brand: a flat, project or monthly fee | A separate agent invoice, and the factory quote reaches you as the factory issued it | The fee terms in the contract and the factory's own quote sheet |
| Factory-paid | The manufacturer: a commission, a margin inside the unit price or a rebate | One bundled price from the agent and little or no factory paperwork | A written statement of every payment from the seller and the factory's original invoice |
| Platform | Suppliers: listing, membership or promotion fees | Free search and introductions for brands, with paid suppliers sometimes ranked first | How suppliers are ranked and which listings are paid |
Models mix. An agent can bill you a fee and also take a rebate from the factory. That is why the questions below ask about every payment, not only the main one.
What Does US Customs Say About Buying and Selling Commissions?
US customs treats the two differently. A selling commission the buyer pays is added to the transaction value of imported goods, unless it is already in the price. A bona fide buying commission is not added (19 U.S.C. 1401a).
A buying commission is a fee paid to an agent acting for the buyer. A selling commission is a fee paid to an agent acting for the seller. CBP says the main test is control: the buyer picks the manufacturer, decides what to buy and controls payment, and the agent follows the buyer's instructions.
CBP also weighs who bears the risk of loss and whether the buyer could buy without the agent. It asks whether the agent is financially detached from the seller and what the commercial documents show. An agent that also works for the seller is not ruled out automatically. CBP does expect it to tell the buyer what it does for the seller and how much the seller pays.
Two points matter for a founder. The importer has to prove a bona fide buying agency. And if the factory pays the agent out of the price you paid, that money is already inside the customs value. Whether a given payment is dutiable on your entries is a call for your licensed customs broker. For how the terms of sale move customs work around, see EXW, FOB and DDP from Korea.
"I'm Liz, I run altameet from Manhattan, NYC. The simplest test is to ask for the factory's own quote sheet before you pay anyone. If your agent works for you, handing it over costs nothing. If you want a quick gut-check on an agent agreement, I'll give you 15 minutes free."
Five Questions to Get Answered in Writing Before You Sign
Ask these five questions before you sign, and put the answers in the agreement itself. A verbal answer will not help you in a dispute or a customs review.
- Do you receive any money from the factory? Commissions, referral fees, rebates, volume bonuses and a margin inside the unit price all count. Ask for a written no or a written amount.
- Will I get the factory's original quote and invoice? They should come from the manufacturer in its own name, not retyped on the agent's letterhead.
- Does my payment go straight to the factory? If money passes through the agent, ask why, and what the agent keeps.
- What will you put in writing for each payment? Every deposit and balance should come with an invoice that shows who is paid, for what and how much.
- Who owns the base formula and the brand-specific changes? Get the answer before development starts, not after the first batch.
An agent paid only by your brand has no reason to dodge any of these. If the answers stay vague, treat that as information.
Which Signs Point to an Agent Working for the Factory?
The clearest sign is missing paperwork: no factory quote, no factory invoice and every payment routed through the agent. CBP's guidance flags the same pattern when it describes an intermediary acting for the seller or for itself.
- The agent will not name the factory until you pay a deposit.
- Every quote arrives as one price on the agent's letterhead.
- You never speak to the factory, even on a video call with the agent present.
- The agent chooses the manufacturer, and you could not buy from it without the agent.
- The agent always uses the same factory or a related company.
- The contract says nothing about payments from the seller.
One sign alone proves nothing. Several together mean you are not in control of the purchase, and control is exactly what CBP's test looks for.
Formula Rights Belong in the Same Paperwork
Settle formula rights with the manufacturer in writing before development starts. On an ODM base, the base formula belongs to the ODM, and what a brand can secure is its brand-specific modification.
An agent cannot hand you rights the factory never granted. Ask which document covers the brand-specific changes and make sure the manufacturer signs it. The full picture is in who owns your K-beauty formula and trademark.
How Should the Payments and Paperwork Be Set Up?
The clean setup is two invoices and two payments. The factory bills your brand for the goods, the agent bills your brand for its fee, and you pay each one directly. CBP describes this as the easiest way to show that a payment to a middleman is a buying commission.
Have the agreement say who selects the manufacturer, who approves each order and who controls payment. Keep the factory invoices and the agent invoices together, because your customs broker will ask for both.
If an agent insists on collecting the full amount and paying the factory itself, ask for the factory's receipt for each transfer. A receipt in the factory's name shows what the factory actually got, and the gap between that and your payment is the agent's share.
Still choosing between going direct, a Korean trading house or a US-side partner? Compare the routes in Korean ODM direct vs trading house vs US broker. For the whole path from brief to launch, start with the step-by-step guide to starting a K-beauty skincare brand.
For the record, here is how ALTAMEET is paid. ALTAMEET is a consultancy paid only by the brands it represents, and it does not accept commissions, referral fees, rebates or margin from manufacturers or partners.
Sourcing Agent Agreement Checklist
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Frequently Asked Questions
Is a factory-paid agent always a bad choice?
No. A factory can pay its own sales agent, and that can work if it is disclosed up front. The problem is undisclosed pay to an agent that presents itself as yours. At the border, a payment that is really a selling commission also belongs in the customs value.
Do I need a written buying agency agreement?
It helps a great deal. CBP treats a written agreement as evidence of a buying agency, not proof, and says a buying agency is very difficult to establish without one. What the parties actually do still decides.
Can I ask the factory directly whether it pays my agent?
Yes. Ask the manufacturer to confirm in writing that its price to you includes no commission, fee or rebate for the agent, and keep that next to the agent's own statement.
Do US importers have to report commissions at entry?
Yes. CBP's guidance says invoices must show all charges, including commissions, and the importer signs a declaration on CBP Form 7501 that covers them. Your customs broker decides how each payment is treated.
By Liz Song, K-beauty sourcing consultant.
