What is a commissionaire and how does it work?
At arm’s length, the lower the risk and activity, the lower the profit a distributor can expect to earn. This gave rise to a number of new structures for distributors, one of the most common of which was the commissionaire arrangement
A commissionaire is an arrangement recognised under the European civil law concept of agency. Under civil law, a commissionaire can enter into sales contracts in its own name, but on behalf of the principal, where the commissionaire does not usually bind the principal. In theory the customer cannot sue the principal - there is no contractual relationship between the principal and the customer.
A typical commissionaire structure for a manufacturing business operating cross border is shown in the diagram below, where the manufacturer is the principal, and the distributor is the commissionaire.