The Agent Who Saved You 15% Was Also Paid by the Factory
Quote from chief_editor on May 31, 2026, 3:00 amChinese procurement agents and sourcing intermediaries frequently receive commissions from both the buyer and the supplier. Understanding how this affects the advice you receive changes how you use their services.
A mining company in West Africa was sourcing jaw crusher wear parts through a Hong Kong-based trading agent. The agent had been introduced through an industry contact and had performed well on two initial orders -- correct parts, reasonable prices, on-time delivery. On the third order, the buyer noticed the invoice price was slightly higher than the previous two orders for the same items.
When the buyer asked the agent for a breakdown of the cost structure to understand the increase, the agent declined to provide it, citing commercial confidentiality. The buyer's subsequent investigation, conducted through a different sourcing channel, established that the Shandong manufacturer supplying through the agent was selling the parts at a price approximately 22% below what the agent was invoicing. The agent's margin was 28%.
A separate investigation established that the Shandong manufacturer was paying the agent a 5% introduction commission, which the agent had not disclosed to the buyer.
The agent was receiving 28% margin from the buyer and 5% commission from the manufacturer. Both parties were paying for a relationship that was serving the agent's interests more consistently than either party's interests.
How Dual Commission Structures Work in Chinese Industrial Trade
Dual commission -- receiving payment from both the buyer and the seller in a transaction -- is not illegal in Chinese commercial practice and is not universally disclosed. It is common in the segments of Chinese industrial trade where intermediaries have established relationships with both manufacturers and international buyers and where neither party has direct access to the other.
The mechanics are straightforward. A trading agent or sourcing firm with relationships at both the manufacturer and buyer level can position themselves as representing the buyer's interests (charging a service fee or margin on the goods) while simultaneously receiving an introduction or volume commission from the manufacturer whose goods they are sourcing. The buyer believes they are paying for independent sourcing service. The manufacturer believes they are paying for market access. The agent is being paid by both parties for what is effectively the same service.
The commercial justification the agent would offer is that the two payments reflect different services: the buyer pays for sourcing, specification management, quality oversight, and logistics coordination; the manufacturer pays for market access, customer management, and volume generation. Both services have value. Whether both payments are disclosed to both parties is a separate question.
In practice, the dual commission structure creates an incentive misalignment that is most visible in price negotiation. An agent negotiating on behalf of a buyer, who is also receiving a manufacturer commission that may be percentage-based, has a financial incentive to maintain the manufacturer's price at a level that sustains the commission base. The agent who negotiates aggressively on the buyer's behalf reduces their own commission income. This incentive does not mean all agents with dual commissions negotiate poorly for buyers. It means the incentive structure works against the buyer's price interest in a systematic way.
How to Identify and Address Dual Commission Arrangements
Disclosure is the starting point. An agent who is unwilling to confirm, in writing, that they do not receive payment or commission from any supplier in a given transaction is either receiving dual commission or is unwilling to put their fee structure in writing for other reasons. Both are informative.
Direct manufacturer contact verification is the next step. For an established sourcing relationship, the buyer should periodically obtain pricing directly from the manufacturers in their supply chain to benchmark the agent's pricing. This is not a betrayal of the agent relationship. It is price verification that every procurement professional should conduct on any indirect procurement channel. If the agent's pricing is consistently within a small margin of direct manufacturer pricing, the agent margin is transparent and defensible. If the gap is large and variable, the pricing structure warrants investigation.
Fee structure specification in the agency agreement -- requiring the agent to disclose all sources of remuneration related to the buyer's orders, and to return any manufacturer commission to the buyer as a price reduction -- is the contractual mechanism that addresses dual commission. Agents who refuse this clause are operating a dual commission model. Agents who accept it may still be worth using if their service value justifies a transparent margin.
The West Africa mining buyer's agent was providing genuine service. The service was worth a margin. Whether the margin was 28% plus 5% manufacturer commission is a different question -- one that the buyer could not answer because the fee structure was not disclosed. Transparency in intermediary fee structures is not an unreasonable requirement. It is the starting condition for knowing whether the intermediary's interests are aligned with yours.
Chinese procurement agents and sourcing intermediaries frequently receive commissions from both the buyer and the supplier. Understanding how this affects the advice you receive changes how you use their services.
A mining company in West Africa was sourcing jaw crusher wear parts through a Hong Kong-based trading agent. The agent had been introduced through an industry contact and had performed well on two initial orders -- correct parts, reasonable prices, on-time delivery. On the third order, the buyer noticed the invoice price was slightly higher than the previous two orders for the same items.
When the buyer asked the agent for a breakdown of the cost structure to understand the increase, the agent declined to provide it, citing commercial confidentiality. The buyer's subsequent investigation, conducted through a different sourcing channel, established that the Shandong manufacturer supplying through the agent was selling the parts at a price approximately 22% below what the agent was invoicing. The agent's margin was 28%.
A separate investigation established that the Shandong manufacturer was paying the agent a 5% introduction commission, which the agent had not disclosed to the buyer.
The agent was receiving 28% margin from the buyer and 5% commission from the manufacturer. Both parties were paying for a relationship that was serving the agent's interests more consistently than either party's interests.
How Dual Commission Structures Work in Chinese Industrial Trade
Dual commission -- receiving payment from both the buyer and the seller in a transaction -- is not illegal in Chinese commercial practice and is not universally disclosed. It is common in the segments of Chinese industrial trade where intermediaries have established relationships with both manufacturers and international buyers and where neither party has direct access to the other.
The mechanics are straightforward. A trading agent or sourcing firm with relationships at both the manufacturer and buyer level can position themselves as representing the buyer's interests (charging a service fee or margin on the goods) while simultaneously receiving an introduction or volume commission from the manufacturer whose goods they are sourcing. The buyer believes they are paying for independent sourcing service. The manufacturer believes they are paying for market access. The agent is being paid by both parties for what is effectively the same service.
The commercial justification the agent would offer is that the two payments reflect different services: the buyer pays for sourcing, specification management, quality oversight, and logistics coordination; the manufacturer pays for market access, customer management, and volume generation. Both services have value. Whether both payments are disclosed to both parties is a separate question.
In practice, the dual commission structure creates an incentive misalignment that is most visible in price negotiation. An agent negotiating on behalf of a buyer, who is also receiving a manufacturer commission that may be percentage-based, has a financial incentive to maintain the manufacturer's price at a level that sustains the commission base. The agent who negotiates aggressively on the buyer's behalf reduces their own commission income. This incentive does not mean all agents with dual commissions negotiate poorly for buyers. It means the incentive structure works against the buyer's price interest in a systematic way.
How to Identify and Address Dual Commission Arrangements
Disclosure is the starting point. An agent who is unwilling to confirm, in writing, that they do not receive payment or commission from any supplier in a given transaction is either receiving dual commission or is unwilling to put their fee structure in writing for other reasons. Both are informative.
Direct manufacturer contact verification is the next step. For an established sourcing relationship, the buyer should periodically obtain pricing directly from the manufacturers in their supply chain to benchmark the agent's pricing. This is not a betrayal of the agent relationship. It is price verification that every procurement professional should conduct on any indirect procurement channel. If the agent's pricing is consistently within a small margin of direct manufacturer pricing, the agent margin is transparent and defensible. If the gap is large and variable, the pricing structure warrants investigation.
Fee structure specification in the agency agreement -- requiring the agent to disclose all sources of remuneration related to the buyer's orders, and to return any manufacturer commission to the buyer as a price reduction -- is the contractual mechanism that addresses dual commission. Agents who refuse this clause are operating a dual commission model. Agents who accept it may still be worth using if their service value justifies a transparent margin.
The West Africa mining buyer's agent was providing genuine service. The service was worth a margin. Whether the margin was 28% plus 5% manufacturer commission is a different question -- one that the buyer could not answer because the fee structure was not disclosed. Transparency in intermediary fee structures is not an unreasonable requirement. It is the starting condition for knowing whether the intermediary's interests are aligned with yours.