The Commission Was 3%. It Was Charged on Both Sides.
Quote from Guest on May 14, 2026, 12:42 amSome Chinese industrial trading companies collect commissions from both the buyer and the supplier simultaneously. Identifying this structure requires specific documentation.
A mining equipment procurement manager in Chile was working with a Shanghai-based trading company that positioned itself as the buyer's agent in China. The arrangement was explicit: the trading company would source from Chinese manufacturers, manage quality control and logistics, and receive a 3% service fee from the buyer on the total order value. The arrangement ran for two years and three separate equipment batches. The buyer was satisfied with the service.
On the fourth batch, a factory relationship change led to an introduction where the buyer accidentally met the factory's export sales manager directly. In the conversation, the factory representative referenced the "agent commission" they paid to the Shanghai trading company—a commission that, when described in terms of percentage and payment timing, was clearly an additional margin on top of the factory price, separate from the buyer's fee.
The buyer had been paying a 3% service fee to their agent. The agent had been receiving an additional 4-6% from the factory—incorporated into the factory price that was presented to the buyer as the base cost.
How the Structure Works and Why It Is Hard to Detect
The dual-commission structure is not universally used by Chinese trading companies or agents. It is common enough that it should be understood as a structural possibility, not an exceptional case. The mechanism operates through opacity at the factory pricing level.
When a trading company presents a factory quotation to a buyer, the presented price is typically described as the factory's price—the cost before the agent's service fee is added. In the dual-commission structure, the "factory price" presented to the buyer is not the manufacturer's actual list price or production cost. It is a price that includes a factory-side margin for the agent, negotiated bilaterally between the factory and the agent without the buyer's knowledge.
The buyer sees: factory price X + agent fee Y%. The actual structure is: factory price A + agent factory-side commission B = X, then + agent buyer-side fee Y%. The buyer is paying for two layers of intermediary margin while believing they are paying for one.
This structure is not fraud in all jurisdictions—it is a variant of normal commercial practice in some industries. Whether it violates the specific terms of the agency relationship depends on what the agency agreement says about exclusive representation and undisclosed compensation. Many agency agreements with Chinese trading companies do not address this scenario explicitly, which means the buyer's remedy is limited even when the structure is discovered.
What Creates Transparency in This Relationship
The mechanism that makes the dual-commission structure visible is factory price verification. If the buyer has independent access to the factory's price list—or can get a direct quotation from the factory under a pretext—the comparison will reveal the gap between the factory's actual pricing and the "factory price" presented by the agent.
This requires buyer access to factories that the agent may have an interest in limiting. Agents who operate on dual commissions have a structural incentive to maintain the buyer's reliance on them as the sole channel to the factory. They may actively discourage or prevent direct buyer-factory contact. A sudden shift in agent behavior toward restricting factory access—particularly on established supplier relationships—warrants attention.
Requesting factory invoices as part of the payment documentation provides partial transparency. The factory's VAT invoice will reflect the price the factory received, which should be reconcilable with the "factory price" quoted by the agent. If the factory invoice amount is materially below the buyer's understanding of the factory price, the difference is the factory-side margin.
The more fundamental question is whether the agent's arrangement with the factories they source through is disclosed and acceptable to the buyer. A transparent agent—one who collects fees from both sides but discloses this in writing and allows the buyer to verify factory pricing independently—is providing a legitimate bundled service at a disclosed total cost. An agent who operates the same structure without disclosure is extracting undisclosed margin from a buyer who believed they were getting independent representation.
Whether your current agent arrangements with China-based trading companies or sourcing agents involve undisclosed factory-side compensation is a question that is easier to investigate before a long-term relationship is established than after.
Keywords: China trading company double commission industrial procurement | China intermediary commission structure, industrial trading company China risk, procurement intermediary transparency China, supplier agent China fee, China broker dual commission
Words: 712 | Source: Industry pattern — documented across multiple procurement cases in mining, energy, and industrial operations | Created: 2026-05-03
Some Chinese industrial trading companies collect commissions from both the buyer and the supplier simultaneously. Identifying this structure requires specific documentation.
A mining equipment procurement manager in Chile was working with a Shanghai-based trading company that positioned itself as the buyer's agent in China. The arrangement was explicit: the trading company would source from Chinese manufacturers, manage quality control and logistics, and receive a 3% service fee from the buyer on the total order value. The arrangement ran for two years and three separate equipment batches. The buyer was satisfied with the service.
On the fourth batch, a factory relationship change led to an introduction where the buyer accidentally met the factory's export sales manager directly. In the conversation, the factory representative referenced the "agent commission" they paid to the Shanghai trading company—a commission that, when described in terms of percentage and payment timing, was clearly an additional margin on top of the factory price, separate from the buyer's fee.
The buyer had been paying a 3% service fee to their agent. The agent had been receiving an additional 4-6% from the factory—incorporated into the factory price that was presented to the buyer as the base cost.
How the Structure Works and Why It Is Hard to Detect
The dual-commission structure is not universally used by Chinese trading companies or agents. It is common enough that it should be understood as a structural possibility, not an exceptional case. The mechanism operates through opacity at the factory pricing level.
When a trading company presents a factory quotation to a buyer, the presented price is typically described as the factory's price—the cost before the agent's service fee is added. In the dual-commission structure, the "factory price" presented to the buyer is not the manufacturer's actual list price or production cost. It is a price that includes a factory-side margin for the agent, negotiated bilaterally between the factory and the agent without the buyer's knowledge.
The buyer sees: factory price X + agent fee Y%. The actual structure is: factory price A + agent factory-side commission B = X, then + agent buyer-side fee Y%. The buyer is paying for two layers of intermediary margin while believing they are paying for one.
This structure is not fraud in all jurisdictions—it is a variant of normal commercial practice in some industries. Whether it violates the specific terms of the agency relationship depends on what the agency agreement says about exclusive representation and undisclosed compensation. Many agency agreements with Chinese trading companies do not address this scenario explicitly, which means the buyer's remedy is limited even when the structure is discovered.
What Creates Transparency in This Relationship
The mechanism that makes the dual-commission structure visible is factory price verification. If the buyer has independent access to the factory's price list—or can get a direct quotation from the factory under a pretext—the comparison will reveal the gap between the factory's actual pricing and the "factory price" presented by the agent.
This requires buyer access to factories that the agent may have an interest in limiting. Agents who operate on dual commissions have a structural incentive to maintain the buyer's reliance on them as the sole channel to the factory. They may actively discourage or prevent direct buyer-factory contact. A sudden shift in agent behavior toward restricting factory access—particularly on established supplier relationships—warrants attention.
Requesting factory invoices as part of the payment documentation provides partial transparency. The factory's VAT invoice will reflect the price the factory received, which should be reconcilable with the "factory price" quoted by the agent. If the factory invoice amount is materially below the buyer's understanding of the factory price, the difference is the factory-side margin.
The more fundamental question is whether the agent's arrangement with the factories they source through is disclosed and acceptable to the buyer. A transparent agent—one who collects fees from both sides but discloses this in writing and allows the buyer to verify factory pricing independently—is providing a legitimate bundled service at a disclosed total cost. An agent who operates the same structure without disclosure is extracting undisclosed margin from a buyer who believed they were getting independent representation.
Whether your current agent arrangements with China-based trading companies or sourcing agents involve undisclosed factory-side compensation is a question that is easier to investigate before a long-term relationship is established than after.
Keywords: China trading company double commission industrial procurement | China intermediary commission structure, industrial trading company China risk, procurement intermediary transparency China, supplier agent China fee, China broker dual commission
Words: 712 | Source: Industry pattern — documented across multiple procurement cases in mining, energy, and industrial operations | Created: 2026-05-03