Given the complexities of international trading nowadays, businesses today prefer a specialist trading company that can handle diverse export-import procedures and operations seamlessly. The primary role of an international trading company is to bridge the gap between an importer and exporter. They facilitate the buying and selling process between businesses from different countries, streamlining operations and ensuring profitable outcomes for both producers and consumers.
The essence is to procure commodities in bulk from one country and trade them in different countries where the demand is high. Such companies are involved in handling high volumes of primary materials, food, non-food, generic pharmaceuticals, chemicals, heavy machinery, etc.
It is important to understand here that trading houses such as SUISSE COMMODITY, are full-service companies and do not engage in manufacturing or marketing any commodities directly. They only serve as value addition, aiding in effective international transactions. Typically, there are three reasons why trading companies are gaining significance today –
- Trade liberalisation and reduced tariff barriers
- Growing competition in the field of global trading
- Fast-paced industrialisation in developing countries
- Flexibility to choose the desired market
- Seamless trading transactions with the ability to focus on core business
If you think a trading company is right for your business to flourish, diversify and penetrate global markets, discussed here are their primary functions that you should consider.
Table of Contents
Functions of a Trading Company
1. Discovering a high-demand market for any given commodity:
It begins with identifying potential and lucrative market for a particular product or commodity where the demand is high and supply is poor. The objective is to reach necessary commodities from their high-supply/high-production regions to their high-demand regions, facilitating profitable trading between two businesses or countries.
2. Identifying buyers (importers) and to invoke their interest:
Once a high-demand market has been identified, the role of a trading company is to classify prospective buyers or agents and engage with them meaningfully to invoke interest. This is an important function because a lot depends on how efficiently a trading house can influence the buyer by spotting their needs and building profitable connections.
The function of a trading company also involves identifying suppliers or exporters who can supply the goods in bulk volumes and at competitive prices.
3. Determining creditworthiness of the buyer:
Experienced and reputable trading companies strictly ensure the financial stability and trustworthiness of the buyer or importer before engaging in a trade. A buyer with poor creditworthiness or lack of Proof of Funds can pose a serious risk to the company’s payment interest. Therefore, top-notch trading houses like SUISSE COMMODITY also provide trade financing solutions, including powerful financial instruments that help assure payment.
4. Deciding upon the terms of sale, price and product delivery:
It is also the responsibility of a trading company to negotiate the price of commodities, terms of sales and assurance of delivery. This is a vital step that helps protect the interests of both parties. With competitive pricing and mutually-beneficial terms & conditions, the trading transactions become more efficient and profitable.
5. Inspection and Certification:
This is a crucial function but only a few good trading houses ensure strict inspection of the goods to be exported. It is done to protect the importer’s interest and ensure the commodities meet the terms and conditions agreed upon. Upon a thorough inspection of the goods in batches, they provide a certificate, assuring that the product quality is at par with the pre-determined standards.
Considering the nature and bulk amount of goods being traded between the two countries, it is imperative to have insurance and mitigate the risk of loss. Several trading companies also provide insurance services through self or a third-party, assuring loss recovery if misfortune strikes during the shipping process.
7. Managing all aspects of logistics and shipping:
This is an integral function of a trading company – effective logistics management and prompt shipping. They will take care of all procedures regarding logistics handling and transportation, ensuring you the peace of mind to focus on your core business.
8. Overcoming challenges of customs & trading barriers:
A trading company will handle every custom-related activity and leave no stone unturned to overcome all trading barriers that may arise when the goods reach their destination country. All documentation will be done by them on behalf of the parties to trade. A good trading house is one that completes all custom procedures and documentation beforehand to avoid last-minute hassles or cause the goods to wait for days or months before they can be distributed. This is an important function and only an experienced international trading company can do this with efficiency and least hassles.
9. Effective supply chain management:
Once the goods reach the destination and get customs clearance, the role of the trading company is to organise and manage their value chain. This helps ensure that the goods reach the consumers promptly and efficiently.
10. Financing the international trading transaction:
Many trading companies partner with banks or financial institutions who aid in financing the trade. They provide different types of financial instruments – Letter of Credit, Bank Guarantee, Proof of Funds, Standby Letter of Credit and Warranty – on behalf of the buyer or importer. This helps guarantee that if in any case, the buyer is unable to pay or becomes insolvent, the payment will still be made on fulfilling specific conditions as mentioned in the trade agreement. It is the responsibility of the trading company to collect such payments from the buyer for goods traded.
The role of an efficient trading company, such as SUISSE COMMODITY, is integral for successful global trading. By effectively managing all aspects of export-import, they not only help build profitable relations but enables you to focus on your key business. However, it is crucial to choose the trading company wisely as a lot depends on their experience, knowledge and skills. Make sure you identify the fine line of difference between a trading intermediary and a trading company and choose the latter wisely for effective business outcomes.