Information on "Consignment" and how exporters can use it in the export process. This article is part of "A Basic Guide to Exporting", provided by the U.S. Commercial Service, to assist companies in exporting.
Last Published: 10/20/2016
Consignment in international trade is a variation of the open-account method of paymentin which payment is sent to the exporter only after the goods have been sold by the foreign distributor to the end customer. An international consignment transaction is based on a contractual arrangement in which the foreign distributor receives, manages, and sells the goods for the exporter, who retains title to the goods until they are sold. Payment to the exporter is required only for those items sold. One of the common uses of consignment in exporting is the sale of heavy machinery and equipment since the foreign distributor generally needs floor models and inventory for sale. Goods not sold after an agreed-upon time period may be returned to the exporter at cost.

Clearly, exporting on consignment is very risky, inasmuch as the exporter is not guaranteed any payment and its goods are in a foreign country in the hands of an independent distributor or agent. However, consignment can help exporters become more competitive on the basis of better availability and faster delivery of goods. Selling on consignment can also help exporters reduce the direct costs of storing and managing inventory. The key to success in exporting on consignment is to partner with a reputable and trustworthy foreign distributor or a third-party logistics provider. Appropriate insurance should be in place to cover consigned goods in transit or in possession of a foreign distributor, as well as to mitigate the risk of nonpayment.