An agency agreement is the written deal between two forwarders in different countries who hand each other cargo: who controls which customers, how the margin on a shared shipment is divided, how the two sides bill each other and when the balance is settled. Many agent relationships run for years on emails and a rate sheet, and that works until a shipment goes wrong or a balance goes unpaid, at which point the questions nobody wrote down (whose customer was it, who owed what, in which currency, by when) become the whole dispute. This guide covers the commercial side: the clauses worth agreeing, the common profit-share models, and how settlement between agents actually works. Choosing the agent in the first place is covered in vetting overseas freight agents.
What an agency agreement between forwarders should cover
There is no standard international form that every forwarder signs. Networks publish their own membership rules, and some agents work from a template their lawyer drafted years ago. Whatever the starting point, these are the clauses that do the work.
- Parties and scope. The legal entities (not trading names), the modes covered (air, ocean FCL and LCL, road, customs brokerage) and the trade lanes. An agreement that says "all freight" invites arguments about whether a project shipment or an e-commerce consolidation was in scope.
- Exclusivity and territory. Whether each side appoints the other as its only agent in a country, a region or a port, and for which modes. Exclusivity is a concession: if you grant it, tie it to performance, such as a review if response times or volumes fall below an agreed level.
- Non-solicitation. The clause that stops your agent from approaching your customer, or the consignee you introduced, directly. Define "customer" (shipper, consignee, or both), how long the restriction lasts after the agreement ends, and what happens if the customer approaches the agent unprompted.
- Who controls the cargo. On each shipment, which side holds the customer relationship and the right to route it. This decides who earns the profit share and who earns a handling fee (see below).
- Liability allocation. Each side's liability to the other for its own acts, the trading conditions each side works under, the insurance each must carry, and who handles a cargo claim when the loss happened in the other agent's country. The same liability and insurance questions that apply to your customers apply agent to agent too.
- Payment terms, currency and settlement. Credit limit, the period for settling balances, the settlement currency, the exchange rate source, bank charges and the procedure for disputing an invoice.
- Bank details and change control. How a change of bank account is confirmed (by a call to a known number, never by email alone). Agent-to-agent payments are a favourite target of the fraud described in business email compromise and bank detail fraud in freight.
- Governing law and disputes. Which country's law applies, and whether disputes go to a named court, to arbitration, or first to a network's own dispute procedure. Without this clause, the first argument in any dispute is about where to have the argument.
- Term and termination. Notice period, what happens to shipments in transit at termination, and the deadline for settling the final balance.
A point that catches people out: in the EU, Council Directive 86/653/EEC gives commercial agents protections such as compensation on termination, but it defines a commercial agent as someone with continuing authority to negotiate "the sale or the purchase of goods" on behalf of a principal. Freight agents trading services with each other on their own account will usually fall outside it, although national laws implementing the Directive can go further. If your agreement involves one side genuinely acting as the other's representative in a member state, take local legal advice rather than assuming either way.
Routed freight, nominated cargo and who controls the customer
Agent relationships run on two kinds of shipment, and the commercial terms differ between them.
- Your own sales (free hand or "own" cargo). You won the customer, you quote, and you appoint the agent at the other end to handle origin or destination work. The agent is effectively your supplier for that leg, and you pay their tariff or agreed rates.
- Routed or nominated cargo. The customer is controlled by the other end. A buyer in your agent's country has bought on terms such as FOB or FCA, so the buyer controls the main carriage and tells its forwarder to collect the goods from the seller in your country. Your agent "routes" the shipment to you, and you handle the origin work for a seller who never chose you.
The controlling party is usually whoever arranges and pays for main carriage, which is why the Incoterms rule on the sales contract matters so much. A seller on CIF or CIP controls the freight; a buyer on FOB, FCA or EXW does. Incoterms 2020 explained sets out who arranges carriage under each rule.
Profit share, handling fees and the common models
How the margin on a shared shipment is divided is a commercial choice, not a rule, and networks generally leave it to the two agents. The models you will meet in practice:
| Model | How it works | Where it tends to be used | Watch for |
|---|---|---|---|
| Profit share (often called a 50/50 split) | Selling price to the customer minus agreed costs, the resulting profit split between the two agents in an agreed ratio | Routed cargo where both sides contribute work and one side brought the customer | Which costs are deductible, who sees the buy rates, and whether the split is calculated before or after local charges |
| Fixed handling fee | The handling agent receives a flat fee per shipment, per bill of lading, per container or per kilo, and the controlling agent keeps the rest | Nominated cargo where the handling agent has no say in the price | A fee that does not cover the work on complex shipments, and charges that were not in the agreed list |
| Rate sheet (agent tariff) | Each side buys the other's services at a published or agreed tariff and sets its own selling price | Your own sales, where the agent is a supplier for one leg | Rates that expire or change without notice, and surcharges billed outside the tariff |
| Hybrid | A handling fee plus a share of profit above a threshold | Larger or recurring routed accounts | Complexity: the more conditions in the formula, the more reconciliation disputes |
An illustrative example only. A routed FCL shipment sells to the controlling customer for USD 2,400 all in. The agreed costs (carrier freight, origin terminal charges, trucking) come to USD 1,900, leaving USD 500 profit. On an equal split, each agent earns USD 250. Under a fixed handling fee model at, say, USD 75 per bill of lading, the handling agent earns USD 75 plus reimbursement of its costs, and the controlling agent keeps USD 425. Neither split is "correct"; what matters is that both sides agreed it before the shipment moved and that the costs being deducted are evidenced.
A common misconception is that a 50/50 split is a network rule or an industry standard you can insist on. It is a common convention for routed cargo, and nothing more. Many agents prefer handling fees precisely because they avoid opening their buy rates to the other side.
Freight prepaid or collect: who invoices whom
Whether the freight is prepaid or collect decides which agent collects the money from a customer and therefore which way the debt runs between agents.
- Prepaid. The origin agent invoices the shipper for the freight. If the destination agent did work (delivery, customs clearance on behalf of the origin side, or its share of profit), the origin agent owes it.
- Collect. The freight is paid at destination. The destination agent invoices the consignee, and if the origin agent paid the carrier or is owed a profit share, the destination agent owes the origin agent.
The trap is a collect shipment where the destination agent releases the cargo before the consignee has paid, and then cannot collect. Under most agreements the destination agent still owes its partner, because releasing the cargo was its decision. Write that into the agreement rather than arguing about it afterwards. The cargo control side of this is covered in prepaid vs collect freight payment terms.
Debit notes, credit notes and the statement of account
Agents do not usually send each other tax invoices for their share of a shipment. The working documents are:
- Debit note: "you owe us", issued per shipment, quoting the house and master bill or air waybill numbers, the agreed charges and the currency.
- Credit note: "we owe you", issued for your partner's profit share, a handling fee, or to correct a debit note.
- Statement of account: a periodic list of every open debit and credit note between the two agents, with the net balance.
Whether a debit note is also a tax invoice, and whether VAT, GST or withholding tax applies to cross-border agent charges, depends on the law of each country. Check with your accountant rather than assuming the agent document is enough for your local tax filing. Each debit or credit note should tie back to a job file, so the share is booked against the right shipment; the mechanics are in job costing, accruals and disbursements.
Periodic settlement and netting
Because two active agents owe each other money in both directions, paying every note separately would mean dozens of international transfers a month, each with bank charges. The usual practice is periodic settlement:
- At an agreed interval (monthly is common), each side sends its statement of account.
- The two statements are reconciled. Missing or disputed notes are flagged and taken out of this round.
- The agreed items are netted, so only the difference is paid, by the side with the net debt.
- The payment is made in the settlement currency, quoting the statement reference, and each side marks the notes as settled.
Netting only works with consent. A unilateral set-off, where an agent simply withholds a disputed amount from an unrelated balance, is a frequent cause of relationship breakdown. The agreement should say whether set-off is allowed and on what notice. Also agree what happens to a disputed note: the clean approach is to pay the undisputed balance on time and resolve the disputed item separately, so one argument does not freeze the whole account.
Currency and bank charges
Settlement is usually in a major currency, very often US dollars, with euros common on European trades. If a note is raised in local currency and settled in another, the agreement should name the exchange rate source and date (for example, a central bank rate on the invoice date), or each side will convert at whichever rate suits it. Agree that each side pays its own bank charges, or the receiving agent will see short payments on every transfer. The exposure on your own quotes is covered in currency risk in freight quotes.
When an agent does not pay
An unpaid agent balance is a credit control problem with an international twist: the debtor is in another legal system, you may have no assets to pursue there, and the relationship may still be bringing you cargo. In rough order:
- Keep the record clean. A signed agreement, the rate confirmation for each shipment, delivery evidence and an agreed statement of account are what any network panel, collection agency or court will ask for. An email thread with a rate in it is evidence; a phone call is not.
- Escalate early. Set a credit limit and stop releasing collect cargo or extending new bookings once an agent is over it. Balances get harder to collect the older they are, and network protection schemes typically have reporting deadlines counted from the invoice date.
- Use the cargo in your hands carefully. Many standard trading conditions give a forwarder a lien over goods in its possession, but holding a third party's cargo to pressure an agent can create liability to the cargo owner. Take advice before using it.
- Use the network procedure if there is one. Most networks have a dispute or mediation step between members, and it is usually quicker than a court.
The general disciplines (terms letters, credit limits, statements, escalation) are the same as for any customer, and are covered in credit control for freight forwarders.
How network payment protection schemes work in principle
Many forwarder networks offer some form of payment or financial protection between members, and it is one of the main things members say they pay for. The details vary by network and change, so read the current rules on the network's own site rather than relying on a sales summary. In principle, these schemes tend to share a shape:
- They cover insolvency, not disputes. A scheme typically pays when a member goes bankrupt or ceases trading owing you money. It generally does not decide whose figure is right on a disputed invoice; that goes to the network's dispute process.
- They have deadlines. Claims usually have to be reported within a set period of the invoice date, often after documented reminders. A balance you let run for six months may not qualify at all.
- They have caps and conditions. Payouts are usually limited per debtor or per claim, may be proportional when several members claim against the same debtor, and may require you to assign your rights against the debtor to the network.
- They are not insurance. Several networks state this explicitly. Payment is from a pool or at the network's discretion, under its rules.
As one example of published terms, Conqueror's Payment Protection Plan, as stated on its own website in October 2026, is optional for members, covers debts from members who become bankrupt or go out of business, does not cover disputed invoices, requires the request for assistance within 90 days of the invoice date, caps payment at USD 25,000 per debtor, and describes itself as not an insurance policy. Other networks' schemes differ, and some have none. How the main networks compare is in freight forwarder networks worth joining.
The practical lesson: a protection scheme is a backstop for an agent's collapse, not a substitute for credit control. If the scheme would not pay because you missed a deadline or because the debt is disputed, you are back to your own agreement and your own records.
What to do next
- List your active agents and check which ones you have a signed agreement with. For the rest, send a short terms letter covering scope, cargo control, payment terms, currency, set-off and governing law.
- For each agent, decide whether routed cargo is on a profit share or a handling fee, and confirm it in writing with the deductible costs named.
- Agree a monthly statement and netting cycle, with a rule that undisputed items are paid on time even when one note is in dispute.
- Diary the reporting deadlines of any network protection scheme you rely on, and escalate overdue agent balances before those deadlines pass.
If you are looking for agents in a new country, more than 29,300 logistics companies are searchable by country and service in the CargoLinked directory, and the public requests board lists freight that shippers have posted for forwarders to quote on directly.
This article is general information, not legal, tax, accounting or financial advice. Agency agreements, set-off, liens and the tax treatment of agent charges depend on the law of each country and the terms you sign. Check the current rules of any network scheme on the network's own site, and confirm your position with a licensed lawyer or accountant before relying on it.
