International Distribution Agreement Checklist

Amelia runs a skincare brand in Melbourne. A distributor in Japan loves her products and wants exclusive rights to sell them across the country. It feels like a huge opportunity - until the distributor asks for broad territory rights, control over pricing and permission to use her brand assets.

That kind of deal can be exciting, but it also needs careful boundaries. Once your products are overseas, it can be much harder to control how they're marketed, priced, stored and sold.

A good international distribution agreement helps you grow into a new market while protecting your margins, trade marks, customer reputation and exit options if things don't work out.

What Is An International Distribution Agreement?

An international distribution agreement is a contract where your Australian business appoints an overseas distributor to buy, market and resell your products in another country or region.

Unlike a sales agent under a sales agency agreement, a distributor usually buys products from you and resells them to its own customers. That means the distributor often takes on more commercial risk, but also expects more control over the market.

Your agreement should make the commercial deal very clear. For example:

• Who buys the products: the distributor, an affiliated company or approved resellers.
• Where they can sell: a country, region, online channel or customer category.
• Whether the appointment is exclusive: and what the distributor must do to keep that exclusivity.
• How pricing works: including wholesale prices, currency, taxes, duties and payment timing.
• Who handles compliance: including local product approvals, labelling and import requirements.
• How the relationship can end: including what happens to unsold stock and brand materials.

If you're exporting from Australia, the agreement also needs to fit your broader export supply arrangements. You may need export documents, product certificates, customs paperwork, insurance, freight terms and local regulatory approvals in the destination country.

Templates can be a useful starting point, but cross-border distribution is one area where a generic document often misses the practical risks. Your agreement should match your product, industry, destination market and bargaining position.

Should You Give An Overseas Distributor Exclusivity?

You can give an overseas distributor exclusivity, but you should usually make it conditional on clear performance targets.

Exclusivity means you agree not to appoint other distributors, sell directly or supply certain customers in the agreed territory. From the distributor's perspective, this can justify spending money on marketing, retail relationships and local compliance.

From your perspective, exclusivity can become a problem if the distributor underperforms. You may be locked out of a promising market while sales stay low.

A safer approach is to define exclusivity carefully. You might limit it by:

• Territory: for example, Japan only, not all of Asia.
• Channel: for example, pharmacy retail only, not online marketplaces.
• Product range: for example, one skincare line, not future products.
• Customer type: for example, wholesale customers only, not direct-to-consumer sales.
• Time period: for example, an initial 12-month trial before renewal.

You can also include reserved rights. For example, you may keep the right to supply existing international customers, sell through your own website, service global accounts or respond to unsolicited enquiries outside the distributor's active sales activity.

If the arrangement looks more like a franchise than a distribution deal, get advice early. In Australia, the Franchising Code of Conduct can apply to some business models even if the contract doesn't use the word franchise.

How Do You Protect Pricing, Territory And Minimum Sales?

You protect pricing, territory and minimum sales by writing them into measurable obligations, not leaving them to emails or assumptions.

Start with pricing. Your agreement should say:

• the wholesale price or pricing formula
• the currency, such as AUD, USD or local currency
• whether prices include or exclude GST, VAT, sales tax, duties and freight
• when you can change prices and how much notice you need to give
• when invoices are due and what happens if payment is late

Be careful with resale pricing. In Australia, resale price maintenance is restricted under the Competition and Consumer Act 2010. Overseas competition laws may also limit how much control you can have over the distributor's resale prices. Often, you can set your own wholesale prices and recommend retail prices, but you should get advice before trying to set minimum resale prices.

Worked Example

Say Amelia sells sunscreen to her Japanese distributor at AUD $12 per unit. The distributor wants exclusive rights for Japan. Amelia agrees, but only if the distributor buys at least 5,000 units in the first 6 months and 12,000 units in the first year.

The agreement says that if the distributor misses the first target, exclusivity automatically changes to non-exclusive. Amelia doesn't need to terminate the whole deal. She can appoint another distributor or sell through another channel while still accepting orders from the original distributor.

This kind of mechanism gives the distributor a fair chance to build the market, while protecting you if sales don't come through.

Who Is Responsible For Product Compliance And Export Rules?

Responsibility for product compliance depends on the agreement, but you should spell it out clearly because both sides may have obligations.

Your distributor will usually be closer to local rules in the destination country. They may be best placed to manage import permits, product registrations, local warnings, translated labels and retailer requirements.

Your business may still need to provide accurate product information, safety data, certificates, ingredients, technical files and manufacturing details. If your product claims are misleading, unsafe or unsupported, the commercial damage can come back to you even if the distributor made the local sale.

For Australian exporters, check whether your goods are subject to specific import and export controls or documentation. Depending on your product, this could involve agencies such as the Australian Border Force, Department of Agriculture, Fisheries and Forestry, Department of Foreign Affairs and Trade sanctions rules, or Defence Export Controls for controlled technology or military-related items.

Consumer protection also matters. The Australian Consumer Law applies to many dealings in Australia, including misleading or deceptive conduct and product safety. Overseas consumer laws may apply in the destination market too.

Your contract should say who is responsible for:

• checking local product standards and registrations
• translating and approving labels, manuals and warnings
• obtaining import permits and customs clearances
• paying duties, tariffs, taxes and inspection fees
• recalling products or handling safety notices
• keeping records of batch numbers, expiry dates and customers supplied

If your product is regulated, such as food, cosmetics, supplements, medical devices, electrical goods or children's products, get local advice in the destination country before shipping stock.

How Do You Keep Control Of Your Brand And Trade Marks?

You keep control of your brand by treating trade mark use as a limited licence, not an open-ended permission.

If you have registered trade marks in Australia through IP Australia, that protects you in Australia only. Trade mark rights are generally country-by-country, so you may need to register your brand in the distributor's territory before, or at the same time as, launching there.

Your distribution agreement should make it clear that you own the brand, logos, product images, packaging designs, website content and marketing materials. The distributor should only be allowed to use them to promote and sell your products under your rules.

Useful brand control clauses include:

• Approved use: the distributor can only use your trade marks in approved formats.
• Brand guidelines: the distributor must follow your style guide, packaging rules and marketing claims.
• Approval rights: you can review ads, websites, marketplace listings and translated materials before publication.
• No registration: the distributor can't register your trade marks, business names, domains or social handles.
• No alterations: the distributor can't repackage, relabel or modify products without approval.
• End of use: the distributor must stop using your brand when the agreement ends.

This is especially important for online sales. A poorly translated product claim, unauthorised marketplace listing or discount campaign can affect your reputation well beyond one country.

If the distributor creates local marketing content, decide who owns it. You may want the right to reuse translations, photos, product descriptions and customer testimonials in other markets.

What Should Your International Distributor Contract Include?

Your international distributor contract should include the full commercial deal, cross-border risk allocation and a practical exit plan.

Here is a fill-in outline you can use as an international distribution agreement checklist. It isn't a finished legal document, and a lawyer should tailor it before you use it.

1. Parties: write the legal names, ACN or company numbers, addresses and signing details for both businesses.
2. Products: describe the products, SKUs, packaging, specifications and any excluded products.
3. Territory: define the countries, regions, channels and reserved customers.
4. Appointment: state whether the distributor is exclusive, non-exclusive or sole, what distribution services it must provide, and when that status can change.
5. Minimum Sales: set targets, reporting dates and consequences for missing them.
6. Orders And Forecasts: explain how orders are placed, accepted, varied and forecast.
7. Pricing And Payment: cover currency, taxes, duties, price changes, payment timing and late payment consequences.
8. Delivery And Risk: state freight responsibilities, insurance, Incoterms if used, title transfer and risk transfer.
9. Compliance: allocate local product approvals, labelling, import rules, recalls and record keeping.
10. Trade Marks And Marketing: set brand use rules, approval rights and limits on online selling.
11. Confidentiality: protect pricing, customer lists, product information and launch plans.
12. Warranties And Liability: define product warranties, exclusions, indemnities and limits that fit the deal.
13. Term And Renewal: set the initial term, renewal process and any trial period.
14. Termination: include termination for non-payment, serious breach, insolvency, compliance failure or missed targets.
15. Stock Buy-Back: say whether you must, may or won't buy back unsold stock, and at what price.
16. Governing Law And Disputes: choose the law, forum, negotiation process and whether arbitration is suitable.
17. CISG: decide whether to exclude the United Nations Convention on Contracts for the International Sale of Goods, which can apply to some international goods sales.

Governing law deserves real thought. Choosing New South Wales law, for example, may feel familiar to you, but you also need to think about enforcement in the distributor's country. For larger deals, arbitration can sometimes be more practical for cross-border enforcement than court proceedings, depending on the countries involved.

Termination is another clause worth slowing down for. If the relationship ends, decide whether the distributor can keep selling remaining stock, whether you can buy stock back, who pays freight, and what happens to customised packaging or country-specific labels.

Key Takeaways

• An international distribution agreement should protect your territory, pricing, brand, compliance position and exit rights.
• Exclusivity can work well, but it should usually depend on minimum sales targets and clear performance milestones.
• Be careful with resale pricing rules. You can usually control your wholesale price, but minimum resale prices can raise competition law issues.
• Product compliance should be allocated clearly, especially for regulated goods, local labelling, import permits and recalls.
• Your trade marks should be protected in the destination market, and the distributor's brand use should be limited and approved.
• Termination clauses should deal with unsold stock, stock buy-back, brand materials, customer handover and ongoing confidentiality.

If you'd like help with your overseas distribution terms, trade mark protections, product compliance clauses or stock buy-back and termination rights, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.