Advice when picking a distributor
A Nova Scotia company is approached by someone in the Philippines looking to be the firm’s exclusive dealer. Read the latest Ask the TCS column for key advice on how to make sure a dealer is right for you.
Dear TCS,
My name is Kathryn McKenna and I work for a small business in Nova Scotia. We have dealers worldwide and have been approached by someone in the Philippines looking to be an exclusive dealer. What is required to register a dealer in the Philippines? Any information would be appreciated.
Thank you,
Kathryn McKenna
Phoenix Agritech
Andrew Smith, Senior Trade Commissioner in the Philippines, responds:
Canada's Senior Trade Commissioner
in the Philippines
Dear Ms. McKenna,
In short, there appears to be no obligation on your part to register a distributor of your products for the Philippines. However, your question brings to the fore broader issues related to due diligence that will have a profound impact on your success in the Philippines.
First, there are several important considerations you should be aware of when looking to establish an agreement with a distributor. Determine whether the agreement is for one product or your full range of products. Also, decide if they will represent you in the Philippine market alone or if you need representation outside the Philippines as well. This is topical since the countries of ASEAN are moving towards a common market under the ASEAN Economic Community by 2015. Figure out if you will set sales targets as a means of managing the distributor’s performance (providing you with an ‘out’ to cancel the agreement), or if the agreement will include sunset clauses. You will also need to determine how your firm will manage this market and guide your new distributor – that is, whether you travel to visit your distributors or have them simply call you in Canada.
When it comes to due diligence, it is important to ensure that the proposed distributor is appropriately licensed and that the firm is certified by the Philippine Department of Transportation and Communication to handle the importation of aerospace-related products.
Be aware that according to Philippine law, a business entity in the form of single proprietorship must be registered with the Department of Trade and Industry and that a partnership or corporation must be registered with the Securities and Exchange Commission. We would be happy to look into this for you.
As you move through the process, you may wish to undertake more thorough financial due diligence to ensure that the firm has the financial wherewithal to manage its purchases from your firm. So on a fee-for-service basis, you could tap the credit information services of CIBI Information Inc. or Dun & Bradstreet Philippines.
I have forwarded your message to my colleague Christine Smith, Senior Trade Commissioner at our regional office in Halifax to further assist your company. I encourage you to keep the Halifax regional office up-to-date on your international business activities.
I have also informed Marife Villanueva, Trade Commissioner for the aerospace sector here at the Embassy in Manila. Consider her a resource to support your firm in its ongoing market entry and in fostering your relationship with a new Philippine distributor.
For your consideration, both the Halifax office and the Embassy in Manila are equipped with Internet video conference capabilities. If you decide to move forward with this partnership, I would like to offer to set up an ‘e-introduction’ to this local partner facilitated by our video conference capabilities.
Should this particular distributor not work out in the end, and your firm remains keen on its Philippine market entry, we would be able to suggest new potential partners for your company.
In the interim, you can find market reports and information about doing business in the Philippines on our website. I would also refer you to the DFAIT document Step-by-Step Guide to Exporting as it details some of the advantages and disadvantages of opting for a distributor relationship.
I hope my response is helpful and please do not hesitate to contact us again.
Sincerely,
Andrew Smith
Senior Trade Commissioner
Canadian Trade Commissioner Service in the Phillipines
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