Trading company: a supplier that sells what others make
Published by Manufacturer Quotes. Editorial policy. Updated .
Definition
A trading company sells manufactured goods it does not make: it buys from factories and resells, often handling export and adding its margin. US Customs calls a party in that position a middleman: one that serves as a buyer (usually buying the imported merchandise from a foreign manufacturer) as well as a seller[1] to the U.S. importer.
Trading company vs manufacturer
The difference is who controls production. A manufacturer owns or runs the plant, so it can tell you what the machines can do and change the process. A trading company controls the relationship with the factory, and its value is in choosing factories, combining orders and handling export.
| Manufacturer | Trading company | |
|---|---|---|
| Makes the goods | Yes | No; it buys from factories |
| Product range | Narrow: what its lines can make | Wide: whatever its factories make |
| Minimum order | Set by the factory's production runs | Can be lower, by combining buyers' orders |
| Price | The factory's price | The factory's price plus the trading company's margin |
| Technical answers | Direct from engineers and production staff | Relayed from the factory |
| If quality slips | You deal with the plant | You deal with the trading company, which deals with the plant |
Neither is better in general. A trading company can be the right supplier for a small first order or a range of products from different factories. A manufacturer is usually the better supplier once you order enough volume of one product for the factory to want your business directly.
What it changes on your import paperwork
Customs sees a trading company as one more sale in the chain, and that affects two things you file.
- The value you pay duty on. CBP presumes that the customs value, which ad valorem duty is charged on, is the price actually paid or payable for the merchandise by the U.S. importer[1], which includes the trading company's margin. You can ask to use the earlier, lower sale between the factory and the trading company (called first sale), but only if that sale was conducted at "arm's length" and the goods were "clearly destined for exportation to the United States"[1], and you can establish by documentary evidence that such a sale is a sale for exportation to the United States[1]. If the trading company and the factory are related, for example under the same owner, their sale counts as arm's length only if the relationship between the buyer and seller did not influence the price, or the transaction value closely approximates a test value[1]. In practice, that means contracts, invoices and payment records from a sale you were not party to, which a trading company may not want to share.
- The names on your security filing. For ocean shipments, the Importer Security Filing asks separately for the seller, meaning the last known entity by whom the goods are sold or agreed to be sold[2], and for the manufacturer or supplier, meaning the entity that last manufactures, assembles, produces, or grows the commodity, or the party supplying the finished goods in the country from which the goods are leaving[2]. When you buy through a trading company, those can be two different companies.
How to tell which one you are dealing with
- Ask directly: "Do you own the factory that will make this order?" A good trading company will say no and explain how it manages production.
- Ask for the business license and compare the registered name and business scope with the company on your quote and the address of the plant.
- Ask for a video call from the production floor, or book a factory audit.
- On Alibaba.com, read the business type in the supplier's profile and inspection report; the is Alibaba legit guide explains what those show.
Example: the same order through a trading company
A brand buys 2,000 backpacks through a trading company at $11.20 each, $22,400 in total. The trading company bought them from the factory at $10.00 each, $20,000 in total, and kept a margin of 12% (assumed) on its cost. Assume a duty rate of 15% (assumed).
| Duty on the price the brand paid | Duty on the first sale | |
|---|---|---|
| Value used | $22,400 | $20,000 |
| Duty | $3,360.00 | $3,000.00 |
| Duty per backpack | $1.68 | $1.50 |
The first-sale column only applies if the factory sale meets CBP's conditions and the brand can document it. Without those documents, the brand pays duty on the higher value.
Illustrative figures, not a quote. Real prices depend on the spec, quantity and factory.
The margin itself is not a reason to avoid a trading company. Compare the landed cost and the service you get from each option, including who stands behind the goods when something goes wrong.
Sources
- [1]Bona Fide Sales and Sales for Exportation to the United States, U.S. Customs and Border Protection informed compliance publicationcbp.gov. Checked 2026-09-23.
- [2]19 CFR 149.3, Importer Security Filing data elements, eCFRecfr.gov. Checked 2026-09-23.
Why get matched through us
- We name every manufacturer we suggest, so you can look into each one before you talk to it.
- It is free for brands. The manufacturers quote you directly, and any order is between you and the manufacturer.
- We share your contact details with a manufacturer only if you tell us we may.
- Company facts on this site are dated and sourced, so you can see where each one came from.
Get matched with manufacturers for your product
Tell us what you want made. We introduce you to manufacturers that fit your request and name each one. It is free for brands, and the manufacturers quote you directly.
Request quotes