Key takeaways
- Judge any model on three questions: who signs the sales contract, who pays whom, and who carries the product risk.
- Trading companies and factories can both be the right choice. The mistake is not knowing which one you are dealing with.
- Fee models come in types: a fixed fee, a commission, a retainer, or a difference built into the price. Each rewards different behaviour, so get the arrangement in writing.
- Test any partner with documents and questions before the first payment, and start with a small paid project.
- LYBAM is a China-side sourcing and product-development partner working for the buyer. It is not a factory.
The four models in one table
These terms are used loosely in the industry, so ask any company which model it means and what it actually signs. The table describes the usual pattern.
| Model | Who usually signs the sales contract | How it is usually paid | Main risk | Tends to fit when |
|---|---|---|---|---|
| Factory-direct | You and the factory | The factory's own price is the only price you pay | You carry search, negotiation, quality and payment risk yourself | You have a settled specification, the time, and someone who can manage a Chinese factory |
| Trading company | You and the trading company, which buys from factories in its own name | The difference between what it pays the factory and what it charges you | An intermediary sits between you and the factory, so specification and tooling control are indirect | You want ready products from several makers in small quantities |
| Buying agent | Usually you and the supplier, with the agent acting on your instruction | A fee or commission from the buyer, ideally shown separately | The agent executes. If the brief or the supplier is wrong, nobody challenges it | You know what to buy and from whom, and need purchasing and follow-up on the ground |
| Sourcing agent | Varies: often you and the factory, sometimes the agent in its own name | A fixed fee, commission or retainer, sometimes a difference built into the price | Incentives can tilt towards the factories that pay the agent | You need factories found, compared and managed, especially for a custom product |
Sourcing agent: when you still need to find the factory
A sourcing agent searches for suitable factories, shortlists them, negotiates, manages samples and coordinates quality checks. It earns its place when the product is custom, when you have no reliable supplier, or when you cannot visit factories yourself.
The risk is the incentive. If the agent is paid by the factory as well as by you, its advice on which factory to choose is no longer neutral. Look for a clear statement of who the agent works for, a written fee arrangement, and the factory's name and quote shown to you.
Buying agent: when you already know what to buy
A buying agent places and follows up orders with suppliers you or it already know, checks goods, combines several suppliers into one shipment and handles local logistics. It fits when the specification and the supplier are settled and what you lack is a pair of hands in China.
UK customs treatment shows why the label matters. HMRC says commission paid to a buying agent can be left out of the customs value if it is shown separately from the price actually paid, and it may ask for the agency contract and the original seller's invoice. If that evidence is missing, HMRC may decide no genuine buying agency exists and include the payments in the value. An intermediary that buys in its own name and resells to you is acting as a trading company, whatever it calls itself.
Trading company: pros, cons and how to tell
- Pros: a range of products from several factories in one place, small quantities, English-speaking staff, export paperwork handled, and orders from different makers combined into one shipment.
- Cons: an extra layer in the price, less control over specification changes, factory choice and tooling, and the factory behind your product can change unless the contract names it.
To tell which you are dealing with, ask for the business licence and compare the registered name with the company you are talking to (the payment-safety guide shows how). Ask for a live video from the production floor, who owns the moulds, and the name of the factory behind the product. A trading company that answers openly is not a problem. One that insists it is a factory when the paperwork says otherwise is.
Note that 'OEM' is sometimes used informally to mean 'the real factory'. That is a different use from the technical OEM and ODM distinction explained in the OEM vs ODM guide.
Going factory-direct: marketplaces, fairs and introductions
Going direct gives you the factory's own price and a line to the people who make the product. It costs time and skill: finding and screening suppliers, negotiating in a second language, arranging samples and inspection, managing payment risk, and handling shipping terms and export paperwork. It suits importers with a settled product, repeat volume and someone on staff who can manage those steps. For a first custom product, many importers find that the cost of mistakes outweighs the saving.
Fee models and conflicts of interest: what to ask
How a partner is paid shapes what it recommends. These are the common types, described in general terms and without figures.
| Type | How it works in general | What it tends to reward | Ask |
|---|---|---|---|
| Fixed project fee | A set charge for a defined piece of work, such as a sourcing round or an inspection | Finishing the defined job, not order size | What is included, and what triggers extra charges? |
| Commission on order value | A share of what you spend, usually stated separately | Larger orders, and sometimes higher factory prices | Is it on top of the factory's price, and shown on the invoice? |
| Retainer | A recurring fee for ongoing coverage | Availability and responsiveness | What work does it cover, and for how long? |
| Difference built into the price | The partner keeps the difference between what you pay and what the factory charges | Keeping the factory's price low and yours high | Will you show the factory's quote and invoice? |
| Factory-paid commission | The factory pays the partner for orders placed | Steering you towards the paying factory | Do you receive any payment from factories, and will you disclose it? |
None of these is wrong in itself. The problem is an arrangement you cannot see. Models are often combined, so ask for the whole picture in writing, including anything the partner receives from the factory. Keeping each amount on its own line also helps at customs, as the buying-commission point above shows. LYBAM does not publish fee figures on this site, and these questions are fair to put to any partner, including us.
Where does a sourcing and product-development partner fit?
LYBAM GLOBAL LIMITED is a Hong Kong and Shenzhen-based sourcing and product-development company. The founder brings 17 years of direct, hands-on import experience from China to every sourcing project. LYBAM works on the China side for the buyer. It is a sourcing and product-development partner, not a factory.
A project starts with a brief. LYBAM replies with what it can confirm and what still needs confirming, and coordinates samples and agreed inspection steps before production or shipment as a project-based capability assessment, not a certified third-party audit. The focus is consumer electronics, kids electronics and educational and STEM technology, along with toys and games, phone and computer accessories, lighting and photography, beauty and home, and party and event products.
See sourcing services for the overview and how a project runs for the steps.
How do you choose and test a partner?
The UK government's China business-risk guidance advises checking that the other party is genuine before you pursue an opportunity. Six questions make that practical:
- Which entity signs the sales contract with me?You want one answer, in writing, for the sale to you and for the purchase from the factory.
- How are you paid, and do you receive anything from factories?Ask for the fee type and every source of income on the project.
- Will I see the factory's name, address and its own quote?If the answer is no, you cannot check the price or the maker.
- Who owns the tooling, artwork and designs?Ask where this is written, and whether you can move production to another factory.
- What do you check about a factory, and what stays a claim?Ask what evidence you receive. Be wary of blanket labels such as 'audited' or 'approved' with no documents behind them.
- What happens when something goes wrong?Ask who pays for rework, who negotiates with the factory, and what the remedy is.
Then ask for documents: the business licence and registry record of each entity involved, a sample contract or terms, a sample of the paperwork the partner produces (quote format, inspection report layout), and a bank details sheet with the account holder's name. Finally, start with a small paid sample or pilot order and judge response time, the specificity of the answers, and whether what was promised appears in writing. The landed cost guide helps you compare the total cost of each route, not just the unit price.
Frequently asked questions
Which is cheaper: a sourcing agent, a buying agent, a trading company or going direct?
It depends on the product, the volume and the value of your own time. Compare total landed cost, including any fee and the work you would otherwise do yourself, not just the unit price.
Is a buying agent the same as a sourcing agent?
The terms overlap and companies use them differently. A common distinction is that a buying agent executes purchases you have specified, while a sourcing agent also finds and compares the factories. Ask what the company actually does and what it signs.
How do I know whether I am dealing with a factory or a trading company?
Compare the business licence name and address with the company you are talking to, ask for a live video from the production floor, ask who owns the moulds, and ask for the factory's name on the contract. Neither answer is bad. An evasive answer is.
Do agents take hidden commissions from factories?
Some arrangements include a factory-paid commission, sometimes disclosed and sometimes not. Ask directly whether the partner receives any payment from factories, and get the answer in writing.
Is LYBAM a factory?
No. LYBAM GLOBAL LIMITED is a sourcing and product-development company with a Hong Kong entity and a Shenzhen office, working on the China side for the buyer. It does not manufacture. Ask in your brief how your project would be contracted.
Does LYBAM publish its fees?
No. LYBAM does not publish fee figures on this site. The fee types above show what to ask any partner.
Related reading
OEM vs. ODM: What the Difference Means for a Buyer
A clear explanation of OEM vs ODM manufacturing for buyers sourcing from China, and how to ask a supplier the right question.
Supplier Verification Checklist
What to confirm about a Chinese factory before committing to production and before goods ship — LYBAM's real, project-based verification and QC checklist.
Verify a Chinese Supplier Before Paying: Payment-Safety Checks
Verify a Chinese supplier before payment: registry checks, matching the bank account to the contracting company, deposit and balance, escrow and L/Cs.
Sourcing Services
China product sourcing, product development, OEM/ODM coordination, supplier screening, sampling and shipment coordination from LYBAM GLOBAL.
How a China Sourcing Project Works: 8 Steps
The eight steps of a LYBAM GLOBAL sourcing project, from brief to shipment: what you provide, what LYBAM does and what you receive. No invented turnaround promises.
Not sure which model fits your project?
Send a brief with the product, quantity and destination. LYBAM replies with what it can confirm and what still needs confirming, and you can put the six questions above to us directly.
Sources
- GOV.UK, Accounting for buying commission in the customs value (HMRC) checked 2026-10-16
- GOV.UK, Overseas Business Risk: China (section on fraud and scams) checked 2026-10-16