Updated: Nov 8, 2022
A key difference between a limited-risk trader and a purchasing agent is that a limited-risk trader has both legal and economic ownership of the goods purchased.
It is important to note that, in most cases, goods purchased by a limited-risk trader are usually held for a very short period of time or have a very short period of ownership, thus freeing the company from the risk of inventory in the traditional sense.
However, in general, there is still a need to maintain full warehousing facilities.
Where the limited-risk trader has ownership of the goods (albeit temporarily in most cases), it should be reasonable to use a value-added charge based on a percentage of the goods purchased (or, if there is no ownership, the cost incurred in purchasing the goods).
The arm's length nature of the fees charged may be determined or checked using a benchmarking test similar to that of a purchasing agent, although generally without the same or any economic adjustment.
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