NCND Agreement: Commission Clause

The aspect that most often raises questions in NCND agreements is the commission clause. If it is not properly structured, the NCND loses effectiveness: the intermediary does not know when they will be paid, and the company does not know how to calculate it.

The good news is that this problem can be addressed. A well-drafted commission clause should be simple, verifiable, and workable in real-life situations.

What must be included in the commission clause of an NCND agreement

An effective commission clause should answer, without ambiguity:

• When to pay (a clear deadline, for example measured in business days).

• In which currency to pay (an objective FX conversion rule).

• What the calculation basis is (FOB, CIF, gross/net amount, discounts, taxes, freight, insurance).

• The commission rate or amount (percentage, fixed fee, per unit, or a combination).

• What triggers the commission (contract signature, invoice issuance, receipt of payment, etc.).

1) Payment deadline under the NCND commission clause

A common approach is to tie the commission payment to the moment the supplier receives payment from the buyer, with a short, clear deadline. For example: “the commission shall be paid within two (2) business days after receipt of payment by the supplier.”

When the agreement does not set a deadline, the intermediary becomes dependent on informal follow-ups, and the supplier becomes exposed to disputes that can stall the transaction.

2) Exchange rate and PTAX

If the commission is denominated in U.S. dollars (or any other foreign currency) but paid in Brazilian reais, the clause should provide a clear FX conversion mechanism. A practical approach is to use the exchange rate actually applied by the exporter when closing the relevant FX contract, with a fallback criterion if that information is not made available.

Example: the exporter’s FX rate applies; if it cannot be ascertained, the PTAX (the official daily reference rate) for the relevant date applies.

3) Commission calculation basis: FOB, CIF, and what the commission applies to

Another sensitive point is the basis of calculation. Without clear drafting, it often becomes a source of dispute:

• does the commission apply only to the value of the goods, or does it also include freight and insurance?

• does it apply to the full contract value, or only to what was actually delivered and/or paid?

Two terms commonly used in international trade are relevant here:

• FOB (Free On Board): generally, the price of the goods excluding international freight and insurance.

• CIF (Cost, Insurance and Freight): generally, the price of the goods including freight and insurance.

Accordingly, if the goal is to standardize the calculation and reduce arguments, one practical solution is to define in the agreement which basis will apply. If you choose CIF, make it explicit that the “contract value” (i.e., the commission base) includes the goods, insurance, and freight, so there is no debate about what is in—or out of—the calculation.

4) Commission: percentage, fixed fee, and per-unit rate

In addition to the calculation basis, the agreement should specify the commission rate or amount the intermediary will receive. A percentage is the most common approach, but depending on the product and the commercial dynamics, a fixed fee or a per-unit rate (for example, per metric ton) may be more appropriate. Avoid vague wording (such as “fair commission” or “market commission”), and make it clear whether the commission applies per transaction or to transactions carried out within a defined period.

5) Commission trigger: when the right to payment arises

In addition to the payment terms, you should define when entitlement to the commission arises, i.e., what triggers the commission obligation. Depending on the transaction, the trigger may be the execution of the contract with the introduced customer, issuance of an invoice, shipment of the goods, or the supplier’s actual receipt of payment. The more the trigger is tied to an objective, verifiable event, the lower the risk of dispute. It is also advisable to state expressly that the commission is due once the deal is concluded with the contact introduced by the intermediary, even if performance occurs in stages or through successive purchase orders.

Commission clause review checklist 

If you are negotiating an NCND agreement, it is worth checking at least the following points:

• Is the commission trigger clearly defined?

• Are the payment terms stated in business days and tied to a verifiable event?

• Is the basis of calculation defined (FOB/CIF, gross/net, discounts)?

• Is there an FX conversion mechanism for payments in Brazilian reais (including a fallback, such as PTAX)?

• Does the agreement address what happens if the exporter’s FX rate information is not provided?

Conclusion

In intermediary arrangements, commission cannot be “just an idea”: it must be an operational rule. Clear drafting reduces disputes, avoids friction, and protects the intermediary’s work without creating uncertainty for the transaction.

If you are dealing with an NCND agreement or a similar draft, it is advisable to seek professional legal advice for a technical review of the wording—particularly commission terms, the basis of calculation, and the FX conversion mechanism—taking into account the specifics of the deal and the country involved.