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Sourcing Intelligence May 2026 · 5 min read

FOB commission structure for German mid-market retailer sourcing Bangladesh

In brief: Negotiate the scope of the commission, not the percentage. A 6.5% FOB commission that excludes LkSG documentation becomes 8-9% the first time BAFA asks for the records. The brands that hold their margin are the ones who list what the commission covers before they sign.

6.5%

FOB BENCHMARK

The headline rate quoted by Bangladesh buying houses for German mid-market retailers.

2-3%

HIDDEN ADD-ON

Typical LkSG documentation charge added after the brand asks for BAFA records.

1,000+

LKSG THRESHOLD

Employees in Germany at which the Supply Chain Act applies in full.

Bengal Origin Co. · German mid-market FOB commission scope

The Bangladesh garment sourcing German mid-market retailer conversation almost always opens on the 6.5% FOB commission benchmark. That is the wrong opening. What a German retailer actually pays is decided by what the commission covers — not by the percentage. I have read commission agreements quoting 6.5% that then add 2-3% in LkSG documentation charges the first time the brand asks for the records BAFA expects.

Why the 6.5% Benchmark Misleads German Retailers?

The 6.5% FOB commission is the published Bangladesh benchmark. BGBA-member buying houses quote it because it is the published benchmark. The benchmark is not wrong. It is incomplete. It tells the brand what the commission is. It does not tell the brand what the commission does.

A German mid-market retailer is sourcing under the Lieferkettensorgfaltspflichtengesetz — the German Supply Chain Act, in force since January 2024 for companies with 1,000 or more employees in Germany. LkSG requires the brand to document its risk analysis, preventive measures, remedial action, and annual public report. That documentation cannot come from the brand alone. The buying house holds the operational records the brand needs.

When the brand signs a 6.5% commission without naming what documentation work is included, the buying house is free to charge separately for it. I have seen this happen at three German mid-market accounts in the last eighteen months. The 6.5% they thought they signed for became 8.5% the first time the BAFA filing window opened.

What LkSG Documentation Actually Requires from the Buying House?

Let me be specific about what BAFA reads. The German Federal Office for Economic Affairs and Export Control reviews the brand's annual report for evidence of ongoing risk analysis at Tier 1 and Tier 2 suppliers. The buying house is Tier 1. The factory is Tier 2. The records BAFA looks for include written subcontracting prohibitions, ongoing wage-timing monitoring, utility payment status, audit refresh schedules, and remedial action records for any flag raised.

These records are produced inside the buying house. The brand cannot generate them from Düsseldorf. Either the buying house is producing this documentation as part of the commission, or the buying house is producing it as a separate compliance service line — typically billed at 2-3% on top of FOB.

A buying house that does not produce these records is not LkSG-compatible. The brand is still in scope; the documentation gap sits with the brand at BAFA review. Our breakdown of what German mid-market brands must document under LkSG covers the specific records BAFA expects to see.

What is the Eight Items I List on Every German Retailer Commission Agreement?

I list the scope of the commission before the percentage. That conversation is harder. It is also the one that decides what the brand actually pays over the contract life. The eight items I include inside a 6.5% FOB commission structure for a German mid-market retailer Bangladesh buying house relationship are:

  1. Factory vetting with bank solvency certificate refresh every six months
  2. Written subcontracting prohibition on every purchase order
  3. Midpoint production report at 50% completion with floor photographs
  4. Pre-shipment inspection coordination at AQL 2.5 with SGS, Bureau Veritas, or Intertek
  5. Quarterly financial health review using the traffic light system documented in our factory vetting protocol
  6. 48-hour compliance documentation turnaround on BAFA or audit refresh requests
  7. LkSG annual report input pack covering Tier 1 buying house records and Tier 2 factory records
  8. Backup factory designated and held at 30% capacity confirmed for every active order

These are not premium services. These are the documentation the brand is legally required to hold. If a buying house quotes 6.5% and does not list these inside the commission, the brand should ask which ones cost extra.

FOB Commission Scope for German Retailers

Inside the 6.5% commission

Factory vetting and bank solvency check

Written subcontracting prohibition per PO

Midpoint report at 50% with floor photos

Pre-shipment inspection coordination

Quarterly financial health review

LkSG annual report input pack

Billed separately if not named

Tier 2 fabric mill mapping

Wage-timing monitoring records

BAFA response documentation

Audit refresh coordination

Remedial action records

Regulatory response hours

These are the items I list before quoting a percentage. 8-9% is what a 6.5% quote becomes once LkSG documentation is added back.

What is the Three Charges That Get Added After the Fact?

I have read three German retailer commission agreements in the last eighteen months that arrived with the same architecture. A 6.5% headline. A separate "compliance documentation service" priced at 2% per annum. A separate "supplier risk monitoring" line priced at 0.5 to 1% per order. A separate "regulatory response" charge for any BAFA or audit request, billed by the hour.

The brand reads the 6.5%. The brand signs. The first BAFA documentation request lands. The bill arrives. The total commission burden lands between 8% and 9% — sometimes higher in the first year when audit refreshes pile up.

The buying house is not behaving badly here. The buying house quoted what the brand asked about. The brand asked about the percentage. The brand did not ask about the scope. The bank financing position behind those documentation costs is real — how Bangladesh factory financing actually works explains why ongoing monitoring is more expensive to produce than the annual audit most brands assume covers them.

What This Means for European Brands

The question to ask before signing is not "what is your FOB commission rate." The question is "what is included in your FOB commission, and what is billed separately." A buying house that can answer that question item-by-item is operating against a documented service definition. A buying house that cannot is operating against a percentage and will bill for everything else.

For German mid-market retailers specifically, the LkSG documentation pack must be inside the commission. Tier 2 records do not write themselves between orders. If they sit outside the commission they will arrive as an invoice the first time BAFA looks at the brand's annual report — and the brand will be paying 8-9% for what it priced at 6.5%.

The commission conversation worth having with a Bangladesh buying house is a scope conversation. Read the eight items above out loud during the first call and ask which ones are inside the 6.5%. The answer tells the brand more about the buying house than any reference call does. Further reading on what BAFA reads and how operational monitoring is documented sits at bengalorigin.co/sourcing-intelligence/.

If you are negotiating an FOB commission with a Bangladesh buying house and want to understand what LkSG-compatible scope looks like inside the percentage, I am happy to walk through what the eight items cost to actually produce.

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