Full-Fledged Traders perform supply functions, which involve bargaining, product design and inventory management.
The Full-Fledged Traders are exposed to market risk, inventory risk, credit risk and other risks.
The Full-Fledged Traders develops local intangible assets regarding supplier relationships and procurement processes.
For full-function procurement activities where ownership is held (which usually also involves price negotiation, significant market risk and potential inventory risk), it may also be possible to use the independent gross trading profit method (adjusted re-sale price method), which would be sufficient to compensate for the net profit at arm’s length to which they are entitled.
However, given that such companies undertake fewer functions and are less risky than full-fledged distributors, the markup rates achieved by them should be at a lower level than those achieved by full-fledged distributors.
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