Consignee definition
/What is a Consignee?
A consignee is the party identified on shipping documents as the recipient of goods to be delivered. This party is responsible for paying customs duties as the designated owner of the goods. The consignee does not formally take possession of the goods until it pays the consignor. The consignor is usually the party that shipped the goods.
Example of a Consignee
As an example of a consignee, a local artist creates handmade pottery, which he sells through a boutique store that sells home decor items. The boutique store (the consignee) does not pay for the pottery upfront but sells it on behalf of the artist (the consignor). Once the pottery is sold, the boutique takes a percentage as a commission and pays the remaining amount to the artist. If the items do not sell, the boutique may return them to the artist.
Is a Consignee Responsible for Inventory Damage?
A consignee is typically responsible for damage to the goods given into its care, even if ownership still resides with the consignor during the holding period. This is because the consignee is responsible for the goods while they are on its premises.
What is an Intermediate Consignee?
An intermediate consignee is a party that receives a shipment on behalf of the ultimate consignee. The ultimate consignee is the intended final recipient of a delivery, which is forwarded to it by the intermediate consignee.
Accounting for a Consignee
From an accounting perspective, the consignor retains ownership of consigned goods, so these inventory items remain on its balance sheet until such time as they are either sold by the consignee to a third party, or purchased outright by the consignee. The consignor does not record a sale transaction when goods are initially shipped to the consignee, since the consignor still owns the goods. A sale transaction for the consignor only occurs when goods are sold to a third party or bought outright by the consignee.
From the perspective of the consignee, goods received on consignment do not appear on its balance sheet, since it does not own the inventory. Instead, it records a commission on any sales to third parties.