Subcontracting materials - what is it and how to properly arrange them

In a market economy, a method of cooperation is widely used between enterprises. It consists in the fact that one enterprise on certain conditions transfers to another enterprise its materials or semi-finished products for the manufacture (processing, refinement) of the goods. The material being transferred is called tolling, and the work carried out with tolling materials is called tolling.

Raw Material Processing Agreement

When carrying out tolling operations, the contractor and the customer conclude a contract for the processing (completion, manufacturing) of the tolling raw materials.

There are major differences between the parties to the contract. The customer’s side (customer) has materials (raw materials) for the manufacture of products or semi-finished products, which must be modified to specific technical or chemical requirements. The contractor (processor) owns the necessary production equipment or technology to fulfill these requirements, performs the ordered work, processes raw materials (materials) and transfers the finished product to the customer. The customer pays for the work performed, while retaining the rights to the delivered goods and waste generated during processing.

The contract shall indicate the terms of delivery of raw materials and the performance of work, the form of payment, the conditions for the delivery and acceptance of tolling material, the release of processed products and waste, the responsibility of the parties in case of damage or loss of raw materials, products, waste. Separate terms of obligations are negotiated. The cost of the contract includes the costs of the contractor for the work and the remuneration due in case of unforeseen costs.