Customer Compensation Fund

The Customer Compensation Fund is a special reserve established by the seller in the after-sales process of foreign trade to handle product repair disputes. Its core meaning is: when exported products have quality issues requiring repair, if disputes arise due to repair delays, substandard repair quality, or cost-sharing disagreements, the seller pays compensation to the customer from this fund to quickly settle disputes and maintain customer relationships. It is commonly used in industries such as machinery and electronics that require long-term after-sales support, especially when signing contracts with overseas agents or major customers, where a certain percentage of sales may be agreed to be set aside for this fund. Notes: 1) The contract must clearly specify the fund's accrual ratio, conditions of use, compensation cap, and approval process to prevent abuse; 2) This fund is different from Quality Retention Money, which is withheld by the buyer as a performance guarantee, whereas the compensation fund is voluntarily established by the seller for compensation; 3) It is also different from product liability insurance, which transfers risk, while the fund is an internal pool of funds. Difference: Similar to a 'warranty reserve' but focuses more on 'compensation' rather than 'repair costs,' and typically targets direct customer losses.