1. The local firms producing under such kind of agreement are not free to sell the contracted output to anywhere and anybody else. The local manufacturers has to sell the goods to the international company at the predetermined rates. This results in lower profits for the local firms if the open market offers them higher prices than the prices agreed up on contracting.

2. Local manufacturers has no control over manufacturing process because the goods are produced as the per the guidelines given under the contract.

3. Sometimes local manufacturers cannot adhere the quality standard hence loss should be borne by the party fixed up in the contract.