Decision No. 711/2001/QD-NHNN dated May 25, 2001 of the State Bank of Vietnam promulgating the Regulation on the opening of letter of credit for importing goods with deferred payment

DECISION

PROMULGATING THE REGULATION ON THE OPENING OF LETTER OF CREDIT FOR IMPORTING GOODS WITH DEFERRED PAYMENT

THE STATE BANK GOVERNOR

Pursuant to Law No.01/1997/QH10 on the State Bank and Law No.02/1997/QH10 on Credit Institutions;

Pursuant to the Government’s Decree No.15/CP of March 2, 1993 stipulating the tasks, powers and management responsibilities of the ministries and ministerial-level agencies;

Pursuant to the Government’s Decree No.90/1998/ND-CP of November 7, 1998 promulgating the Regulation on management of foreign loan borrowing and debt repayment;

At the proposal of the director of the Foreign Exchange Management Department of the State Bank of Vietnam,

DECIDES:

Article 1.-To promulgate together with this Decision the "Regulation on the opening of letter of credit for importing goods with deferred payment".

Article 2.-This Decision takes effect 15 days after its signing and replaces Decision No.207/QD-NH7 of July 1, 1997 promulgating the Regulation on opening of letter of credit for importing goods with deferred payment.

Article 3.-The director of the Office, the heads of the units of the State Bank, the managing board chairmen and the general directors (directors) of banks shall, within the ambit of their functions, tasks and powers, have to implement this Decision.

REGULATION

ON OPENING OF LETTER OF CREDIT FOR IMPORTING GOODS WITH DEFERRED PAYMENT
(Promulgated together with Decision No. 711/2001/QD-NHNN of May 25, 2001)

Chapter I

GENERAL PROVISIONS

Article 1.-Settlement by means of deferred payment letter of credit (hereinafter referred to as "deferred payment L/C operation") is a mode of term documentary credit settlement performed by banks in service of goods import by enterprises.

Article 2.-Banks that perform deferred payment L/C operation include the State commercial banks, investment banks, development banks, joint stock commercial banks, policy banks, joint-venture banks, branches of foreign banks in Vietnam and banks of other types (hereinafter called "banks"), which are established and operate under the Law on Credit Institutions and meet all the conditions prescribed in Article 6 of this Regulation.

Article 3.-Subjects for which banks open deferred payment L/C are enterprises established and operating in Vietnam under the provisions of the Vietnamese law and meeting all the conditions prescribed in Articles 8 and 9 of this Regulation. Enterprises include: State enterprises, private enterprises, joint-ventures enterprises with foreign parties, enterprises with 100% foreign capital, limited liability companies, joint stock companies, partnerships, branches of foreign companies, enterprises of socio-political organizations, cooperatives and other enterprises of all economic sectors, as prescribed by law (hereinafter called "enterprises").

Article 4.-The opening of deferred payment L/C for importing goods must be compliant with:

1. The State’s import policy;

2. The State’s current regulations related to the foreign loan borrowing and debt repayment, loan security and the provisions of this Regulation.

3. The Uniform Practice Rules on Documentary Credit of the International Chamber of Commerce (upon the version chosen by banks for implementation).

Article 5.-The opening of deferred payment L/C for importing goods items designated by the Prime Minister shall be effected under his/her directions.

Chapter II

CONDITIONS FOR AND SCOPE OF DEFERRED PAYMENT L/C OPERATION

Article 6.-To be allowed to undertake deferred payment L/C operation, banks must fully meet the following conditions:

1. Being licensed to provide international settlement services;

2. Having specific written regulations on the order, procedures and dossiers necessary for undertaking deferred payment L/C operation under the Uniform Practice Rules on Documentary Credit of the International Chamber of Commerce (upon the version chosen by banks for implementation) and consistent with this Regulation.

3. Having specific written regulations on criteria for determining enterprises’ financial capabilities to ensure the L/C settlement within the committed time limit.

Article 7.-Upon opening deferred payment L/Cs for enterprises, banks must ensure that:

1. The balance of deferred payment L/C opened by a bank for one client (including money amount of deferred payment L/C already opened by the bank but not yet paid to the beneficiary) must lie within the limits of the total guarantee balance of the credit institution for one client according to the provisions of the Regulation on bank guarantee.

2. The balance of deferred payment L/C opened by banks for their clients must lie within the limits of the total guarantee level set by the State Bank in the Regulation on bank guarantee.

Article 8.-Banks shall consider the opening of short-term deferred payment L/C (with a term of up to one year) for enterprises when the latter fully meet the following conditions:

1. Having financial capabilities to ensure the L/C settlement within the committed time limit according to the banks’ regulations.

2. Making written commitments with banks on the schedule for transfer of money to banks, so that the latter make payments to foreign countries. Such a money transfer schedule must conform with the banks’ obligation to make payments to foreign countries with regard to the to-be-opened L/C.

3. At the time of applying for L/C opening: Making no breach of the commitment on transfer of settlement money to banks, so that the latter make payments to foreign countries with regard to previously opened deferred payment L/Cs; owing no debt to banks in cases specified in Clauses 1 and 2, Article 13 of this Regulation.

4. Having lawful security (in one or several forms such as: deposit, pledge or property mortgage, or guarantee by a third party) for the opening of deferred payment L/C at banks’ requests.

5. Being able to satisfy the conditions prescribed by the State Bank Governor for short-term foreign loans.

Article 9.-Banks shall consider the opening of medium- and long-term deferred payment L/Cs (with a term of over one year) for enterprises when the latter fully meet the following conditions:

1. Those prescribed in Clauses 1, 2, 3 and 4, Article 8 of this Regulation.

2. Obtaining the State Bank’s written certification that they have registered for foreign loan borrowing and debt repayment.

Chapter III

DEPOSIT, PLEDGE, MORTGAGE, GUARANTEE AND SETTLEMENT

Article 10.-Before opening deferred payment L/Cs for enterprises, the general directors (directors) of banks or competent persons defined by the banks shall, depending on the actual production and/or business situation, financial capabilities and prestige of each enterprise and characteristics of import goods, reach agreements with enterprises on the application of one or several security measures (deposit, pledge, property mortgage, guarantee) and decide on the secured value which enterprises must provide. The application of the security measure being deposit for opening of deferred payment L/C shall be effected in compliance with the provisions of Article 11 of this Regulation.

Article 11.-Regarding the security measure being deposit for opening of deferred payment L/C:

1. Basing himself/herself on the actual situation and the State’s goods import policy, when necessary, the State Bank Governor shall decide the minimum deposit level for goods items on the list of goods restricted from import promulgated by the Government for each period.

2. Enterprises are not allowed to make deposits with bank loans or capital amounts currently guaranteed by banks.

Article 12.-The pledge, property mortgage and guarantee for the opening of deferred payment L/C shall be made according to the agreements between banks and enterprises and in compliance with the current law provisions on loan security and other relevant regulations.

Article 13.-Enterprises shall be responsible for transferring money to banks strictly according to the commitments between enterprises and banks for making payments to foreign countries on time. Banks shall be responsible for making payments to foreign countries according to their own commitments.

If enterprises fail to transfer money (the whole or part) to banks according to commitments, the banks shall still have to perform their obligation to make payments to foreign countries and be entitled to make client debit entries as from the date of payment, and in the following cases, the banks may make their decisions:

1. In cases where enterprises fail to transfer money (the whole or part) to banks strictly according to the commitments due to objective reasons, the banks shall, on their own conditions, make debit entries against enterprises with a credit interest rate applicable to undue debts and decide the debt repayment time limits as follows:

a/ For short-term deferred payment L/C, the maximum debt repayment time limit shall be equal to one production or business cycle but must not exceed 12 months after the banks make payments to foreign countries, except for special cases where the State Bank Governor permits or authorizes the banks to consider and decide it;

b/ For medium-and long-term deferred payment L/C, the maximum debt repayment time limit shall be equal to half of the term of deferred payment L/C after the banks make payments to foreign countries, except for special cases where the State Bank Governor permits or authorizes the banks to consider and decide it.

2. Banks shall debit or transfer over-due debts, and at the same time apply the over-due debt interest rate as prescribed by the State Bank Governor at the time of debiting or transferring over-due debts and take necessary measures to recover debts according to the provisions of law in the following cases:

a/ Enterprises fail to transfer money (the whole or part) to banks according to the commitments due to subjective reasons of enterprises.

b/ Enterprises fail to fulfill the debt repayment obligation within the time limit decided by banks according to the provisions in Clause 1 of this Article.

3. Right after debiting debts, over-due debts or transferring over-due debts for enterprises under the conditions prescribed in Clause 1 or Clause 2 of this Article, banks shall have to promptly notify such in writing to enterprises.

Chapter IV

COMPETENCE TO SIGN DEFERRED PAYMENT L/C AND CHARGE LEVELS FOR DEFERRED PAYMENT L/C OPERATION

Article 14.-Banks shall prescribe competence to decide the opening of deferred payment L/C in their own systems in compliance with the current law provisions.

Article 15.-Charge levels for deferred payment L/C operation (value added tax not yet included):

1. The total charge for L/C opening and charge for document examination shall be at most equal to 2%/year calculated on the value and within the term of the opened L/C.

2. Charge for payment acceptance shall be at most equal to 2%/year calculated on the money amount accepted for payment but not yet paid to the beneficiaries, and within the period from payment acceptance to the payment deadlines.

3. Charge for transfer of money abroad when settling L/C prescribed by banks in compliance with Vietnam State Bank’s regulations on collection of charges for via-bank payment services.

4. Charge for L/C modification, electricity and telex and other reasonable charges (if any) prescribed by banks.

Chapter V

INSPECTION, EXAMINATION AND HANDLING

Article 16.-Periodically or when necessary, the inspection or examination of deferred payment L/C operation shall be conducted as follows:

1. Banks shall submit to the inspection and/or examination by the State Bank;

2. Enterprises shall submit to the inspection and/or examination by banks;

3. Enterprises shall submit to the inspection by the State Bank of the situation of foreign loan borrowing and debt repayment in form of opening letters of credit for importing goods with deferred payment according to the current regulations on foreign loan borrowing and debt repayment by enterprises.

The inspected or examined banks and enterprises shall have to supply all data and vouchers related to the performance of deferred payment L/C operation in service of the above-said inspection or examination. The inspection and examination must be conducted in strict compliance with law provisions.

Article 17.-Organizations and individuals that violate the provisions of this Regulation shall, depending on the nature and seriousness of their violations, be disciplined, administratively handled or examined for penal liability. If damage is caused, compensation therefor must be made according to the law provisions.

Chapter VI

REPORTING REGIME

Article 18.-Periodically, banks shall have to send to the State Bank (the Foreign Exchange Management Department) and the State Bank’s branches in provinces and centrally-run cities where they are located reports made according to the current regulations on reports on foreign loan borrowing and debt repayment (including deferred payment L/C operation).

Article 19.-The State Bank’s provincial/municipal branches shall report to the State Bank (the Foreign Exchange Management Department) according to the following regulations:

1. To promptly report upon detecting violations of the Regulation on opening of letter of credit for importing goods with deferred payment and propose handling measures.

2. To comply with the current regulations on reports on foreign loan borrowing and debt repayment (including deferred payment L/C operation).

Chapter VII

CLAUSE ON SUPPLEMENT AND AMENDMENT

Article 20.-The supplement and/or amendment to this Regulation shall be decided by the State Bank Governor.