Circular 21/2024/TT-NHNN letter of credit operations and other business operations related to letters of credit

CIRCULAR

Prescribing letter of credit operations and other business operations related to letters of credit

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Pursuant to the Civil Code dated November 24, 2015;

Pursuant to the Law on the State Bank of Vietnam dated June 16, 2010;

Pursuant to the Law on Credit Institutions dated January 18, 2024;

Pursuant to the Ordinance dated December 21, 2005 on Foreign Exchange and the Ordinance dated March 18, 2013 Amending and Supplementing a Number of Articles of the Ordinance on Foreign Exchange;

Pursuant to the Government's Decree No. 102/2022/ND-CP dated December 12, 2022 defining the functions, duties, powers and organizational structure of the State Bank of Vietnam;

At the proposal of the Director of the Department of Credit for Economic Sectors and the Director of the Foreign Exchange Management Department;

The Governor of the State Bank of Vietnam hereby promulgates a Circular prescribing letter of credit operations and other business operations related to letters of credit.

Chapter I

GENERAL PROVISIONS

Article 1. Scope of regulation

This Circular prescribes letter of credit operations (other than standby letter of credit operations) and other business operations related to letters of credit conducted by credit institutions and foreign bank branches for their clients.

Article 2. Subjects of application

1. Credit institutions and foreign bank branches that are allowed to perform letter of credit operations and other business operations related to letters of credit, including: commercial banks, cooperative banks and foreign bank branches (hereinafter referred to as banks).

2. Resident and non-resident individuals and organizations involved in letter of credit operations and other business operations related to letters of credit.

Article 3. Interpretation of terms

In this Circular, the terms below are construed as follows:

1. Letter of credit operation means a form of credit extension including letter of credit issuance, confirmation, negotiation, and reimbursement for the purposes of goods sale and service provision.

2. Other business operations related to letters of credit mean the purchase without recourse of a presentation under a letter of credit and the services provided by a bank to a client in addition to those provided by such bank in the process of performing the letter of credit operations for such client.

3. Letter of credit means an irrevocable undertaking of the issuing bank to pay the beneficiary by acceptance of a complying presentation.

4. Letter of credit issuance means the issuing bank’s extension of credit to a client on whose request a letter of credit is issued to the beneficiary. The client shall be indebted and fully repay the principal, interest and fees as agreed in cases where the bank must make payment to the beneficiary using the bank's own funds or request another bank to pay on the client's behalf.

5. Letter of credit confirmation means a definite undertaking of the confirming bank, in addition to that of the issuing bank on whose request, to pay the beneficiary by acceptance of a complying presentation.

6. Payment negotiation means a bank’s negotiation of a term purchase, or purchase with recourse, of a presentation under a letter of credit (with or without drafts) of the beneficiary before the maturity date.

7. Letter of credit reimbursement means the agreement of the reimbursing bank with the issuing bank to pay the beneficiary with its own funds or the undertaking of the reimbursing bank, in addition to that of the issuing bank on whose request, to pay the beneficiary.

8. Purchase without recourse of a presentation under a letter of credit means the purchase of a presentation to which the documents that have not be honored are forwarded from the client. This bank will receive the payment from the issuing bank or confirming bank and has no recourse against the client in cases where the bank does not receive the payment in full from the issuing bank or confirming bank.

9. Presentation under a letter of credit means documents presented to be honored under a letter of credit.

10. Beneficiary means a seller or exporter of goods or services prescribed in the letter of credit or the party with beneficiary rights under a letter of credit already issued.

11. Applicant means the buyer or importer of goods or services on whose request the letter of credit is issued by a bank.

12. Client means an organization (including any overseas bank or credit institution) or an individual, to be specific:

a) With respect to issuing a letter of credit, the client of the issuing bank is the applicant;

b) With respect to confirming a letter of credit, the client of the confirming bank is the issuing bank;

c) With respect to negotiating a payment, the client of the negotiating bank is the beneficiary who requests the bank to negotiate the payment;

d) With respect to reimbursing a letter of credit, the client of the reimbursing bank is the issuing bank;

dd) With respect to other business operations related to a letter of credit, the client of a bank is the party to whom the bank provides services, or the party that requests the bank to purchase without recourse a presentation under the letter of credit.

13. International customary commercial practices for letters of credit mean Uniform Customs and Practice for Documentary Credits issued by the International Chamber of Commerce and other customary commercial practice that are not contrary to the basic principles of Vietnamese law and are chosen by agreement between the parties.

14. Credit agreement for letter of credit operations means an agreement between the issuing bank, confirming bank, negotiating bank or reimbursing bank with the client and other relevant parties (if any) on extending credit to the client by issuing, confirming, negotiating a payment, or reimbursing a letter of credit.

15. Maturity date of a letter of credit means the final due date of payment to the beneficiary under the payment terms of the letter of credit.

16. Client loan means an amount lent to an applicant by a credit institution or foreign bank branch, or a foreign loan to pay for a contract on goods sale or service provision in accordance with the law regulations on lending to clients by credit institutions and foreign bank branches, or on foreign currency loans of credit institutions and foreign bank branches to resident borrowers, or on management of loans to repay foreign debts not guaranteed by the Government, or on foreign exchange management for foreign loan borrowing and repayment by credit institutions from non-resident borrowers.

17. Fund use plan in letter of credit operations means a set of information on the use of funds by a client, containing the following information: funding sources to pay the obligations undertaken in letter of credit operations; purposes of letter of credit issuance, confirmation, negotiation, or reimbursement.

18. Entrustment of the issuance of letters of credit means the undertaking of the entrusting party to provide monetary funds to the entrusting party so that the entrusting party can issue a letter of credit to the beneficiary, for the sake of the applicant that is the entrusting party's client. The entrusting party bears all risks from its client. The entrusted party bears all risks from the entrusting party.

19. Entrusting party means a bank or credit institution in a foreign country (a parent bank or a branch of a parent bank of a foreign bank branch, a branch or a subsidiary that is an overseas credit institution of a commercial bank) entrusting the entrusted party to issue a letter of credit to the beneficiary.

20. Entrusted party means a bank entrusted by the entrusting party to issue a letter of credit to the beneficiary.

Article 4. Autonomy of banks

1. The banks have autonomy in performing letter of credit operations and other business operations related to letters of credit and shall be responsible for the results of their operations.

2. A bank may refuse to extend credit or provide other business operations related to letters of credit on request of a client if it is so found to be ineffective or inconsistent with the bank’s internal regulations, this Circular, international customary commercial practices for letters of credit, and relevant law regulations.

Article 5. Principles for performing letter of credit operations and other business operations related to letters of credit

1. A bank shall perform letter of credit operations for a client under an agreement between the bank and the client. When performing letter of credit operations, the bank must comply with this Circular and relevant law regulations on credit extension. For other issues regarding letter of credit operations, the bank shall comply with international customary commercial practices for letters of credit.

2. Letter of credit operations in foreign currency performed by the banks must be consistent with the scope of foreign exchange operations on the domestic and international markets as prescribed in each bank's operation license and law regulations on the scope of foreign exchange operations, conditions, process and procedures for approval of foreign exchange operations of credit institutions and foreign bank branches and must comply with the law regulations on business and provision of foreign exchange services by the banks on domestic and international markets.

3. When collecting principal, interest and fees in foreign currencies in letter of credit operations, in cases where the client fails to have or does not have enough foreign currencies to repay the debt, the client can buy foreign currencies from the bank performing the letter of credit operations or from another credit institution or foreign bank branch to repay the debt.

In cases where a client needs to buy foreign currencies from a bank performing letter of credit operations, such bank must sell foreign currencies to the client. In cases where a client buys foreign currencies from another credit institution or foreign bank branch, such credit institution or foreign bank branch, which sells the foreign currencies, must transfer such foreign currencies to the bank performing letter of credit operations. In cases where the client generates foreign currency revenue from its production and business operations, the client must sell foreign currencies to the credit institution or foreign bank branch that has sold such foreign currencies to the client, should the latter express a demand for such currencies.

4. When performing payment negotiation operations for non-resident clients, the banks must comply with this Circular and the law regulations on foreign exchange management for overseas borrowing and lending.

5. When issuing, confirming, and reimbursing letters of credit for non-resident clients, the banks are not required to open dedicated foreign currency accounts at a payment service provider to recover foreign debts from letter of credit operations. In cases where a bank opens a dedicated foreign currency account at a payment service provider in Vietnam, such payment service provider shall check and compare documents presented by the bank to ensure the proper performance of transactions related to the performance of letter of credit operations.

6. The bank shall perform other business operations related to letters of credit for a client in accordance with the agreement between the parties and not contravention of this Circular, relevant law regulations and international commercial practices for letters of credit.

7. The compliance with the Law on Credit Institutions and instructions of the State Bank of Vietnam (hereinafter referred to as the State Bank) on prohibited acts, cases ineligible for credit extension, credit restrictions, and credit limits shall be ensured.

Article 6. Application of customary practices and dispute resolution options

1. Parties involved in the letter of credit operations may agree to apply customary commercial practices as prescribed in Article 3 of the Law on Credit Institutions.

2. When applying international customary commercial practices on letters of credit, the parties must specifically refer to the applicable version.

3. Disputes arising in the letter of credit operations shall be resolved under the agreement of the parties in accordance with the law of Vietnam. In cases where the cases involve foreign factors as prescribed in the Civil Code, the parties can agree on the applicable law and dispute resolution body (including courts or international commercial arbitrators) to resolve them.

Article 7. Use of language

1. Credit agreements for letter of credit operations must be made in Vietnamese, unless they involve foreign factors as prescribed in the Civil Code or are made via the international communication network. In case of using a foreign language, on request of a competent authority, the credit agreement must be translated into Vietnamese with confirmation from the bank's legal representative or the translation must be notarized or authenticated, enclosed with such foreign language version.

2. For other documents in the letter of credit operations (in addition to the credit agreement for the letter of credit operations), the banks may agree with relevant parties to use foreign languages in accordance with international customary commercial practices for letters of credit when done. In case of using a foreign language, on request of a competent authority, the documents must be translated into Vietnamese with confirmation from the bank's legal representative or the translation must be notarized or authenticated, enclosed with the foreign language version.

Article 8. Security for performance of obligations by clients

1. The bank shall agree with the client on whether or not to apply security measures when performing letter of credit operations.

2. In case of agreement to apply security measures, the bank and the client shall comply with the law regulations on security for performance of obligations and the bank’s internal regulations.

3. The client and the securing party must coordinate with the bank to dispose of the collateral on grounds for such disposal under the credit agreement for letter of credit operations, the security agreement and the law regulations.

Article 9. Letter of credit balance

1. The letter of credit balance of a client, or a client together with his/her affiliated persons, includes the letter of credit issuance balance, the letter of credit confirmation balance, the negotiation balance, and the reimbursement balance or the letter of credit reimbursement undertaking to such client or to such client together with his/her affiliated persons.

2. The letter of credit balance of a client, or a client together with his/her affiliated persons shall be calculated from the date of issuance of the letter of credit, confirmation of the letter of credit, negotiation, or reimbursement of the letter of credit.

Article 10. Credit extended

The bank and the client shall agree on the credit to be extended based on the value of the goods sale or service provision contract (for letter of credit issuance) or the value of the letter of credit (for letter of credit confirmation, negotiation, or reimbursement), and the credit limits for the client to issue, confirm, negotiate, or reimburse the letter of credit, but the maximum thereof must not exceed the value of the goods sale or service provision contract between the client and the beneficiary or the value of the letter of credit.

Article 11. Currency for issuance, confirmation, reimbursement and payment of letters of credit

1. The bank and the client shall agree on the issuance of a letter of credit in Vietnamese dong or foreign currency depending on the currency in which payment must be made to the beneficiary under the goods sale or service provision contract.

2. The bank and the client shall agree to confirm and reimburse the letter of credit in Vietnamese dong or foreign currency depending on the currency in which payment must be made to the beneficiary under the letter of credit.

3. The issuing bank, confirming bank, and reimbursing bank shall pay the beneficiary on the maturity date of the letter of credit in the payment currency stated in the letter of credit.

Article 12. Interest rates for credit to clients

1. The bank and the client shall agree on the interest rate applicable to reimbursement and negotiation of the letter of credit.

2. The interest rate applicable to the overdue principal balance in letter of credit reimbursement and negotiation shall be agreed upon by the banks in the credit agreement but not exceed 150% of the credit interest rate applicable at the time when it is converted into an overdue debt.

3. The interest rate applicable to the amount paid by the bank on behalf in letter of credit issuance, confirmation, and reimbursement shall depend on the credit agreement but not exceed the highest overdue interest rate currently applicable to the overdue loans of such bank.

4. The interest rate applicable to late payment interest shall be agreed upon by banks in the credit agreement for letter of credit operations but not exceed 10%/year of the late payment interest balance in commensurate with the period of payment delay.

5. In cases where the currency in which the letter of credit operations is performed is a foreign currency, the parties shall agree to collect letter of credit operation interests in foreign currency or convert it into Vietnamese dong or other foreign currencies at the agreed exchange rate.

Article 13. Fees for letter of credit operations and other business operations related to letters of credit

1. The bank shall agree with the client and relevant parties (if any) on the collection and rates of credit extension fees related to letter of credit operations and fees applicable to other business operations related to letters of credit.

2. The banks shall publicly disclose the fees for letter of credit operations and other business operations related to letters of credit.

3. In cases where the currency in which the letter of credit operations is performed is a foreign currency, the parties shall agree to collect credit extension fees in foreign currency or convert it into Vietnamese Dong or other foreign currencies at the agreed exchange rate.

Article 14. Dossiers of request for credit extension

When letter of credit services is necessitated, the client shall send to the bank:

1. Information, documents and data proving eligibility for credit extension as prescribed in Article 21, Article 27, Article 31 and Article 40 of this Circular.

2. Information about affiliated persons of the client as prescribed in the Law on Credit Institutions if such client’s total outstanding credit balance at the bank (including the pending credit) is greater than or equal to 0.1% of the bank’s equity at the bank’s most recent date, unless otherwise the client is an overseas credit institution. In cases where a bank has negative equity, the above rate is applied on the charter capital or allocated capital (for foreign bank branches). Information about affiliated persons includes:

a) Information about affiliated persons who are individuals, including: full name; personal identification number, if they are Vietnamese citizens; nationality, passport number, date of issue, place of issue if they are foreigners; relationship with the client;

b) Information about affiliated persons that are organizations, including: name, enterprise ID, head office address of the enterprise, serial number of Business Registration Certificate or equivalent legal documents, at-law representatives, relationship with the client.

3. Other documents as guided by the bank.

Article 15. Credit evaluation

1. The bank shall evaluate the creditworthiness conditions of the client in accordance with Article 21, Article 27, Article 31 and Article 40 of this Circular, thereby considering issuing, confirming, negotiating or reimbursing the letter of credit. During the evaluation, the bank can use the internal credit rating system together with information at the National Credit Information Center of Vietnam and other information channels.

2. The banks shall consider and approve credit extension on the principle of clearly separating the responsibility of credit evaluation and extension decision.

3. In case of refusing to extend credit, the bank shall notify the client of such refusal and the reason on the client’s request.

Article 16. Classification of assets, ratios and methods of establishment of provisions for credit losses, and use of provisions for credit losses

The bank shall classify assets, determine ratios and method of establishment of provisions for credit losses, and use of provisions to credit losses incurred from undertakings and assets when extending credit in letter of credit operations, when purchasing without recourse presentations under letters of credit, when entrusting the issuance of letter of credits in accordance with the law regulations on classification of assets, ratios and methods of establishment of provisions for credit losses, and use of provisions for credit losses in the operations of banks and foreign bank branches.

Article 17. Internal regulations of the bank on letter of credit operations

1. Pursuant to the Law on Credit Institutions, this Circular and relevant law regulations, a bank shall promulgate its internal regulations on letter of credit operations for its clients (including the regulations on electronic letter of credit operations (if any)), which include the process of performing letter of credit operations in accordance with regulations on credit extension and business characteristics of the bank.

2. The bank shall send its internal regulations on letter of credit operations to the State Bank (attention to the Banking Supervision Agency or the State Bank branch in the respective province or municipality) in accordance with relevant law regulations.

Article 18. Electronic letter of credit operations

1. The bank and the client may choose to perform letter of credit operations and other business operations related to letters of credit electronically (hereinafter referred to as electronic letter of credit operations). Electronic letter of credit operations shall be performed in accordance with this Circular; law regulations on anti-money laundering; electronic transactions; personal data protection; security and confidentiality for providing online banking services, and relevant law regulations.

2. When identifying and verifying the client’s identity electronically, if the client establishes a relationship with the bank for the first time (unless otherwise the client sends an authenticated SWIFT message or uses an electronic signature as prescribed by law), the bank shall proceed as follows:

a) For a resident client: The bank shall identify and verify the client’s identity in accordance with the State Bank’s regulations on opening and using payment accounts at payment service providers.

b) For a non-resident client: The bank shall identify and verify the client’s identity based on its assessment of risk level to select and decide on appropriate electronic transaction authentication methods, forms, and technology, ensuring security and bearing arising risks.

3. The bank shall decide on its own measures, forms, and technologies to carry out electronic letter of credit operations for all stages or each stage of the business process, bear the arising risks (if any) and meet at least the following requirements:

a) The measures, forms, and technologies selected by the bank must adhere to safeguard, security, and confidentiality standards in accordance with the regulations of the State Bank;

b) It shall apply electronic transaction authentication solutions to confirm the client’s consent to the bank when performing electronic transactions in the process of performing electronic letter of credit operations in accordance with relevant law regulations.

c) Documents, information, and identifiable data of the client shall be sufficiently and thoroughly stored and retained during the process of performing electronic letter of credit operations. Information and data must be securely and confidentially stored and backed up, ensuring the completeness and integrity thereof to support the processes of checking, comparing, and authenticating clients in the process of implementing electronic letter of credit operations; resolving inquiries, complaints, and disputes, as well as providing information on request from competent authorities. The retention period shall comply with the law regulations on anti-money laundering and electronic transactions;

d) The bank must check and evaluate the level of safety and confidentiality of measures, forms, and technologies, and suspend service provision to upgrade, modify, and finalize them in case of any signs of insecurity;

dd) The bank shall assign specific responsibilities to each individual and department to develop, set up and operate the information system to support credit evaluation and decision-making in the electronic letter of credit operations. In cases where a risk arises, the bank must have a mechanism to identify each responsible individual and department and promptly handle any arising problem or and risk to ensure efficiency and safety in the process of performing the bank's electronic letter of credit operations.

4. The information system for performing electronic letter of credit operations must meet the requirements for level-3 or higher information system security in accordance with the law regulations on the security of information systems by classification, and the State Bank's regulations on information system security standards for banking operations.

Article 19. Rights and obligations of the banks issuing, confirming, negotiating, and reimbursing letters of credit

1. A bank performing letter of credit operations shall have the rights to:

a) Accept or refuse the client’s request in performing letter of credit operations;

b) Request the client and relevant parties to provide information, documents, and data related to the client verification, and collateral (if any);

c) Request the client to fully repay principal, interest and fees as agreed;

d) Initiate a lawsuit in accordance with the law regulations when relevant parties violate the obligations they undertake;

dd) Reserve other rights as agreed by the parties, in accordance with relevant law regulations and international customary commercial practices for letters of credit.

2. The bank performing letter of credit operations have the following obligations to:

a) Comply with the undertakings to the client;

b) Perform other obligations as agreed by the parties in accordance with this Circular and international customary commercial practices for letters of credit.

Article 20. Rights and obligations of clients

1. A client shall have the rights to:

a) Refuse the bank’s request which is inconsistent with the signed credit agreement for letter of credit operations and law regulations;

b) Initiate a lawsuit in accordance with the law regulations when relevant parties violate the obligations they undertake;

c) Reserve other rights as agreed with the bank, in accordance with international customary commercial practices for letters of credit.

2. Clients shall have the following obligations:

a) Provide information, documents, and data to the bank truthfully, accurately, completely, and promptly to prove that the bank's credit extension conditions are met, and must be held liable for the information, documents and data they provide;

b) Fully reimburse the principal, interest and fees under the agreement and in accordance with international customary commercial practices for letters of credit;

c) Perform other obligations agreed with the banks and prescribed by law.

Chapter II

LETTER OF CREDIT OPERATIONS 

Section 1

 LETTER OF CREDIT ISSUANCE

Article 21. Conditions for clients

1. The bank considers and decides to issue a letter of credit when the client:

a) Has civil legal capacity and civil act capacity prescribed by law;

b) Needs to open a letter of credit for the purpose of lawful goods sale and services provision;

c) Has a feasible fund use plan;

d) Has the financial capacity to pay for the goods sale or service provision contract.

2. In cases where the client is non-resident, the bank (other than a foreign bank branch that issues letters of credit in foreign currency as prescribed in Clause 3 of this Article) shall only consider and decide to issue a letter of credit to a client that meets all the conditions prescribed in Clause 1 of this Article and one of the following requirements:

a) The client is an enterprise established and operating abroad with capital contributed by a Vietnamese enterprise in the form of investment prescribed at Points a and c, Clause 1, Article 52 of the Law on Investment or in other forms of investment prescribed at Point dd, Clause 1, Article 52 of the Law on Investment;

b) The client shall make a collateral equal to 100% of the value of the letter of credit using his/her/its own assets, including: deposit balance or certificate of deposit at the issuing bank or the amount the client will be paid under a letter of credit issued by the bank to the beneficiary that is the client;

c) The beneficiary is resident.

3. A foreign bank branch will only consider and decide to issue a letter of credit in foreign currency to a non-resident client when the client meets all the conditions prescribed in Clause 1 of this Article and the beneficiary is a resident.

Article 22. Credit period in letter of credit issuance

1. The credit period in the letter of credit issuance means the period of time from the day following the date of issuance of the letter of credit until the maturity date of the letter of credit, which shall does not exceed the remaining lawful operational duration of the bank and the client.

2. The renewal of the credit period in the letter of credit issuance shall be agreed upon by the parties in accordance with international customary commercial practices for letters of credit.

Article 23. Credit agreements for letter of credit issuance

1. A credit agreement must contain the following key details:

a) Information about parties in letter of credit issuance;

b) Currency and amount of the letter of credit to be issued;

c) Goods sale or service provision contract;

d) Type of the letter of credit;

dd) Funding sources for payment of the goods sale or service provision contract;

e) Applicable fees, interest rates, penalty interest (if any);

g) Security measures (if any);

h) Required indebtedness, debit of the escrow account or deposit account (if any);

i) Purchase and sale of foreign currencies (if any);

k) Maturity date of the letter of credit;

l) Credit period;

m) Resolution of arising disputes;

n) Other details that are not contrary to the law regulations.

2. A credit agreement must ensure the rights and obligations of the parties and be drawn up for each specific transaction or under a framework agreement generally applicable to all letter of credit issuance transactions enclosed therewith.

Article 24. Letter of credit issuance

1. Pursuant to the credit agreement, the bank issues a letter of credit to the beneficiary. The details of the letter of credit related to the amendment, supplementation, or cancellation thereof shall be agreed upon by the parties in accordance with international customary commercial practices for letters of credit.

2. The banks may issue various types of letters of credit under agreements with clients in accordance with international customary commercial practices for letters of credit.

3. The banks are only allowed to issue deferred letters of credit with terms for sight payment or payment before the maturity date thereof in cases for resident clients.

Article 25. Fulfillment of obligations undertaken in the letter of credit

1. The issuing bank must pay the beneficiary under the letter of credit and in accordance with international customary commercial practices for letters of credit.

2. In cases where the bank issues a letter of credit with sight payment or deferred payment, the bank shall agree with the client to debit the escrow account or deposit account (if any), and use the client's loan to pay for the obligations to the beneficiary. In cases where the client’s balance is not enough to pay the beneficiary, the client is required to be indebted to the bank for the client’s shortfall. The client is obliged to fully repay the required indebtedness as well as the interests and fees in accordance with Article 12 and Article 13 of this Circular.

3. In cases where the bank issues a letter of credit with deferred payment and an arrangement to pay the beneficiary at sight or before the maturity date thereof:

a) The issuing bank shall request the reimbursing bank to pay the beneficiary. For a non-resident beneficiary, the issuing bank may only request a non-resident reimbursing bank to pay such beneficiary;

b) When the reimbursing bank pays the beneficiary, the issuing bank must be indebted to the reimbursing bank and, at the same time, the client must be indebted to the issuing bank for the amount paid by the reimbursing bank to the beneficiary under the undertaking in the letter of credit. The bank shall record a debit to the client when receiving a notice from the reimbursing bank. The reimbursing bank and the issuing bank must include this outstanding balance in the total credit balance extended to the client;

c) On the maturity date of the letter of credit, the client must fully repay the required indebtedness and the interest to the issuing bank, and the issuing bank must fully repay the required indebtedness as well as the interests and fees to the reimbursing bank in accordance with Article 12 and Article 13 of this Circular;

d) In cases where the client fails to fully repay the indebtedness to the issuing bank on the maturity date of the letter of credit, the issuing bank will convert the principal balance unpaid by the client after due date into an overdue debt. The issuing bank must send a notice of such conversion to the client. Such notice shall at least contain the details including the overdue principal balance, the time when it is converted into an overdue debt, and the interest rate applicable to the overdue principal balance as prescribed in Article 12 of this Circular;

dd) In cases where the issuing bank fails to fully reimburse the indebtedness to the reimbursing bank, the reimbursing bank shall comply with Point c, Clause 3, Article 43 of this Circular, unless otherwise the reimbursing bank is non-resident;

e) The parties can agree to repay the indebtedness before the maturity date of the letter of credit and the prepayment penalty.

4. In cases where the issuing bank requests a non-resident reimbursing bank to pay the beneficiary in accordance with Clause 3 of this Article, the issuing bank must ensure compliance with the law regulations on management of foreign loan borrowing and repayment by enterprises not guaranteed by the Government.

5. In cases where the debt is in foreign currency, the client shall repay it in foreign currency or convert it into Vietnamese dong or other foreign currencies at the agreed exchange rate.

Article 26. Loan syndication in letter of credit issuance

1. The banks shall co-issue letters of credit in accordance with the principles, conditions, and procedures prescribed in this Circular and the State Bank's regulations on provision of syndicated loans by credit institutions and foreign bank branches to clients, and relevant law regulations.

2. In case of co-issuing a letter of credit with an overseas credit institution and the client is resident, the client must ensure compliance with this Circular and law regulations on management of foreign loan borrowing and repayment by enterprises not guaranteed by the Government.

Section 2

LETTER OF CREDIT CONFIRMATION

Article 27. Conditions for clients

1. The bank considers and decides to confirm the letter of credit when the client:

a) Has the letter of credit issued for the purpose of lawful goods sale and services provision;

b) Has a feasible fund use plan;

c) Has financial capacity to pay obligations committed in the letter of credit.

2. A bank may not consider the conditions prescribed at Point c, Clause 1 of this Article for a client in the following cases:

a) The client is the parent bank or a Vietnam-based branch in the system of the parent bank of a foreign bank branch;

b) The client is a credit institution that is an overseas branch of a commercial bank.

3. In cases where the client is non-resident, the bank (other than a foreign bank branch that confirms letters of credit in foreign currency as prescribed in Clause 4 of this Article) shall only consider and decide to confirm a letter of credit to a client that meets all the conditions prescribed in Clause 1 and Clause 2 of this Article and one of the following requirements:

a) It is an overseas credit institution that is a branch or subsidiary of a commercial bank; or the parent bank or the branch in the system of the parent bank of a foreign bank branch;

b) The client shall make a collateral equal to 100% of the value of the letter of credit using his/her/its own assets, including deposit balance and escrow deposit at the confirming bank;

c) The beneficiary of the letter of credit is resident.

4. A foreign bank branch will only consider and decide to confirm a letter of credit in foreign currency to a non-resident client when the client meets all the conditions prescribed in Clause 1 and Clause 2 of this Article and the beneficiary is a resident.

Article 28. Credit period in letter of credit confirmation

The credit period in the letter of credit confirmation means the period of time from the day following the date of confirmation of the letter of credit until the maturity date of the letter of credit, which shall does not exceed the remaining operational duration of the bank and the client.

Article 29. Credit agreements for letter of credit confirmation

1. A credit agreement in letter of credit confirmation must contain the following details:

a) Information about relevant parties, including the issuing bank, the confirming bank, the applicant, the beneficiary and other relevant parties (if any);

b) Information about the letter of credit, security measures (if any), and other information as required by the confirming bank;

c) Currency and amount of the letter of credit to be confirmed;

d) Credit period upon letter of credit confirmation;

dd) Fees, interest rates, penalty interest (if any).

2. A credit agreement must be drawn up for each specific transaction or under a framework agreement generally applicable to all letter of credit issuance transactions enclosed therewith.

Article 30. Fulfillment of obligations confirmed in the letter of credit

1. The confirming bank must pay the beneficiary under the letter of credit and in accordance with international customary commercial practices for letters of credit.

2. The confirming bank shall agree with the client to debit the client’s escrow account or deposit account (if any) or the client shall transfer the payment to the confirming bank's designated account for the confirming bank to fulfill payment obligations to the beneficiary. In cases where the client’s balance is not enough to pay the beneficiary, the client is required to be indebted to the confirming bank for the client’s shortfall. The client is obliged to fully repay the required indebtedness as well as the interests and fees to the confirming bank in accordance with Article 12 and Article 13 of this Circular.

3. In cases where the debt is in foreign currency, the client shall repay it in foreign currency or convert it into Vietnamese dong or other foreign currencies at the agreed exchange rate.

Section 3

PAYMENT NEGOTIATION

Article 31. Conditions for clients

1. The bank considers and decides to negotiate payment when the client:

a) Has sufficient civil legal capacity and civil act capacity prescribed by law;

b) Open a letter of credit for the purpose of lawful goods sale and services provision;

c) Has a complying presentation as prescribed in Article 32 of this Circular;

d) Has a feasible fund use plan;

dd) Has the financial capacity to make the negotiated payment.

2. In cases where the client is a non-resident, the bank (other than a foreign bank branch that negotiates in foreign currency as prescribed in Clause 3 of this Article) shall only consider and decide to negotiate a presentation under a letter of credit to a client that meets all the conditions prescribed in Clause 1 of this Article and one of the following requirements:

a) The client is an enterprise established and operating abroad with capital contributed by a Vietnamese enterprise in the form of investment prescribed at Points a and c, Clause 1, Article 52 of the Law on Investment or in other forms of investment prescribed at Point dd, Clause 1, Article 52 of the Law on Investment;

b) The issuing bank is a resident.

3. A foreign bank branch will only consider and decide to negotiate a presentation under a letter of credit in foreign currency to a non-resident client when the client meets all the conditions prescribed in Clause 1 of this Article and the issuing bank is a resident.

Article 32. Conditions for a presentation under a letter of credit to be negotiated

1. The letter of credit with a presentation to be negotiated is issued in accordance with international customary commercial practices for letters of credit.

2. The client is the lawful beneficiary thereof.

3. It is unpaid.

Article 33. Negotiation currency

1. For a presentation under a letter of credit issued in Vietnamese Dong, the bank may negotiate it in Vietnamese Dong.

2. For a presentation under a letter of credit issued in foreign currency, the bank shall negotiate it in the foreign currency stated in the letter of credit or convert it into Vietnamese Dong or other foreign currencies at the agreed exchange rate for negotiation.

Article 34. Currency for repayment of the negotiated amount upon expiration of the negotiation period

1. For a presentation negotiated in Vietnamese Dong, the repayment currency will be Vietnamese Dong.

2. For a presentation negotiated in foreign currency, the repayment currency shall be such foreign currency or it shall be converted into Vietnamese Dong or other foreign currencies at the agreed exchange rate.

Article 35. Negotiation methods

The bank and the client shall agree and select the following negotiation methods:

1. Term purchase of a presentation under a letter of credit, which means the bank purchases an undue presentation under a letter of credit, which is then forwarded to such bank, from the client, and, at the same time, the client must commit to repay the negotiated amount, interest and costs after a period of time determined in the negotiation agreement.

2. Purchase, with recourse, of a presentation under a letter of credit means the bank purchases an undue presentation under a letter of credit, which is then forwarded to such bank, from the client in cases where the bank does not receive the full payment from the bank responsible for honoring such presentation when the letter of credit is mature. The client must be responsible for reimbursing the negotiated amount, interest and other lawful costs related to negotiation in cases where the bank does not receive the full payment from the bank responsible for honoring the presentation.

Article 36. Negotiation price, negotiation period, negotiation interest rates and relevant costs

1. The bank and the client shall agree on the prices to purchase and redeem the presentation based the payment value when due, the risk level of the presentation, the negotiated payment interest rate, the remaining validity period of the presentation, and other elements.

2. The negotiation period for the term purchase shall be agreed upon by the bank and the client, which shall exceed 01 year and the remaining validity period of the presentation.

3. The negotiation period for the purchase with recourse shall be agreed upon by the bank and the client, which shall exceed 01 year and the recourse period. The recourse period shall be agreed upon by the bank and the client, calculated from the day following the maturity date of the letter of credit to the date the client must fully reimburse to the bank the amount unpaid by the person responsible for honoring the presentation.

4. Negotiation interest rates and other costs related to negotiation shall be agreed upon by the bank and the client in accordance with the law regulations.

5. The penalty interest rate applied to the overdue negotiated payment shall be agreed upon by the bank and the client in accordance with Article 12 of this Circular.

Article 37. Negotiation agreements

1. A negotiation agreement must contain at least the following key details:

a) Information about relevant parties, including the negotiating bank, the beneficiary and other relevant parties (if any);

b) Information about the presentation under the letter of credit, and other information as required by the negotiating bank;

c) Negotiation price;

d) Negotiation currency;

dd) Negotiation method;

e) Negotiation period;

g) Interest rate, penalty interest rate and relevant costs;

h) Cases of early termination of the negotiation agreement (if any);

i) Handling of violations;

k) Validity of the negotiation agreement;

l) Other details agreed upon by the parties in accordance with the law regulations.

2. The parties can draw up a specific negotiation agreement for each specific transaction or a framework agreement generally applicable to all negotiation transactions enclosed with each specific agreement.

Article 38. Procedures for negotiating a presentation

1. When the bank accepts to negotiate a presentation for the client, the client forwards the presentation to the bank in accordance with the law regulations.

2. The negotiation process and procedures must be specifically prescribed in the bank’s internal regulations on negotiation.

Article 39. Conversion into overdue debts

1. In case of term purchase of a presentation, if the client fails to repay on due date, the bank shall convert the amount not fully reimbursed by the client to the bank into an overdue debt. On the maturity date of the letter of credit, if the letter of credit amount is less than the amount paid by the negotiating bank to the client plus fees and interest, the bank shall continue to monitor this difference and apply appropriate debt recovery measures.

2. In case of purchase with recourse of a presentation, at the end of the recourse period under the negotiation agreement between the bank and the client, if the client cannot repay the debt to the bank, the bank shall convert the amount negotiated for the client into an overdue debt and apply appropriate debt recovery measures.

3. The bank must notify clients about the conversion into the overdue debt as prescribed in Clause 1 and Clause 2 of this Article. Such notice shall at least contain the details including the overdue principal balance, the time when it is converted into an overdue debt, and the interest rate applicable to the overdue principal balance.

Section 4

LETTER OF CREDIT REIMBURSEMENT

Article 40. Conditions for clients

1. The bank considers and decides to reimburse the letter of credit at the client's request when the client:

a) Has the letter of credit issued for the purpose of lawful goods sale and services provision;

b) Has a feasible fund use plan;

c) Has financial capacity to repay debts.

2. A bank may not consider the conditions prescribed at Point c, Clause 1 of this Article for a client in the following cases:

a) The client is the parent bank or a Vietnam-based branch in the system of the parent bank of a foreign bank branch;

b) The client is a credit institution that is an overseas branch of a commercial bank.

3. In cases where the client is non-resident, the bank (other than a foreign bank branch that reimburses letters of credit in foreign currency as prescribed in Clause 4 of this Article) shall only consider and decide to reimburse a letter of credit to a client that meets all the conditions prescribed in Clause 1 and Clause 2 of this Article and one of the following conditions:

a) It is an overseas credit institution that is a branch or subsidiary of a commercial bank; or the parent bank or the branch in the system of the parent bank of a foreign bank branch;

b) The client shall make a collateral equal to 100% of the value of the letter of credit using his/her/its own assets, including deposit balance and escrow deposit at the reimbursing bank;

c) The beneficiary of the letter of credit is resident.

4. A foreign bank branch will only consider and decide to reimburse a letter of credit in foreign currency to a non-resident client when the client meets all the conditions prescribed in Clause 1 and Clause 2 of this Article and the beneficiary is a resident.

Article 41. Credit period in letter of credit reimbursement

1. In case of reimbursing a letter of credit under an agreement with the client to pay with the funds of the reimbursing bank, the credit period in the letter of credit reimbursement means the period of time from the day following the date the reimbursing bank pays the beneficiary until the credit maturity date, which shall not extend beyond the maturity date of the letter of credit and shall not exceed 01 year and the remaining operational duration of the bank and the client.

2. In case of reimbursing a letter of credit by issuing a reimbursement undertaking, the credit period in the letter of credit reimbursement means the period of time from the day following the date of issuance of the letter of credit reimbursement undertaking until the maturity date of the letter of credit, which shall not exceed the remaining lawful operational duration of the bank and the client.

Article 42. Credit agreements for letter of credit reimbursement

1. The credit agreement to reimburse a letter of credit must contain the following key details:

a) Information about relevant parties, including the issuing bank, the reimbursing bank, the applicant, the beneficiary and other relevant parties (if any);

b) Information about the letter of credit, security measures (if any), and other information as required by the reimbursing bank;

c) Currency and amount of the letter of credit to be reimbursed;

d) Credit period upon letter of credit reimbursement;

dd) Letter of credit reimbursement fee, interest, and penalty interest (if any).

2. The parties can draw up a specific letter of credit reimbursement agreement for each specific transaction or a framework agreement generally applicable to all letter of credit reimbursement transactions enclosed with each specific agreement.

Article 43. Issuance of undertakings and fulfillment of letter of credit reimbursement obligations

1. In case of reimbursing a letter of credit by issuing a reimbursement undertaking, pursuant to the credit agreement, the issuing bank undertakes to reimburse the letter of credit to the beneficiary. The details of the undertaking and the amendment, supplementation, and cancellation of the letter of credit reimbursement undertaking shall be agreed upon by the parties in accordance with international customary commercial practices for letters of credit.

2. The reimbursing bank must pay the beneficiary on reimbursement request of the client or the beneficiary in accordance with international customary commercial practices for letters of credit.

3. In case of reimbursing a letter of credit under an agreement with the client to pay with funds of the reimbursing bank:

a) When the reimbursing bank pays the beneficiary on the client’s request, the issuing bank must debit the amount paid by the reimbursing bank to the beneficiary under the undertaking in the letter of credit to the client;

b) On the maturity date of the letter of credit, the client must fully repay the required indebtedness as well as the interests and fees to the reimbursing bank in accordance with Article 12 and Article 13 of this Circular;

c) In cases where the client fails to fully repay the indebtedness to the reimbursing bank on the maturity date of the letter of credit, the reimbursing bank will convert the principal balance unpaid by the client after due date into an overdue debt. The reimbursing bank must send a notice of such conversion to the client. Such notice shall at least contain the details including the overdue principal balance, the time when it is converted into an overdue debt, and the interest rate applicable to the overdue principal balance as prescribed in Article 12 of this Circular.

4. In case of reimbursing a letter of credit by issuing a reimbursement undertaking, the reimbursing bank shall agree with the client to debit the client’s escrow account or deposit account (if any) or the client shall transfer the payment to the reimbursing bank's designated account for the reimbursing bank to fulfill payment obligations to the beneficiary. In cases where the client’s balance is not enough to pay the beneficiary, the client is required to be indebted to the reimbursing bank for the client’s shortfall. Clients are obliged to fully repay the debts they are required to accept as well as interests and fees to the reimbursing bank as prescribed in Article 12 and Article 13 of this Circular.

5. In cases where the debt is in foreign currency, the client shall repay it in foreign currency or convert it into Vietnamese dong or other foreign currencies at the agreed exchange rate.

Section 5

ENTRUSTMENT OF LETTER OF CREDIT ISSUANCE

Article 44. Conditions for entrusting or taking entrustment by a bank

A bank may entrust or take the entrustment of letter of credit issuance when the following conditions are met:

1. The entrustment and entrustment-taking operations must be recorded in its establishment and operation license.

2. It has internal regulations on management of entrustment and entrustment-taking operations, including regulations on identification, measurement and management of risks of the entrustment and entrustment-taking operations in accordance with the characteristics and operating scale of the bank.

3. The entrustment and entrustment-taking operations must be risk managed by a risk management department.

4. The entrusted party has facilities, network and a team of qualified, professional and technical staff to ensure the implementation of the entrustment.

5. The entrusted party must consider and conduct financial due diligence to ensure the funds to be provided by the entrusting party before deciding to accept the entrustment to issue letters of credit.

Article 45. Entrustment principles

1. The entrustment must be executed into an agreement compliant with Article 46 of this Circular and relevant law regulations.

2. The entrusted party may not sub-entrust it to a third party.

3. The provision of entrusted funds must be subject to the maturity date of the letter of credit.

4. The entrusted party must not use the entrusted capital contrary to the purposes and entrustment prescribed in the entrustment agreement.

5. The entrusting party must include the balance of entrusted funds for the issuance of letters of credit in the total outstanding credit balance of the client, and the entrusted party must include the balance of letter of credit issuance in the total outstanding balance of credit extended to the entrusting party in accordance with the law regulations on prudential limits and ratios for operations of banks and foreign bank branches.

6. A foreign bank branch entrusted by the parent bank or an overseas branch of the parent bank to issue letters of credit; a commercial bank entrusted by a branch or a subsidiary of an overseas bank to issue letters of credit and relevant parties shall comply with this Circular and law regulations on foreign borrowing and foreign loan repayment and foreign exchange management, and other relevant law regulations.

7. Entrusted funds in foreign currencies must comply with the law regulations on foreign exchange management and relevant law regulations.

8. The entrusting party and the entrusted party must classify debts, establish and use provisions for credit losses to the entrusted balance in accordance with the law regulations on classification of assets, ratios and methods of establishment of provisions for credit losses, and use of provisions for credit losses in the operations of banks and foreign bank branches.

9. The banks shall not entrust the issuance of letters of credit to applicants to whom credit shall not be extended as prescribed in the Law on Credit Institutions.

Article 46. Entrustment agreements

1. An entrustment agreement must contain at least the following details:

a) Information of the entrusting party and the entrusted party;

b) Information related to the applicant, beneficiary, goods sale or service provision contract and other relevant information, providing sufficient grounds to issue the letter of credit;

c) Purposes of entrustment;

d) Scope and details of entrustment;

dd) Entrustment period;

e) Entrustment fee and penalty interest (if any);

g) Entrusted funds and timeline of provision of entrusted funds;

h) Currency for letter of credit issuance;

i) Rights and obligations of the entrusting party and the entrusted party, which must clearly state that the entrusting party bears all risks from its client and enjoys all benefits from the entrustment, and the entrusted party must bear all risks from the entrusting party and receive the entrustment fee;

k) Dispute resolution.

2. In addition to the details prescribed in Clause 1 of this Article, the entrustment agreement may contain other details agreed upon by the parties in accordance with this Circular and relevant law regulations.

Article 47. Entrustment period

The entrustment period shall be agreed upon by the entrusting party and the entrusted party. It means the period of time from the time the entrusted party issues the letter of credit until the time the entrusted party pays the beneficiary under the entrustment agreement.

Article 48. Entrustment fees

The entrusting party and the entrusted party shall agree on the amount of entrustment fees that the entrusting party must pay to the entrusted party to issue the letter of credit in accordance with the entrustment agreement and the law regulations.

Article 49. Fulfillment of obligations undertaken in the letter of credit

1. The issuing bank, which is the entrusted party, must pay the beneficiary under the letter of credit and in accordance with international customary commercial practices for letters of credit.

2. On the maturity date of payment of the letter of credit, the entrusted party shall agree with the entrusting party to debit the entrusting party’s escrow account or deposit account (if any) or the entrusting party shall transfer its funds to the entrusted party’s designated account for the entrusted party to fulfill payment obligations to the beneficiary.

In cases where the entrusting party's balance is not enough to pay the beneficiary, the entrusting party is required to be indebted to the entrusted party for the entrusting party’s shortfall paid by the entrusted party on behalf thereof. The entrusting party is obliged to fully repay the required indebtedness and penalty interest as agreed in the entrustment agreement.

3. On the maturity date of payment of the letter of credit, the entrusting party shall debit the client’s escrow account or deposit account (if any) or use the client loan to make transfer to the entrusted party’s designated account for the entrusted party to fulfill payment obligations to the beneficiary.

In cases where the client’s balance is not enough to pay the beneficiary, the client is required to be indebted to the entrusting party for the client’s shortfall. The client is obliged to fully repay the required indebtedness as well as the interests and fees in accordance with Article 12 and Article 13 of this Circular.

Article 50. Rights and obligations of the entrusting party

1. The entrusting party has the following rights to:

a) Request the entrusted party to provide dossiers and documents proving that the entrusted party is allowed to perform letter of credit operations in accordance with the law regulations;

b) Request the entrusted party to provide documents, information and data on the situation and results of performance of the entrustment agreement;

c) Supervise and inspect the entrusted party's performance of the entrustment within the scope prescribed in the entrustment agreement;

d) Reserve other rights as prescribed in the entrustment agreement in accordance with law regulations.

2. The entrusting party shall have the following obligations to:

a) Review and evaluate the entrusted party's ability to issue letters of credit;

b) Provide the entrusted funds for the entrusted party so that the entrusted party can fulfill the payment obligations as committed in the letter of credit on the maturity date of the letter of credit under the entrustment agreement;

c) Provide the entrusted party with documents, information, and data related to the entrustment under the entrustment agreement and be held liable for the truthfulness, accuracy, completeness, and timeliness of such information, documents and data;

d) Pay the entrustment fees and penalty interest (if any) to the entrusted party under the entrustment agreement;

dd) Perform other obligations under the entrustment agreement in accordance with law regulations.

Article 51. Rights and obligations of the entrusted party

1. The entrusted party has the following rights to:

a) Refuse the entrusting party's requests related to the scope and details of the entrustment which are not prescribed in the entrustment agreement or contrary to the law regulations;

b) Receive the entrustment fees and penalty interest (if any) under the entrustment agreement;

c) Request the entrusting party to provide information, documents, and data related to the entrustment under the entrustment agreement and on the request of relevant parties;

d) Reserve other rights as prescribed in the entrustment agreement in accordance with law regulations.

2. The entrusted party shall have the following obligations to:

a) Review and evaluate the scope of operations of the entrusting party to ensure that the entrusting party is allowed to perform letter of credit operations in accordance with the law regulations;

b) Comply with the details and scope of the entrustment under the entrustment agreement;

c) Timely and fully notify the entrusting party about the situation of letter of credit issuance and pay the beneficiary under the entrustment agreement;

d) Return to the entrusting party all lawful benefits, relevant dossiers and documents (if any) under the entrustment agreement;

dd) Perform other responsibilities under the entrustment agreement.

Chapter III

OTHER BUSINESS OPERATIONS RELATED TO LETTERS OF CREDIT

Article 52. Purchase without recourse of presentations under letters of credit

1. Conditions for a presentation under a letter of credit to be purchased without recourse:

a) It is issued in accordance with international customary commercial practices for letters of credit;

b) The client is the lawful beneficiary thereof;

c) It is unpaid;

d) The presentation has been approved to be honored by the issuing bank or confirming bank.

2. In cases where the client is a non-resident, the bank may only purchase the presentation under the letter of credit without recourse when the issuing bank or the confirming bank is a resident.

3. Currency for purchase of presentations:

a) For a presentation under a letter of credit issued in Vietnamese Dong, the bank may purchase it in Vietnamese Dong;

b) For a presentation under a letter of credit issued in foreign currency, the bank shall purchase it by the foreign currency stated in the letter of credit or convert it into Vietnamese Dong or other foreign currencies at the agreed exchange rate.

4. The bank shall assess the risk to the issuing bank (unless the bank purchases without recourse the presentation under the letter of credit issued by itself) or the confirming bank, if the letter of credit is confirmed, so as to consider and reach an agreement with the client on the purchase of the presentation, which shall contain the following details: the price for purchase of the presentation, the currency of purchase, certain cases where recourse against the client is allowed (if any), other details agreed upon by the parties based on the payment value when due, the maturity date of the letter of credit, and other details.

5. The process and procedures for purchasing and paying for a presentation must comply with the agreement between the parties in accordance with international customary commercial practices for letters of credit and must be prescribed in internal regulations on other business operations of the bank.

6. The total balance for the purchase without recourse of the presentation under the letter of credit shall be included in the total outstanding credit balance of the bank purchasing the presentation under the letter of credit to the issuing bank or confirming bank, if the letter of credit is confirmed, unless the bank purchases without recourse the presentation under the letter of credit issued by itself.

Article 53. Other services related to letters of credit

The banks may provide their clients with other services related to letters of credit in accordance with Point e, Clause 1, Article 114 of the Law on Credit Institutions and international customary commercial practices for letters of credit, including:

1. Services provided to clients who are sellers and exporters of goods and services:

a) Notification of letters of credit, notification of amendment to letters of credit;

b) Checking, processing and presentation of documents;

c) Modification and adjustment of the debt collection notice on the client’s request;

d) Honoring a presentation;

dd) Cancellation of letters of credit on request;

e) Forwarding letters of credit; modifying letter of credit forwarding; canceling letter of credit forwarding;

g) Cable charges;

h) Delivery of a presentation;

i) Preparation of a presentation under the letters of credit to be enclosed therewith;

k) Provisional check of documents;

l) Consultation on letter of credit operations;

m) Letter of credit reimbursement using funds of a customer;

n) Forwarding of a presentation under the letter of credit;

o) Notice of acceptance of a presentation;

oo) Other services compliant with international customary commercial practices for letters of credit.

2. Services provided to clients who are buyers and importers of goods and services:

a) Consultation on letter of credit operations;

b) Shipping guarantee, endorsement of bill of lading, authorization to receive goods;

c) Cable charges;

d) Delivery of a presentation;

dd) Other services compliant with international customary commercial practices for letters of credit.

Chapter IV

ORGANIZATION OF IMPLEMENTATION

Article 54. Accounting and reporting

1. The banks shall perform accounting for letter of credit operations in accordance with applicable law regulations on accounting regimes.

2. The banks shall report on their performance of letter of credit operations in accordance with the regulations on statistical reporting regime of the State Bank.

Article 55. Responsibilities of subordinates of the State Bank

1. The Department of Credit for Economic Sectors shall:

a) Monitor, summarize and check the performance of letter of credit operations and other business operations related to letters of credit of banks for resident clients;

b) Be the contact point and coordinate with relevant units to settle arising problems related to letter of credit operations and other business operations related to letters of credit for resident clients.

2. The Foreign Exchange Management Department shall:

a) Monitor, summarize and check the performance of letter of credit operations and other business operations related to letters of credit of banks for non-resident clients;

b) Be the contact point and coordinate with relevant units to settle arising problems related to letter of credit operations and other business operations related to letters of credit for non-resident clients.

3. The Banking Supervision Agency shall act as the contact point and coordinate with relevant units to check, inspect, and supervise letter of credit operations and other business operations related to letters of credit by the banks and handle arising violations within their competence.

4. The Finance and Accounting Department shall guide the banks to implement accounting regimes for transactions related to letter of credit operations and other business operations related to letters of credit prescribed in this Circular.

5. The State Bank branches in provinces and municipalities shall supervise, examine and inspect the banks for their compliance with this Circular within their competence.

Chapter V

IMPLEMENTATION PROVISIONS

Article 56. Transitional provisions

1. Other agreements, arrangements, undertakings, and transactions related to letter of credit operations executed before the effective date of this Circular shall continue to be performed and monitored by banks and clients until their validity periods expire and the obligations of relevant parties have been fulfilled. Amendments, supplements, and renewals of agreements, arrangements, undertakings, and other transactions may only be made if such amendments, supplements, and renewals comply with this Circular.

2. The banks that have been licensed to perform letter of credit operations before the effective date of this Circular may perform letter of credit operations and other business operations related to letters of credit without making any amendments or supplements to their licenses.

3. The banks that have been licensed to perform domestic payment services; international payment services; payment services between clients; and provide payment services on the domestic or international market before the effective date of this Circular may continue to perform letter of credit operations and other business operations related to letters of credit until December 31, 2025 without making any amendments or supplements to their licenses.

Article 57. Effect

This Circular takes effect on July 1, 2024.

Article 58. Responsibilities for implementation

The Chief of the Ministerial Office, the Director of the Department of Credit for Economic Sectors, the Director of Foreign Exchange Management Department, heads of subordinates under the State Bank, credit institutions, and foreign bank branches shall be responsible for implementing this Circular./.

For the Governor
Deputy Governor
DAO MINH TU