Circular No. 07/1997/TT-NHNN7 guiding the implementation of Decision No. 802/TTg dated September 24, 1997 of the Government Prime Minister on handling existing issues related to issuing letters of credit

CIRCULAR

Guidelines for Implementation

Decision 802/TTg dated September 24, 1997 of the Government Prime Minister
on handling existing issues regarding the issuance of letters of credit

On September 24, 1997, the Government Prime Minister issued Decision No. 802/TTg on handling existing issues regarding the issuance of letters of credit. Pursuant to Article 6 of the aforementioned Decision, the State Bank guides implementation as follows:

1. The subjects to which this Circular applies include enterprises established and operating under Vietnamese Law, permitted to directly engage in import and export activities and/or hold an Import License from the Ministry of Trade, and implementing such activities through the issuance of deferred payment letters of credit for imports.

2. Enterprises issuing deferred payment letters of credit for imports must strictly fulfill their payment obligations with the guaranteeing bank according to the terms of the Contract upon maturity. In cases where the enterprise is unable to make payments or has already deposited funds with the guaranteeing bank, the guaranteeing bank shall be responsible for making full and timely payments abroad in accordance with the State Bank's regulations on the issuance of deferred payment letters of credit for imports and international practice.

Where an enterprise has deposited Vietnamese Dong with the bank to purchase foreign currency for payment to the bank, the exchange rate applied to convert Vietnamese Dong into foreign currency shall be carried out according to the agreement between the bank and the enterprise in the Contract and in compliance with current foreign exchange management regulations.

3. The amount of debt that an enterprise is required to accept due to the guaranteeing bank's payment on its behalf shall not be included in the overdraft limit of the bank towards the enterprise.

4. The ordinary loan stipulated in Decision No. 802/TTg refers to loans granted at the ceiling interest rate currently set by the State Bank Governor (excluding overdue interest rates).

5. The amount paid by the bank on behalf of the enterprise and the debt the enterprise is required to accept shall be subject to ordinary loans in the following cases:

a. In cases where imported equipment, materials, or goods serve directly for a project but due to objective reasons (such as natural disasters, pests, macroeconomic policy changes, etc.), the enterprise is unable to make timely payments. The enterprise must provide specific explanations with written confirmation from relevant authorities (for example, if the reason is delayed land clearance, then the Chairman of the Provincial People's Committee or his authorized representative signs the confirmation; if the reason is late arrival of imported goods, then the customs authority confirms it...). For centrally-managed enterprises, there must be confirmation from the supervising agency, and the reasons must be accepted by the guaranteeing bank. Simultaneously, the guaranteeing bank and the debtor enterprise agree on a repayment plan based on the production cycle and capital recovery period of the debtor enterprise, and complete collateral procedures (if necessary and lacking valid documentation or collateral) to ensure full recovery of the loan.

b. For imported goods paid on deferred terms that have not been sold or partially sold, the enterprise is responsible for immediately paying the bank the amount corresponding to the goods sold (if partially sold). The General Director (Director) of the bank bases the decision on the quantity of unsold goods, the quantity, value, and sales potential of remaining inventory to determine the amount of compulsory loan to the enterprise under normal conditions. The commercial bank sets the loan term based on the production cycle and sales potential of the goods and completes collateral procedures (if necessary and lacking valid documentation or collateral) to ensure full recovery of the loan.

c. Objective reasons leading to losses of imported goods must be confirmed by relevant authorities (depending on the nature and cause of the loss, the enterprise submits a report for confirmation by the relevant authority). At the same time, the enterprise provides detailed explanations to the guaranteeing bank and related agencies such as the State Bank, Ministry of Finance to develop a solution for dealing with lost goods to be reported to the Government Prime Minister.

d. For enterprises importing goods on deferred terms as directed by the Government, if exchange rate fluctuations result in losses, the enterprise shall follow the specific guidance of the Ministry of Finance to declare and seek compensation.

6. In cases where enterprises have misused funds for deferred payment imports, the enterprise is responsible for recovering and returning the amount paid by the guaranteeing bank. Additionally, the enterprise must accept a loan from the bank at the overdue interest rate. The guaranteeing bank actively cooperates with relevant authorities to inventory, assess imported goods, collateral assets, and other related assets to initiate foreclosure and asset sale procedures according to the law to recover the debt.

If goods are lost due to embezzlement or corruption, the guaranteeing bank has the right to request legal authorities to prosecute.

7. The responsibilities of organizations or individuals guaranteeing enterprises issuing letters of credit or guaranteeing enterprises purchasing goods from importers are as follows:

a. In cases where enterprises are guaranteed by organizations or individuals to issue deferred payment letters of credit, if the enterprise does not have or does not have sufficient ability to pay, the guarantor organization or individual must pay on behalf of the enterprise to allow the bank to make timely payments abroad. If the guarantor organization or individual fails to fulfill their obligation to the bank, the bank may sell the assets according to the law.

b. In the case where an organization or individual acts as guarantor for a business to purchase goods from an importing business, the importing business shall be responsible for paying the bank. If the business purchasing the goods has not yet or does not have sufficient ability to pay the importing business, the organization or individual acting as guarantor for the purchasing business must undertake to make the payment on behalf of the importing business. In the event that the guarantor organization or individual fails to fulfill their obligations towards the importing business, the provisions of the law shall apply.

8. This Circular takes effect fifteen days after the date of signature. The Director of the Governor's Office; Heads of units under the State Bank; Directors of the State Bank Branches in Provinces and Cities directly under the Central Government; General Directors and Directors of Commercial Banks; and the Development Bank are responsible for implementing this Circular.