Decision No. 207/QD-NH7 On Issuing the Rules for Opening Documentary Letters of Credit for Import with Deferred Payment

Pursuant to …;

OF THE GOVERNOR OF THE STATE BANK OF VIETNAM

Regarding the issuance

Rules for Opening Deferred Payment Import Letters of Credit

GOVERNOR OF THE STATE BANK OF VIETNAM

Based on the State Bank of Vietnam Ordinance dated May 24, 1990;

Pursuant to Decree No. 15/CP dated March 2, 1993 of the Government on the tasks, powers, and responsibilities for state management of ministries and ministerial-level agencies;

Based on the Government Decree No. 58/CP dated August 30, 1993 on the issuance of rules for managing foreign borrowing and debt repayment;

At the proposal of the Director of the Foreign Exchange Management Department of the State Bank of Vietnam;

DECISION:

Article 1. This Decision promulgates the "Rules for Opening Deferred Payment Import Letters of Credit" attached hereto.

Article 2. This Decision shall take effect fifteen days from the date of signature and replace the relevant provisions on opening deferred payment import letters of credit in the following documents issued by the Governor of the State Bank of Vietnam:

The Guarantee and Re-guarantee Rules for Foreign Borrowing issued pursuant to Decision No. 23/QĐ-NH14 dated February 21, 1994; Directive No. 06/NH7-CT dated June 6, 1996 on strengthening the management of foreign borrowing and debt repayment;

Circular No. 434/CV-NH7 dated August 5, 1996 detailing certain aspects of Directive No. 06/NH7-CT dated June 6, 1996.

Article 3. The Governor's Office Chief, Heads of Units under the State Bank of Vietnam, Branch Governors of the State Bank of Vietnam in provinces and centrally-administered cities, General Directors (Directors) of commercial banks, investment and development banks are responsible for implementing this Decision.

REGULATIONS

OPENING DEFERRED PAYMENT IMPORT LETTERS OF CREDIT

(Issued together with Decision No. 207/QĐ-NH7
dated July 1, 1997 of the Governor of the State Bank of Vietnam)

PART I
GENERAL PROVISIONS

Article 1. A deferred payment import letter of credit (hereinafter referred to as L/C payable at a later date) is a banking service provided for enterprises importing goods from abroad under documentary credit terms with a maturity period.

Article 2. Banks conducting the business of opening L/C payable at a later date are those operating in Vietnam that meet the conditions stipulated in Article 6 of these Rules. These banks include state-owned commercial banks, investment and development banks, joint-stock commercial banks, joint venture banks, and branches of foreign banks (hereinafter referred to as banks).

Article 3. The entities eligible for banks to open L/C payable at a later date are enterprises established and operating under Vietnamese law that meet the conditions stipulated in Article 7 of these Rules. These enterprises include state-owned enterprises, private enterprises, limited liability companies, cooperatives, joint stock companies, enterprises belonging to political and social organizations, joint ventures with foreign countries, and wholly foreign-owned enterprises (hereinafter referred to as enterprises).

Article 4. The opening of L/C payable at a later date for importing goods must be consistent with the annual import-export policy of the State, current regulations of the State concerning foreign borrowing and debt repayment, and the provisions of these Rules.

Article 5. The opening of L/C payable at a later date for importing goods designated by the Government shall be carried out according to the directives of the Prime Minister.

PART II
CONDITIONS FOR IMPLEMENTATION OF THE BUSINESS
OPENING L/C PAYABLE AT A LATER DATE

Article 6. Banks conducting the business of opening L/C payable at a later date must meet all the following conditions, except where otherwise provided by law:

6.1 Permission to conduct international settlement transactions:

6.2 Specific written provisions regarding procedures and necessary documentation for the business of opening and settling L/C in accordance with international practice on documentary credits of the International Chamber of Commerce and consistent with these Rules;

6.3 Compliance with regulations on deposit guarantees, pledges, mortgages, and guarantees as stipulated in Chapter III of these Rules;

6.4 Establishment of a guarantee fund in accordance with current regulations on guarantee and re-guarantee funds;

6.5 The balance of short-term L/C payable at a later date (within one year) must be within the limit of short-term borrowing and guarantee as prescribed by the Governor of the State Bank of Vietnam for each period;

6.6 The bank does not have overdue foreign debts arising from the business of opening L/C payable at a later date;

Article 7. Enterprises wishing to open L/C payable at a later date must meet the following conditions:

7.1 For short-term L/C payable at a later date:

7.1.1 Permission to engage in direct import and export trade;

7.1.2 Sound financial condition (profitable operations, no overdue debts with the bank) and a feasible production and business plan; 7.1.3 Deposit guarantee and/or pledged assets, mortgaged assets, or guaranteed by the bank or other enterprises in accordance with Chapter III of these Rules;

7.1.4 The payment term of L/C payable at a later date for imported raw materials and consumer goods for production purposes shall not exceed one year.

7.2 For medium- and long-term L/C payable at a later date (terms exceeding one year):

Enterprises must register foreign borrowing in accordance with the current regulations of the State Bank of Vietnam.

CHAPTER III
DEPOSIT GUARANTEES, PLEDGES, MORTGAGES, GUARANTEES,
PAYMENTS

Article 8. The General Director (Director) of the Bank, based on the actual situation of production and business, financial capacity, and reputation of each enterprise, especially the imported goods and materials, decides to apply one or more security measures (deposit guarantees, pledges, mortgages, guarantees) to ensure the recovery of debts. The pledge of imported goods themselves can only be applied in cases approved by the Prime Minister.

Specifically, for goods listed in the restricted import catalog (this catalog is published annually by the Ministry of Planning and Investment), based on specific circumstances and the State's import policy, the Governor of the State Bank of Vietnam will determine the minimum deposit guarantee level for each period. The deposit guarantee amount above the minimum level mentioned here is determined by the General Director (Director) of the Bank.

Article 9. Enterprises opening L/C payable at a later date may not use borrowed bank funds or funds currently guaranteed by the bank as deposit guarantees.

Article 10. The pledge, mortgage, and guarantee provisions in these Rules must be implemented in accordance with current regulations on pledges, mortgages, and loan guarantees.

Article 11. The bank is responsible for settling with foreign parties the value of L/C payable at a later date it has accepted. The enterprise is responsible for settling with the bank according to the agreement between the enterprise and the bank to repay foreign debts on time. If the enterprise cannot settle (in full or in part) with the bank until the due date, the enterprise must recognize overdue debt with the bank and bear interest penalties according to current regulations on lending in foreign currency of the State Bank of Vietnam from the date the bank settles with foreign parties. The bank may take necessary measures to recover the debt in accordance with the law or agreements between the bank and the enterprise.

PART IV
PROCEDURES, AUTHORITY TO SIGN, AND FEES
OPENING L/C PAYABLE AT A LATER DATE

Article 12. Within ten days for short-term deferred payment letters of credit (L/Cs) and thirty days for medium and long-term deferred payment L/Cs, from the date of receipt of the application to open a deferred payment L/C, the Bank must notify the Enterprise of its acceptance or rejection of opening the deferred payment L/C.

Article 13. The General Director (Director) of the Bank is the person authorized to sign for opening deferred payment L/Cs. The General Director (Director) of the Bank may delegate in writing to the Deputy General Director (Deputy Director) or to the Branch Director or Deputy Director under the banking system to sign and implement. The delegation document must clearly specify the scope of the delegation. The delegatee shall not further delegate to another person.

Article 14. Depending on the actual situation and the financial capacity of each enterprise, the Bank shall stipulate a fee rate based on the amount that the Enterprise still needs to pay to the Bank for opening a deferred payment L/C, but the maximum shall not exceed 1% per annum. The fees for opening, amending, and paying out deferred payment L/Cs shall be determined by the Bank.

CHAPTER V
INSPECTION, AUDITING, AND HANDLING

Article 15. The Bank is subject to inspection and audit by the State Bank. Enterprises are subject to supervision and inspection by the Bank. Periodically or when necessary, the State Bank and/or the Bank shall conduct inspection and audit work. The Bank and the Enterprise being inspected and audited have the duty to provide full information, data, and relevant documents related to the opening and payment of deferred payment L/Cs for such inspections and audits. Inspections and audits shall be carried out in accordance with the provisions of the law.

Article 16. Organizations and individuals violating this Regulation, depending on the level of violation, will be administratively sanctioned and required to compensate for damages according to the provisions of the law. In cases of serious violations, they may be held criminally responsible according to the provisions of the law.

Chapter VI
REPORTING SYSTEM

Article 17. Except in exceptional cases, no later than the 10th day of the following month, the Bank must submit to the State Bank (Department of Foreign Exchange Management) and the branch of the State Bank in the province/city on its territory the following reports:

Summary report on the situation of opening, accepting debt, and paying out deferred payment L/Cs according to attached Form No. 1.

Summary report on the situation of overdue debts arising from deferred payment L/C business according to attached Form No. 2.

Detailed report on overdue debts of deferred payment L/Cs according to attached Form No. 3.

Article 18. The branch of the State Bank in the province/city shall aggregate and report to the State Bank (Department of Foreign Exchange Management) as follows:

Prompt report on cases of violation of the Regulation on opening deferred payment import L/Cs and recommendations for handling measures.

Quarterly, no later than the 20th day of the first month of the next quarter, report summarizing the situation of opening and paying out deferred payment L/Cs of banks within its jurisdiction.

Chapter VII
IMPLEMENTING PROVISIONS

Article 19. Any supplementation or amendment to this Regulation shall be decided by the Governor of the State Bank.

TABLE 1

NAME OF BANK REPORTING:

SUMMARY REPORT ON THE SITUATION OF OPENING, ACCEPTING DEBT AND PAYING OUT DEFERRED PAYMENT L/Cs
OF THE BANK

(Report for the month... year 199...)

End-of-period own capital (in equivalent USD):Unit: 1000 USD

Notes (Form 1)

Balance of deferred payment L/Cs (column 2, column 14): is the total value of deferred payment L/Cs that the Bank has opened but not yet paid to foreign countries;

Balance of deferred payment L/Cs accepted (column 3, column 15): is the total value of deferred payment L/Cs that the Bank has accepted debt with foreign countries;

Balance of overdue deferred payment L/Cs (column 4, column 16): is the amount of debt received from deferred payment L/Cs that have reached their due date but the Bank has not yet paid to foreign countries;

Enterprises have not paid to the Bank (enterprises overdue with the Bank - column 5, column 17): records the total amount of money that enterprises have not yet paid to the Bank for deferred payment L/Cs that have reached their due date;

Bank has not paid to foreign countries (column 6, column 18): records the total amount of money the Bank must pay (on behalf of enterprises) to foreign countries for deferred payment L/Cs where enterprises are overdue;

Column 7: is the total value of deferred payment L/Cs opened by the Bank during the reporting period;

Amount accepted for debt (column 8): is the total value of deferred payment L/Cs that the Bank has accepted debt during the reporting period;

Amount repaid to foreign countries (column 13): is the total amount of money the Bank has repaid to foreign countries during the reporting period.

TABLE 2

NAME OF BANK REPORTING:

SUMMARY REPORT ON THE SITUATION OF OVERDUE DEBTS

(Report for the month... year 199...)Unit: 1,000 USD

TABLE NO. 3

DETAILED REPORT ON OVERDUE DEBTS OF DEFERRED PAYMENT L/Cs

(Report for the month... year 199...)Unit: Equivalent 1,000 USD