Circular No. 21/2024/TT-NHNN on documentary credit business and other related business activities

CIRCULAR

REGULATING LETTER OF CREDIT BUSINESS

AND OTHER RELATED BUSINESS OPERATIONS INVOLVING LETTERS OF CREDIT

 

Pursuant to the Law on Navigation of Vietnam dated June 14, 2005; LCIVIL 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;

On the basis of the Foreign Exchange Law dated December 13, 2005; the Ordinance Amending and Supplementing Certain Articles of the Foreign Exchange Law dated March 18, 2013;

Pursuant to Decree No. 102/2022/NĐ-CP dated December 12, 2022 of the Government stipulating the functions, tasks, powers, and organizational structure of the State Bank of Vietnam;

AT THE REQUEST OF THE HEAD OF THE DEPARTMENT OF INDUSTRY ECONOMIC CREDIT AND THE HEAD OF THE FOREIGN EXCHANGE MANAGEMENT DEPARTMENT;

THE GOVERNOR OF THE STATE BANK OF VIETNAM ISSUES THIS CIRCULAR REGULATING LETTER OF CREDIT BUSINESS AND OTHER RELATED BUSINESS OPERATIONS INVOLVING LETTERS OF CREDIT.

PART I

GENERAL PROVISIONS

Article 1. Scope of Regulation

THIS CIRCULAR REGULATES LETTER OF CREDIT BUSINESS (EXCEPT FOR BACKING LETTER OF CREDIT BUSINESS) AND OTHER RELATED BUSINESS OPERATIONS INVOLVING LETTERS OF CREDIT CONDUCTED BY CREDIT ORGANIZATIONS AND FOREIGN BANK BRANCHES TOWARDS CUSTOMERS.

Article 2. Applicability

1. CREDIT ORGANIZATIONS AND FOREIGN BANK BRANCHES ARE PERMITTED TO CONDUCT LETTER OF CREDIT BUSINESS AND OTHER RELATED BUSINESS OPERATIONS INVOLVING LETTERS OF CREDIT INCLUDING COMMERCIAL BANKS, COOPERATIVE BANKS, AND FOREIGN BANK BRANCHES (HEREINAFTER REFERRED TO AS "BANK").

2. INDIVIDUALS AND ORGANIZATIONS WHO ARE RESIDENTS AND NON-RESIDENTS RELATING TO LETTER OF CREDIT BUSINESS AND OTHER RELATED BUSINESS OPERATIONS INVOLVING LETTERS OF CREDIT.

Article 3. Explanation of Terms

In this Circular, the following terms are understood as follows:

1. LETTER OF CREDIT BUSINESS IS A FORM OF CREDIT GRANTING THROUGH THE ISSUANCE, CONFIRMATION, NEGOTIATION, AND REIMBURSEMENT OF LETTERS OF CREDIT TO SERVE COMMERCE AND SERVICE PURCHASE AND SALE ACTIVITIES.

2. OTHER BUSINESS OPERATIONS RELATED TO LETTERS OF CREDIT ARE OPERATIONS OF PURCHASING COMPLETELY WITHOUT RECOURSE SET OF DOCUMENTS PRESENTED UNDER LETTERS OF CREDIT AND OTHER SERVICES PROVIDED BY BANKS TO CUSTOMERS OUTSIDE THE SERVICES PROVIDED BY BANKS IN THE COURSE OF IMPLEMENTING LETTER OF CREDIT BUSINESS FOR CUSTOMERS.

3. LETTER OF CREDIT IS AN IRREVOCABLE COMMITMENT OF THE ISSUING BANK TO PAY ON THE BASIS OF RECEIVING A SET OF DOCUMENTS PRESENTED IN ACCORDANCE WITH THE TERMS OF THE LETTER OF CREDIT.

4. ISSUING LETTER OF CREDIT IS THE ACTION OF THE ISSUING BANK GRANTING CREDIT TO THE CUSTOMER THROUGH THE ISSUANCE OF A LETTER OF CREDIT TO THE BENEFICIARY UPON THE CUSTOMER'S REQUEST. THE CUSTOMER MUST ACCEPT THE DEBT AND FULLY REPAY THE PRINCIPAL, INTEREST, AND FEES AS AGREED IN CASE THE BANK HAS TO MAKE PAYMENT TO THE BENEFICIARY FROM ITS OWN FUNDS OR REQUEST ANOTHER BANK TO PAY ON BEHALF OF THE CUSTOMER.

5. CONFIRMING LETTER OF CREDIT IS THE ACTION OF THE BANK CONFIRMING, UPON THE REQUEST OF THE ISSUING BANK, THE COMMITMENT TO PAY THE BENEFICIARY BASED ON RECEIVING A SET OF DOCUMENTS PRESENTED IN ACCORDANCE WITH THE TERMS OF THE LETTER OF CREDIT, IN ADDITION TO THE COMMITMENT OF THE ISSUING BANK.

6. NEGOTIATING LETTER OF CREDIT IS THE ACTION OF THE BANK NEGOTIATING TO BUY WITH A FIXED TERM OR WITH A RIGHT OF RECOURSE SET OF DOCUMENTS PRESENTED UNDER THE LETTER OF CREDIT (WITH OR WITHOUT ACCOMPANYING DRAFTS) OF THE BENEFICIARY BEFORE THE PAYMENT DUE DATE.

7. REIMBURSING LETTER OF CREDIT IS THE ACTION OF THE BANK REIMBURSING THE AGREEMENT WITH THE ISSUING BANK REGARDING PAYMENT FROM ITS OWN FUNDS TO THE BENEFICIARY OR THE ACTION OF THE BANK REIMBURSING UPON THE REQUEST OF THE ISSUING BANK COMMITTING TO PAY THE BENEFICIARY, IN ADDITION TO THE COMMITMENT OF THE ISSUING BANK.

8. PURCHASING COMPLETELY WITHOUT RECOURSE SET OF DOCUMENTS UNDER LETTER OF CREDIT IS THE ACTION OF THE BANK PURCHASING A SET OF DOCUMENTS AND RECEIVING THE TRANSFER OF THE UNPAID SET OF DOCUMENTS FROM THE CUSTOMER; THE BANK WILL RECEIVE THE AMOUNT PAID FROM THE ISSUING BANK OR THE CONFIRMING BANK AND WILL HAVE NO RIGHT TO CLAIM AGAINST THE CUSTOMER IF IT DOES NOT RECEIVE THE FULL AMOUNT FROM THE ISSUING BANK OR THE CONFIRMING BANK.

9. SET OF DOCUMENTS UNDER LETTER OF CREDIT ARE THE DOCUMENTS SUBMITTED FOR PAYMENT AS STATED IN THE LETTER OF CREDIT.

10. BENEFICIARY IS THE SELLER, EXPORTER OF GOODS OR SERVICES AS STATED IN THE LETTER OF CREDIT OR THE PARTY ENTITLED TO BENEFIT FROM THE LETTER OF CREDIT ISSUED.

11. APPLICANT IS THE BUYER, IMPORTER OF GOODS OR SERVICES REQUESTING THE BANK TO ISSUE A LETTER OF CREDIT.

12. Customer IS AN ENTITY (INCLUDING BANKS AND FOREIGN CREDIT ORGANIZATIONS) OR AN INDIVIDUAL, SPECIFICALLY AS FOLLOWS:

a) IN THE ISSUANCE OF LETTER OF CREDIT, THE CUSTOMER OF THE ISSUING BANK IS THE APPLICANT;

b) IN THE CONFIRMATION OF LETTER OF CREDIT, THE CUSTOMER OF THE CONFIRMING BANK IS THE ISSUING BANK;

c) IN THE NEGOTIATION OF LETTER OF CREDIT, THE CUSTOMER OF THE NEGOTIATING BANK IS THE BENEFICIARY REQUESTING THE BANK TO NEGOTIATE THE LETTER OF CREDIT;

d) IN THE REIMBURSEMENT OF LETTER OF CREDIT, THE CUSTOMER OF THE REIMBURSING BANK IS THE ISSUING BANK;

e) IN OTHER BUSINESS OPERATIONS RELATED TO LETTERS OF CREDIT, THE CUSTOMER OF THE BANK IS THE PARTY RECEIVING SERVICES FROM THE BANK, OR THE PARTY REQUESTING THE BANK TO PURCHASE COMPLETELY WITHOUT RECOURSE SET OF DOCUMENTS PRESENTED UNDER THE LETTER OF CREDIT.

13. INTERNATIONAL COMMERCIAL PRACTICE ON LETTERS OF CREDIT ARE RULES, CUSTOMS, AND PRACTICES UNIFORMLY ESTABLISHED BY THE INTERNATIONAL CHAMBER OF COMMERCE ON LETTERS OF CREDIT AND OTHER COMMERCIAL CUSTOMS NOT CONTRARY TO THE BASIC PRINCIPLES OF VIETNAMESE LAW AS AGREED UPON BY THE PARTIES.

14. CREDIT FACILITY AGREEMENT FOR LETTER OF CREDIT BUSINESS IS THE AGREEMENT BETWEEN THE ISSUING BANK, THE CONFIRMING BANK, THE NEGOTIATING BANK, OR THE REIMBURSING BANK WITH THE CUSTOMER AND OTHER RELATED PARTIES (IF ANY) REGARDING THE GRANTING OF CREDIT TO THE CUSTOMER THROUGH THE ISSUANCE, CONFIRMATION, NEGOTIATION, AND REIMBURSEMENT OF LETTERS OF CREDIT.

15. LETTER OF CREDIT PAYMENT DUE DATE IS THE FINAL PAYMENT DUE DATE FOR THE BENEFICIARY AS STATED IN THE PAYMENT TERMS OF THE LETTER OF CREDIT.

16. CUSTOMER LOAN IS THE AMOUNT BORROWED BY THE APPLICANT FROM CREDIT ORGANIZATIONS, FOREIGN BANK BRANCHES, OR ABROAD TO IMPLEMENT PAYMENTS FOR CONTRACTS OF PURCHASE AND SALE OF GOODS AND SERVICES IN ACCORDANCE WITH LAWS ON CREDIT ORGANIZATION LENDING ACTIVITIES, FOREIGN CURRENCY LOANS BY CREDIT ORGANIZATIONS TO RESIDENT CUSTOMERS, MANAGEMENT OF FOREIGN LOANS NOT GUARANTEED BY THE GOVERNMENT, OR FOREIGN EXCHANGE MANAGEMENT FOR FOREIGN LOANS AND DEBT COLLECTION BY CREDIT ORGANIZATIONS FROM NON-RESIDENT CUSTOMERS.

17. CAPITAL UTILIZATION PLAN IN LETTER OF CREDIT BUSINESS IS A COMPREHENSIVE SET OF INFORMATION ON CUSTOMER CAPITAL USE, WHICH MUST INCLUDE INFORMATION ON FUNDS FOR PAYING OBLIGATIONS COMMITTED IN LETTER OF CREDIT BUSINESS; PURPOSES FOR ISSUING, CONFIRMING, NEGOTIATING, OR REIMBURSING LETTERS OF CREDIT.

18. TRUST ISSUANCE OF LETTER OF CREDIT is the act where the entrusting party commits to transferring capital in cash to the entrusted party for the entrusted party to carry out the issuance of a letter of credit for the beneficiary, serving the applicant who is a customer of the entrusting party. The entrusting party bears all risks from its own customers. The entrusted party bears all risks from the entrusting party.

19. The entrusting party is a bank or foreign credit institution (being the parent bank or branch of the parent bank of a foreign bank branch, branch or subsidiary being a foreign credit institution of a commercial bank) that entrusts the entrusted party to issue a letter of credit for the beneficiary.

20. The entrusted party is a bank acting on the entrustment of the entrusting party to issue a letter of credit for the beneficiary.

Article 4. Autonomy of banks

1. Banks have the right to operate independently in conducting letter of credit transactions and other related business activities and bear responsibility for the results of their business operations.

2. Banks have the right to refuse credit requests and other related business activities involving letters of credit from customers if they find them ineffective or not in compliance with internal regulations of the bank, provisions of this Circular, international trade practices regarding letters of credit, and relevant laws.

Article 5. Principles for implementing letter of credit transactions and other related business activities

1. Bank's letter of credit transactions with customers shall be carried out according to agreements between the bank and the customer. When conducting letter of credit transactions, the bank must comply with the provisions set forth in this Circular and relevant laws concerning credit provision. Other aspects of letter of credit transactions, the bank shall follow international trade practices regarding letters of credit.

2. When conducting letter of credit transactions in foreign currency, the bank must comply with the scope of foreign exchange operations in the domestic market and international market as stipulated in each bank’s operating license, relevant laws on the scope of foreign exchange operations, conditions, procedures, and approval processes for foreign exchange operations of credit institutions, foreign bank branches, and must comply with laws governing foreign exchange business and service supply on the domestic and international markets.

3. When collecting principal, interest, and fees in foreign currency in letter of credit transactions, if the customer does not have or has not yet sufficient foreign currency to repay the debt, the customer may purchase foreign currency from the bank conducting the letter of credit transaction or from another credit institution, foreign bank branch to repay the debt.

If the customer needs to purchase foreign currency from the bank conducting the letter of credit transaction, the bank must sell foreign currency to the customer. If the customer purchases foreign currency from another credit institution, foreign bank branch, the credit institution, foreign bank branch selling foreign currency must transfer the amount of foreign currency to the bank conducting the letter of credit transaction. The customer must sell foreign currency to the credit institution, foreign bank branch that sold foreign currency to the customer when the customer has foreign currency income from production and business activities, upon request of such credit institution, foreign bank branch.

4. When conducting payment negotiation transactions for non-resident customers, the bank must comply with the provisions of this Circular and relevant laws on foreign exchange management for foreign lending and debt recovery.

5. When issuing, confirming, and refunding letters of credit for non-resident customers, the bank is not required to open a dedicated foreign currency account at a payment service provider to recover foreign debts from letter of credit transactions. In case the bank opens a dedicated foreign currency account at a payment service provider in Vietnam, the payment service provider is responsible for verifying and reconciling documents presented by the bank to ensure compliance with transactions related to letter of credit operations.

6. Banks conduct other business activities related to letters of credit for customers according to agreements among parties that do not contravene the provisions of this Circular, relevant laws, and international trade practices regarding letters of credit.

7. Comply with the provisions of the Law on Credit Institutions and guidelines of the State Bank of Vietnam (hereinafter referred to as the State Bank) regarding prohibited acts, cases not eligible for credit, restricted credit, and credit limits.

Article 6. Application of Customary Practices and Dispute Resolution

1. The parties involved in letter of credit transactions may agree to apply commercial customs as provided for in Article 3 of the Law on Credit Institutions.

2. When applying international commercial customs regarding letters of credit, the parties must specifically refer to the applicable version.

3. The handling of disputes arising from letter of credit transactions shall be carried out in accordance with the agreement of the parties in compliance with Vietnamese law. In cases involving foreign elements as stipulated in the Civil Code, the parties may agree on the applicable law, dispute resolution body (including courts or international commercial arbitration) to resolve the disputes.

Article 7. Language Usage

1. The credit agreement for letter of credit transactions must be established in Vietnamese, except in cases involving foreign elements as stipulated in the Civil Code or when established through international telecommunications networks. In cases where a foreign language is used, upon request of the competent authority, the credit agreement must be translated into Vietnamese with confirmation by the authorized representative of the bank or must be notarized or certified and attached with the original in the foreign language.

2. For other documents in letter of credit transactions (excluding the credit agreement for letter of credit transactions), banks may agree with relevant parties to use a foreign language according to international commercial customs regarding letters of credit when implementing them. In cases where a foreign language is used, upon request of the competent authority, the documents must be translated into Vietnamese with confirmation by the authorized representative of the bank or must be notarized or certified and attached with the original in the foreign language.

Article 8. Guaranteeing Customer Obligations

1. The bank agrees with the customer on the application or non-application of security measures when implementing letter of credit transactions.

2. In cases where security measures are agreed to be applied, the bank and the customer shall implement them in accordance with the provisions of the law on guaranteeing obligations and internal regulations of the bank.

3. The customer and guarantor must cooperate with the bank to handle the secured assets when there is a basis for doing so under the credit agreement for letter of credit transactions, the guarantee contract, and the provisions of the law.

Article 9. Balance of Letter of Credit Transactions

1. The balance of letter of credit transactions for one customer or one customer and related party includes the balance of issued letters of credit, confirmed letters of credit, negotiation balances, repayment balances, or commitments to repay letters of credit for that customer, that customer, and related parties.

2. The balance of letter of credit transactions for one customer or one customer and related party is calculated from the date of issuance of letters of credit, confirmation of letters of credit, negotiation of payments, and repayment of letters of credit.

Article 10. Credit Amount

The bank and the customer agree on the credit amount based on the value of the sales and purchase contract, supply of goods and services (for issuing letters of credit) or the value of the letter of credit (for confirmation, negotiation of payments, repayment of letters of credit), credit limits for customers to issue, confirm, negotiate payments, repay letters of credit but the maximum amount shall not exceed the value of the sales and purchase contract between the customer and the beneficiary or the value of the letter of credit.

Article 11. Currency for Issuing, Confirming, Reimbursing, and Paying Documentary Credits

1. The bank and the customer shall agree on issuing documentary credits in Vietnamese dong or foreign currency appropriate to the currency that must be paid to the beneficiary under the goods purchase and service contract.

2. The bank and the customer shall agree on confirming and reimbursing documentary credits in Vietnamese dong or foreign currency appropriate to the currency that must be paid to the beneficiary under the documentary credit.

3. The issuing bank, confirming bank, and reimbursing bank shall make payment to the beneficiary when the due date for payment under the documentary credit arrives, according to the payment currency stated on the documentary credit.

Article 12. Interest Rate for Credit Facilities Provided to Customers

1. The bank and the customer shall agree on the interest rate applicable to the reimbursement and negotiation of documentary credits.

2. The interest rate applicable to overdue principal balances in the reimbursement and negotiation of documentary credits shall be agreed upon in the credit facility agreement between the banks but shall not exceed 150% of the interest rate for on-time credit facilities at the time the overdue debt is transferred.

3. The interest rate applicable to the amount the bank pays on behalf of in the issuance, confirmation, and reimbursement of documentary credits shall comply with the credit facility agreement but shall not exceed the highest overdue interest rate currently applied to overdue loans at the same bank.

4. The interest rate applicable to overdue interest payments shall be agreed upon in the credit facility agreement for documentary credit operations but shall not exceed 10% per annum based on the outstanding overdue interest balance corresponding to the period of delay.

5. In cases where the currency for performing documentary credit operations is foreign currency, the parties shall agree on charging documentary credit fees in foreign currency or converting them into Vietnamese dong or other foreign currencies according to the agreed exchange rate.

Article 13. Fees for Documentary Credit Operations and Related Business Activities

1. The bank shall agree with the customer and related parties (if any) on collecting various fees and credit facility fees related to documentary credit operations and the fees applicable to other business activities related to documentary credits.

2. The bank must publicly display the fees for documentary credit operations and other business activities related to documentary credits.

3. In cases where the currency for performing documentary credit operations is foreign currency, the parties shall agree on collecting credit facility fees in foreign currency or converting them into Vietnamese dong or other foreign currencies according to the agreed exchange rate.

Article 14. Application Documents for Credit Facilities

When there is a need for documentary credit services, the customer must submit to the bank:

1. Information, documents, and data proving eligibility for credit facilities as stipulated in Articles 21, 27, 31, and 40 of this Circular.

2. Information about related parties associated with the customer as prescribed in the Law on Credit Institutions if the total outstanding credit facility balance of that customer at the bank (including the amount being requested for credit facilities) is greater than or equal to 0.1% of the bank's equity capital at its most recent point in time, except in cases where the customer is a foreign credit institution. If the bank has negative equity capital, the ratio shall be applied to the charter capital or authorized capital (for branches of foreign banks). Information about related parties includes:

a) Information about individual related parties, including: full name, personal identification number for Vietnamese citizens; nationality, passport number, date of issue, place of issue for foreigners; relationship with the customer;

b) Information about organizational related parties, including: name, business registration code, main office address of the enterprise, business registration certificate number or equivalent legal document, legal representative, relationship with the customer.

3. Other documents as directed by the bank.

Article 15. Credit Granting Appraisal

1. The bank appraises credit granting conditions for customers in accordance with Articles 21, 27, 31, and 40 of this Circular to consider issuing, confirming, negotiating payment, and returning letters of credit. During the appraisal process, the bank may use its internal credit rating system, combined with information from the National Credit Information Center and other sources of information.

2. The bank must organize the review and approval of credit granting according to the principle of defining responsibilities between the appraisal stage and the decision-making stage for credit granting.

3. In cases where credit is not granted, the bank shall notify the customer of the decision not to grant credit and the reasons when requested by the customer.

Article 16. Classification, Provisions, Methods of Establishing Reserve for Risk, and Utilization of Reserve to Address Credit Risk

The bank implements the classification of assets, provisions, methods of establishing reserve for risk, and utilization of reserve to address risk for commitments and assets when granting credit in letter of credit transactions, when carrying out outright purchase without recourse of presented documents under letters of credit, and entrusting the issuance of letters of credit in accordance with the laws on asset classification, provision establishment, risk reserve establishment methods, and reserve utilization to address risk in banking operations, including foreign bank branches.

Article 17. Internal Regulations of Banks on Letter of Credit Business

1. Based on the provisions of the Law on Credit Institutions, this Circular, and relevant laws, the bank issues internal regulations on letter of credit business for customers (including electronic letter of credit business if applicable), which include procedures for implementing letter of credit business consistent with credit granting regulations and the characteristics of the bank's business.

Article 18. Electronic Letter of Credit Business

1. The bank and the customer may choose to carry out letter of credit business and related commercial activities through the use of electronic means (hereinafter referred to as electronic letter of credit business). The implementation of electronic letter of credit business complies with the provisions of this Circular; laws on anti-money laundering; electronic transactions; personal data protection; online service security and confidentiality in the banking industry, and relevant laws.

2. When conducting customer identification and verification through electronic means for new customers establishing a relationship with the bank (except in cases where the customer submits a request via the SWIFT system or uses an electronic signature as prescribed by law), the bank shall proceed as follows:

a) For resident customers: The bank conducts customer identification and verification in accordance with the State Bank of Vietnam's regulations on opening and using settlement accounts at service providers.

b) For non-resident customers: The bank conducts customer identification and verification based on self-assessment of risk levels to select appropriate transaction authentication methods, forms, and technologies that ensure safety and bear the risks arising therefrom.

3. The bank decides independently on measures, forms, and technologies for electronic letter of credit business throughout the entire process or specific stages, bears any resulting risks (if any), and must meet the following minimum requirements:

a) Measures, forms, and technologies selected by the bank must comply with standards for security, safety, and confidentiality as stipulated by the State Bank of Vietnam.

b) Apply transaction authentication methods to confirm the customer's agreement with the bank during electronic transactions in the process of electronic letter of credit business in accordance with relevant laws.

c) Maintain and preserve all documentation, information, and data related to customer identification during the implementation of electronic letter of credit business securely and confidentially, backed up to ensure the completeness and integrity of the data for customer verification, dispute resolution, and providing information upon request from authorized agencies. Storage periods comply with laws on anti-money laundering and electronic transactions.

d) The bank must conduct regular checks and evaluations of the security and confidentiality of measures, forms, and technologies, and temporarily suspend services for upgrades, corrections, and improvements in case of security breaches.

đ) Assign specific responsibilities to individuals and departments involved in building, setting up, and operating information systems for the appraisal and decision-making stages of electronic letter of credit business. In case of risks, the bank must have mechanisms to identify responsible individuals and departments and promptly address emerging issues and risks to ensure effective and safe implementation of electronic letter of credit business.

4. The information system for electronic letter of credit business must comply with regulations ensuring information system security level 3 or higher as stipulated by laws on information system security levels and the State Bank of Vietnam's regulations on information system security in banking operations.

Article 19. Rights and Obligations of the Issuing Bank, Confirming Bank, Negotiating Bank, and Paying Bank in Relation to Letters of Credit

1. The bank conducting letter of credit transactions has the right to:

a) Accept or reject the customer's request in the performance of letter of credit transactions;

b) Require the customer and related parties to provide information, documents, and data relevant to the assessment of the customer and collateral (if any);

c) Demand that the customer fully repay the principal, interest, and fees as agreed;

d) Initiate legal proceedings as prescribed by law when related parties breach their commitments;

đ) Other rights as agreed by the parties, in accordance with relevant laws and international commercial practices regarding letters of credit;

2. The bank conducting letter of credit transactions has the obligation to:

a) Perform all contents as committed to the customer;

b) Other obligations as agreed by the parties, in compliance with this Circular and international commercial practices regarding letters of credit;

Article 20. Rights and Obligations of the Customer

1. The customer has the right:

a) Refuse requests from the bank that are not in accordance with the credit agreement for letter of credit transactions signed and the provisions of the law;

b) Initiate legal proceedings as prescribed by law when related parties breach their commitments;

c) Other rights as agreed with the bank, in compliance with international commercial practices regarding letters of credit;

2. The customer has the obligation:

a) Provide truthful, accurate, complete, and timely information, documents, and data to the bank to prove compliance with the bank's credit conditions and bear responsibility for providing such information, documents, and data;

b) Fully repay the principal, interest, and fees as agreed and in compliance with international commercial practices regarding letters of credit;

c) Other obligations as agreed with the bank and prescribed by law;

Chapter II

LETTER OF CREDIT BUSINESS

Section 1

ISSUING LETTER OF CREDIT BUSINESS

Article 21. Conditions for Customers

1. The bank shall consider and decide to issue a letter of credit when the customer meets the following conditions:

a) Having civil legal capacity and civil conduct capacity as prescribed by law;

b) Need to open a letter of credit to serve legitimate trading activities of goods and services;

c) Having a feasible capital utilization plan;

d) Having financial capability to settle contracts for the purchase and sale of goods and services;

2. In cases where the customer is a non-resident, the bank (except for foreign bank branches issuing letters of credit in foreign currency in accordance with Clause 3 of this Article) shall only consider and decide to issue a letter of credit for the customer when the customer meets the conditions stipulated in Clause 1 of this Article and must meet one of the following requirements:

a) Being a business established and operating abroad with Vietnamese enterprise capital contribution under investment forms prescribed at point a, c Clause 1 Article 52 of the Investment Law or other investment forms prescribed at point đ Clause 1 Article 52 of the Investment Law;

b) Ensuring 100% value of the letter of credit by the customer's assets including: Balance of deposits, deposit certificates at the issuing bank or amount of money the customer will be paid from another letter of credit issued by the bank to the beneficiary who is the customer;

c) The beneficiary is a resident;

3. Foreign bank branches shall only consider and decide to issue letters of credit in foreign currency for non-residents when the customer meets the conditions stipulated in Clause 1 of this Article and the beneficiary is a resident.

Article 22. Credit Granting Period in Letter of Credit Issuance Business

1. The credit granting period in letter of credit issuance business is the time determined from the day following the issuance date of the letter of credit to the due date for payment of the letter of credit, but not exceeding the remaining lawful operating period of the bank and the customer.

2. The extension of the credit granting period in letter of credit issuance business shall be agreed upon by the parties in accordance with international trade practices regarding letters of credit.

Article 23. Credit Agreement in Letter of Credit Issuance Business

1. The credit agreement must include the following main contents:

a) Information about the parties involved in the letter of credit issuance business;

b) Type of currency and amount requested for issuing the letter of credit;

c) Sales contract for goods or services;

d) Type of letter of credit;

đ) Source of funds for payment under the sales contract for goods or services;

e) Fees, interest rates, and penalty interest (if applicable) applied;

g) Guarantee measures (if applicable);

h) Mandatory debt collection, deduction from deposit account, or current account (if applicable);

i) Foreign exchange transactions (if applicable);

k) Due date for payment of the letter of credit;

l) Credit granting period;

m) Dispute resolution arising;

n) Other contents that do not contravene the provisions of the law.

2. The credit agreement must ensure the rights and obligations of the parties and be established in the form of a specific credit agreement for each transaction or a framework agreement applicable to all letter of credit issuance transactions, attached with specific agreements.

Article 24. Issuing Letters of Credit

1. Based on the credit agreement, the bank issues a letter of credit to the beneficiary. The content of the letter of credit and any amendments, supplements, or cancellations thereof shall be agreed upon by the parties in accordance with international trade practices regarding letters of credit.

2. The bank may issue various types of letters of credit according to agreements with customers in compliance with international trade practices regarding letters of credit.

3. The bank may only issue deferred payment letters of credit with immediate or pre-payment terms before the due date of the letter of credit if the customer is a resident.

Article 25. Fulfillment of Obligations Under the Commitments in the Letter of Credit

1. The issuing bank must pay the beneficiary in accordance with the provisions of the letter of credit and comply with international trade practices regarding letters of credit.

2. In cases where the issuing bank issues an immediate or deferred payment letter of credit, the bank agrees with the customer on the deduction from the deposit account or current account (if any), using the customer's loan to fulfill the obligation to pay the beneficiary. If the customer’s funds are insufficient to cover the payment to the beneficiary, the customer must accept a mandatory debt with the bank for the shortfall. The customer has the obligation to repay the full amount of the mandatory debt and interest and fees as stipulated in Articles 12 and 13 of this Circular.

3. In cases where the issuing bank issues a deferred payment letter of credit with a term allowing the beneficiary to be paid immediately or before the due date of the letter of credit, the parties shall act as follows:

a) The issuing bank requests the paying bank to refund the payment to the beneficiary. If the beneficiary is a non-resident, the issuing bank can only request the paying bank to be a non-resident to make the payment to the beneficiary;

b) When the paying bank makes the payment to the beneficiary, the issuing bank must accept a debt with the paying bank, while the customer must accept a debt with the issuing bank for the amount the paying bank has paid to the beneficiary as committed in the letter of credit. Banks will debit the customer's account upon receipt of notification from the paying bank. Both the paying bank and the issuing bank must include this outstanding debt in the total credit limit granted to the customer;

c) On the due date of the letter of credit, the customer has the obligation to fully repay the debt and interest to the issuing bank, and the issuing bank has the obligation to fully repay the debt and interest and fees to the paying bank as stipulated in Articles 12 and 13 of this Circular;

d) In case the customer fails to fully repay the debt to the issuing bank on the due date of the letter of credit, the issuing bank transfers the overdue debt for the principal balance that the customer cannot repay on time. The issuing bank must notify the customer about the transfer of the overdue debt. The minimum content of the notice includes the overdue principal balance, the date of transferring the overdue debt, and the interest rate applied to the overdue principal balance as stipulated in Article 12 of this Circular;

đ) In case the issuing bank fails to fully repay the debt to the paying bank, the paying bank shall act in accordance with point c, Clause 3, Article 43 of this Circular, except when the paying bank is a non-resident;

e) The parties may agree to repay the debt before the due date of the letter of credit and prepayment fees.

4. In cases where the issuing bank requests a non-resident paying bank to make payment to the beneficiary as stipulated in Clause 3 of this Article, the issuing bank must ensure compliance with the legal regulations on foreign borrowing management of enterprises not guaranteed by the Government.

5. In cases where the debt is in foreign currency, the customer may repay the debt in foreign currency or convert it into Vietnamese dong or another foreign currency at the agreed exchange rate.

Article 26. Joint Issuance of Letters of Credit

1. The bank shall jointly issue letters of credit in accordance with the principles, conditions, and procedures for organizing and implementing set forth in this Circular, the State Bank’s regulations on joint lending by credit institutions and foreign bank branches to customers, and relevant laws.

2. In cases where there is joint issuance of letters of credit with foreign credit institutions and the customer is a resident, the customer must ensure compliance with the provisions of this Circular and the laws governing the management of foreign borrowing and repayment by enterprises not guaranteed by the Government.

Section 2

LETTER OF CREDIT CONFIRMATION BUSINESS

Article 27. Conditions for Customers

1. The bank shall consider and decide to confirm a letter of credit when the customer meets all of the following conditions:

a) The letter of credit is issued by the customer to serve legitimate trade and service activities;

b) There is a feasible capital utilization plan;

c) There is financial capacity to settle obligations committed under the letter of credit.

2. The bank is not required to examine the condition stipulated in point c Clause 1 of this Article in the following cases:

a) The customer is the parent bank or branch within the system in Vietnam of the parent bank of the foreign bank branch;

b) The customer is a credit institution that is a foreign branch of a commercial bank.

3. In cases where the customer is a non-resident, the bank (except for foreign bank branches confirming letters of credit in foreign currency in accordance with the provisions of Clause 4 of this Article) shall only consider and decide to confirm a letter of credit for the customer when the customer meets all the conditions stipulated in Clauses 1 and 2 of this Article and must satisfy one of the following requirements:

a) The customer is a foreign credit institution that is a branch or subsidiary of a commercial bank; or the parent bank or branch within the system of the parent bank of the foreign bank branch;

b) The customer guarantees the full value of the letter of credit by their assets including deposit balances and pledged funds at the confirming bank;

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

4. Foreign bank branches may only consider and decide to confirm letters of credit in foreign currency for non-resident customers when the customer meets all the conditions stipulated in Clauses 1 and 2 of this Article and the beneficiary is a resident.

Article 28.Credit Term in Letter of Credit Confirmation Business

The credit term in letter of credit confirmation business is the period determined from the day following the date of letter of credit confirmation until the due date of the letter of credit but shall not exceed the remaining operating period of the bank and the customer.

Article 29. Credit Agreement in Letter of Credit Confirmation Business

1. The credit agreement in letter of credit confirmation business must include the following contents:

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

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

c) Type of currency and amount of the confirmed letter of credit;

d) Credit term when confirming the letter of credit;

đ) Types of fees, interest rates, and penalty interest (if any).

2. The credit agreement may be established in the form of a specific credit agreement for each transaction or a framework agreement applicable to all letter of credit confirmation transactions, accompanied by specific agreements.

Article 30. Performance of Obligations According to Confirmed Letter of Credit Commitments

1. The confirming bank shall perform payment to the beneficiary in accordance with the provisions of the letter of credit and comply with international trade usages regarding letters of credit.

2. The confirming bank agrees with the customer on the deduction from the deposit account or the customer's deposit account (if any), or the customer transfers the payment amount into the designated account of the confirming bank for the confirming bank to fulfill its payment obligation to the beneficiary. In case the customer’s funds are insufficient to cover the payment to the beneficiary, the customer must compulsorily acknowledge the debt to the confirming bank for the outstanding amount. The customer is obligated to repay the full amount of the compulsory debt acknowledgment and interest and fees to the confirming bank as stipulated in Articles 12 and 13 of this Circular.

3. In cases where the debt is denominated in foreign currency, the customer shall settle the debt in foreign currency or convert it into Vietnamese dong or another foreign currency at the agreed exchange rate.

Section 3

NEGOTIATION PAYMENT BUSINESS

Article 31. Conditions for Customers

1. The bank considers and decides to negotiate payment when the customer meets all of the following conditions:

a) Having full civil legal capacity and civil conduct capacity as prescribed by law;

b) The letter of credit is issued to serve legitimate trading activities of goods and services;

c) A set of documents meeting the conditions prescribed in Article 32 of this Circular;

d) There is a feasible capital utilization plan;

đ) Possess financial capability to repay the negotiated payment amount.

2. In cases where the customer is a non-resident, the bank (except for branches of foreign banks negotiating payment in foreign currency in accordance with Clause 3 of this Article) will only consider and decide to negotiate payment of a set of documents under the letter of credit for the customer if the customer meets all the conditions prescribed in Clause 1 of this Article and must meet one of the following requirements:

a) Being a business established and operating abroad with Vietnamese enterprise capital contribution under investment forms prescribed at point a, c Clause 1 Article 52 of the Investment Law or other investment forms prescribed at point đ Clause 1 Article 52 of the Investment Law;

b) The issuing bank of the letter of credit is a resident.

3. Branches of foreign banks will only consider and decide to negotiate payment of a set of documents under the letter of credit in foreign currency for non-resident customers if the customer meets all the conditions prescribed in Clause 1 of this Article and the issuing bank of the letter of credit is a resident.

Article 32. Conditions for Sets of Documents Under Letters of Credit Subject to Negotiation Payment

1. The letter of credit accompanied by a set of documents presented for negotiation payment is issued in accordance with international trade usages regarding letters of credit.

2. Belongs to the lawful beneficiary of the customer.

3. Has not been paid.

Article 33. Currency for Negotiation Payment

1. For sets of documents under letters of credit issued in Vietnamese dong, the bank negotiates payment in Vietnamese dong for the customer.

2. For sets of documents under letters of credit issued in foreign currency, the bank negotiates payment in the foreign currency stated on the letter of credit or negotiates payment converted into Vietnamese dong or another foreign currency at the agreed exchange rate.

Article 34. Currency for Repayment of Negotiated Payment Amount Upon Expiry of Negotiation Period

1. For sets of documents negotiated in Vietnamese dong, repayment shall be made in Vietnamese dong.

2. For sets of documents negotiated in foreign currency, repayment shall be made in foreign currency or converted into Vietnamese dong or another foreign currency at the agreed exchange rate.

Article 35. Methods of Negotiated Payment

The bank and the customer shall negotiate and select the following methods of negotiated payment:

1. Purchase with maturity period of the set of documents under the letter of credit is the act of the bank purchasing and receiving the transfer of the set of documents under the letter of credit that have not yet reached the payment due date from the customer, while the customer must commit to repay the negotiated payment amount, interest rate, and related costs after a determined period in the negotiated payment agreement.

2. Purchase with reservation of right to claim the set of documents under the letter of credit is the act of the bank purchasing the set of documents and receiving the transfer of the set of documents that have not yet reached the payment due date from the customer, the bank has the right to claim the customer if the bank does not receive the full payment amount from the responsible bank for paying the set of documents when the letter of credit reaches its payment due date. The customer must be responsible for repaying the negotiated payment amount, the negotiated payment interest rate, and other legitimate costs related to the negotiated payment activity if the bank does not receive the full payment amount from the responsible bank for paying the set of documents.

Article 36. Price, Term, Interest Rate on Negotiated Payment and Related Costs

1. The bank and the customer shall agree on the purchase price of the set of documents and the repurchase price of the set of documents based on the payment value at the payment due date, the level of risk of the set of documents, the negotiated payment interest rate, the remaining term of the set of documents, and other factors.

2. The term of negotiated payment under the method of purchase with maturity period shall be agreed upon by the bank and the customer but shall not exceed one year and shall not exceed the remaining term of the set of documents.

3. The term of negotiated payment under the method of purchase with reservation of right to claim shall be agreed upon by the bank and the customer but shall not exceed one year and shall not exceed the end date of the claim period. The claim period shall be agreed upon by the bank and the customer, calculated from the day following the payment due date of the letter of credit to the day the customer must be responsible for fully repaying to the bank the amount that the responsible bank for paying the set of documents did not fully pay to the bank.

4. The negotiated payment interest rate and other costs related to the negotiated payment activity shall be agreed upon by the bank and the customer in accordance with the provisions of the law.

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

Article 37. Agreement on Negotiated Payment

1. The agreement on negotiated payment must include at least the following main contents:

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

b) Information about the set of documents attached to the letter of credit, and other information required by the negotiating bank;

c) The negotiated payment price;

d) The currency of negotiated payment;

đ) The method of negotiated payment;

e) The term of negotiated payment;

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

h) Circumstances for terminating the negotiated payment agreement before the term (if any);

i) Handling of breaches;

k) Effectiveness of the negotiated payment agreement;

l) Other contents agreed upon by the parties in accordance with the provisions of the law.

2. The parties may establish a specific negotiated payment agreement for each transaction or a framework agreement applicable to all negotiated payment transactions, accompanied by specific agreements.

Article 38. Procedures for Negotiation and Payment of Documents

1. When the bank agrees to negotiate payment on behalf of the customer, the customer shall transfer the set of documents to the bank in accordance with the provisions of the law.

2. The sequence and procedures for negotiation and payment must be specifically stipulated in the internal regulations governing the bank's negotiation activities.

Article 39. Transfer of Overdue Debt

1. In the case of purchasing documents with a maturity date, if the customer fails to repay the debt on the due date, the bank will transfer the overdue debt corresponding to the amount that the customer has not fully repaid to the bank. On the letter of credit payment date, if the amount paid under the letter of credit is less than the negotiated payment amount for the customer plus fees and interest, the bank will continue to monitor this difference and take measures to recover the debt.

2. In the case of purchasing documents with recourse, if the customer cannot repay the debt to the bank by the end of the recourse period agreed upon in the negotiation and payment agreement between the bank and the customer, the bank will transfer the overdue debt corresponding to the negotiated payment amount for the customer and take measures to recover the debt.

3. The bank must notify the customer about the transfer of overdue debt as specified in Clause 1 and Clause 2 of this Article. The notification content must include at least the outstanding principal balance that has become overdue, the date of the overdue debt transfer, and the interest rate applied to the overdue principal balance.

Section 4

LETTER OF CREDIT REFUND BUSINESS

Article 40. Conditions for Customers

1. The bank shall consider and decide to refund the letter of credit based on the customer's request when the customer meets all of the following conditions:

a) The letter of credit is issued by the customer to serve legitimate trade and service activities;

b) There is a feasible capital utilization plan;

c) Having the financial capacity to repay the debt.

2. The bank is not required to examine the condition stipulated in point c Clause 1 of this Article in the following cases:

a) The customer is the parent bank or branch within the system in Vietnam of the parent bank of the foreign bank branch;

b) The customer is a credit institution that is a foreign branch of a commercial bank.

3. In the case where the customer is a non-resident, the bank (except for foreign bank branches refunding letters of credit in foreign currency in accordance with the provisions of Clause 4 of this Article) shall only consider and decide to refund the letter of credit to the customer when the customer meets all the conditions stipulated in Clause 1 and Clause 2 of this Article and satisfies one of the following conditions:

a) The customer is a foreign credit institution that is a branch or subsidiary of a commercial bank; or the parent bank or branch within the system of the parent bank of the foreign bank branch;

b) The customer guarantees the full value of the letter of credit with their own assets including the deposit balance and pledged funds at the same bank issuing the refund.

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

4. Foreign bank branches shall only consider and decide to refund letters of credit in foreign currency to non-resident customers when the customer meets all the conditions stipulated in Clause 1 and Clause 2 of this Article and the beneficiary is a resident.

Article 41. Credit Term in Letter of Credit Refund Business

1. In the case of refunding a letter of credit through an agreement with the customer to pay using the bank's funds, the credit term in the letter of credit refund business is the period determined from the day following the day the refunding bank makes payment to the beneficiary until the due date of the credit but does not exceed the payment due date of the letter of credit and ensures it does not exceed one year and does not exceed the remaining operational period of the bank and the customer.

2. In the case of refunding a letter of credit through the issuance of a refund commitment, the credit term in the letter of credit refund business is the period determined from the day following the issuance of the refund commitment letter of credit until the payment due date of the letter of credit but does not exceed the remaining lawful operating period of the bank and the customer.

Article 42. Credit Agreement for Documentary Credit Reimbursement Operations

1. The credit agreement for documentary credit reimbursement must include the following main contents:

a) Information on the parties involved including the issuing bank, the reimbursing bank, the applicant, the beneficiary, and other related parties (if any);

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

c) Type of currency and amount requested for documentary credit reimbursement;

d) Credit period for documentary credit reimbursement;

đ) Documentary credit reimbursement fee, interest, and penalty interest (if any).

2. The parties may establish a specific documentary credit reimbursement agreement for each transaction or a framework agreement applicable to all documentary credit reimbursement transactions, attached with specific agreements.

Article 43. Issuance of Commitments and Performance of Documentary Credit Reimbursement Obligations

1. In the case of documentary credit reimbursement through issuance of a reimbursement commitment, based on the credit agreement, the issuing bank commits to reimburse the documentary credit to the beneficiary. The content of the commitment and its amendment, supplementation, or cancellation shall be agreed upon by the parties, in accordance with international trade practices regarding documentary credits.

2. The reimbursing bank shall make payment to the beneficiary based on the customer's or the beneficiary's reimbursement request, in compliance with international trade practices regarding documentary credits.

3. In the case of documentary credit reimbursement through an agreement with the customer to pay using the funds of the reimbursing bank:

a) When the reimbursing bank makes payment to the beneficiary based on the customer's request, the reimbursing bank must record a debit against the customer for the amount paid to the beneficiary according to the commitment in the documentary credit;

b) On the due date of the documentary credit, the customer is obligated to repay the full amount owed and interest and fees to the reimbursing bank as stipulated in Article 12 and Article 13 of this Circular;

c) If the customer fails to fully repay the amount owed to the reimbursing bank on the due date of the documentary credit, the reimbursing bank will transfer the overdue debt for the outstanding principal that the customer has not repaid on time. The reimbursing bank must notify the customer about the transfer of the overdue debt. The notification must minimally include the outstanding principal amount overdue, the date of the overdue debt transfer, and the interest rate applied to the overdue principal amount as stipulated in Article 12 of this Circular.

4. In the case of documentary credit reimbursement through issuance of a reimbursement commitment, the reimbursing bank agrees with the customer on the deduction from the deposit account or savings account (if any) of the customer or the customer transfers payment funds into the designated account of the reimbursing bank for the reimbursing bank to fulfill the payment obligation to the beneficiary. If the customer's funds are insufficient to cover the payment to the beneficiary, the customer must obligatorily recognize a debt with the reimbursing bank for the shortfall. The customer is obligated to fully repay the obligatorily recognized debt and interest and fees to the reimbursing bank as stipulated in Article 12 and Article 13 of this Circular.

5. In cases where the debt is in foreign currency, the customer may repay the debt in foreign currency or convert it into Vietnamese dong or another foreign currency at the agreed exchange rate.

Section 5

AUTHORIZATION AND RECEIPT OF AUTHORIZATION TO ISSUE DOCUMENTARY CREDITS

Article 44. Conditions for Entrusting and Accepting Entrustment by Banks

A bank may undertake entrustment and accept entrustment to issue letters of credit when it meets the following conditions:

1. The entrustment and acceptance of entrustment activities must be recorded in the License for Establishment and Operation.

2. There must be internal regulations on managing entrustment and acceptance of entrustment activities, including provisions on identifying, measuring, and managing risks associated with entrustment and acceptance of entrustment activities that are appropriate to the nature and scale of the bank's operations.

3. Entrustment and acceptance of entrustment activities must be managed by a risk management department.

4. The entrusting party must have physical infrastructure, network, and staff with the necessary qualifications and expertise to ensure the implementation of entrusted tasks.

5. The entrusting party must assess the financial capacity of the entrusting party to ensure the capital transfer before considering and deciding to accept entrustment to issue letters of credit.

Article 45. Principles of Entrustment

1. Entrustment must be established in a contract in accordance with Article 46 of this Circular and relevant laws.

2. The entrusting party shall not re-entrust to a third party.

3. The capital transfer for entrustment must be consistent with the due date for payment of the letter of credit.

4. The entrusting party shall not use the entrusted capital contrary to the purpose and content stipulated in the entrustment contract.

5. The entrusting party must include the balance of entrusted issuance of letters of credit in the total credit limit granted to customers, and the entrusting party must include the balance of letter of credit issuance in the total credit limit granted to the entrusting party according to the legal limits and safety ratios in banking operations, as stipulated by law.

6. A foreign bank branch accepting entrustment from its parent bank or a foreign branch of its parent bank to issue letters of credit; a commercial bank accepting entrustment from a foreign branch or subsidiary of a bank to issue letters of credit, and related parties must comply with the provisions of this Circular and the laws on foreign borrowing, debt repayment, foreign exchange management, and other relevant laws.

7. Entrusted amounts in foreign currency must comply with the legal provisions on foreign exchange management and other relevant laws.

8. The entrusting party and the entrusting party must classify debts, establish reserves, and use reserves to handle risks associated with entrusted balances in accordance with the legal provisions on asset classification, reserve levels, reserve risk calculation methods, and the use of reserves to handle risks in banking operations, as stipulated by law.

9. A bank shall not entrust the issuance of letters of credit to a requesting party in cases where credit is not allowed as prescribed by the Law on Credit Institutions.

Article 46. Entrustment Contract

1. An entrustment contract must contain at least the following contents:

a) Information about the entrusting party and the entrusting party;

b) Information related to the requesting party, the beneficiary, the sales contract, service contract, and other relevant information to ensure sufficient basis for issuing letters of credit;

c) Purpose of entrustment;

d) Scope and content of entrustment;

đ) Duration of entrustment;

e) Entrustment fee, penalty interest (if applicable);

g) Entrusted capital, time of entrusted capital transfer;

h) Currency for issuing letters of credit;

i) Rights and obligations of the entrusting party and the entrusting party, wherein it must clearly state that the entrusting party bears all risks from its own customers and enjoys all benefits from entrustment activities, and the entrusting party bears all risks from the entrusting party and receives the entrustment fee;

k) Dispute resolution.

2. In addition to the contents prescribed in Clause 1 of this Article, the entrustment contract may contain other contents agreed upon by the parties in accordance with the provisions of this Circular and relevant laws.

Article 47. Term of Entrustment

The term of entrustment shall be agreed upon by the entrusting party and the entrusted party, which is the period calculated from the time when the entrusted party issues the letter of credit until the time when the entrusted party makes payment to the beneficiary as stipulated in the entrustment contract.

Article 48. Entrustment Fee

The entrusting party and the entrusted party shall agree on the amount of the entrustment fee that the entrusting party pays to the entrusted party for issuing the letter of credit, as specified in the entrustment contract, in compliance with the provisions of the law.

Article 49. Performance of Obligations According to the Letter of Credit Commitment

1. The issuing bank, as the entrusted party, must pay to the beneficiary according to the provisions of the letter of credit and comply with international trade usages regarding letters of credit.

2. On the due date of the letter of credit, the entrusted party shall agree with the entrusting party on the deduction from the escrow account, deposit account (if any) of the entrusting party or the entrusting party transferring funds into the designated account of the entrusted party to fulfill the payment obligation to the beneficiary.

In case the amount of the entrusting party is insufficient to cover the payment to the beneficiary, the entrusting party must accept the compulsory debt towards the entrusted party for the outstanding amount that the entrusted party has paid on behalf of the entrusting party. The entrusting party has the obligation to fully repay the compulsory debt and interest penalty as agreed in the entrustment contract.

3. On the due date of the letter of credit, the entrusting party shall deduct from the escrow account, deposit account (if any), or use customer loan funds as agreed to transfer funds to the entrusted party to fulfill the payment obligation to the beneficiary.

In case the customer's amount is insufficient to cover the payment to the beneficiary, the customer must accept the compulsory debt towards the entrusting party for the outstanding amount. The customer has the obligation to fully repay the compulsory debt and interest and fees as provided for in 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:

a) Requesting the entrusted party to provide documents and materials proving that the entrusted party is authorized to perform the letter of credit business in accordance with the law;

b) Requesting the entrusted party to provide information and data about the performance and results of the entrustment contract;

c) Supervising and inspecting the entrusted party's implementation of the entrusted content and scope as stipulated in the entrustment contract;

d) Other rights as stipulated in the entrustment contract in compliance with the law.

2. The entrusting party has the following obligations:

a) Assessing whether the entrusted party has the capability to perform the letter of credit issuance business;

b) Transferring the entrusted capital to the entrusted party so that the entrusted party can fulfill the payment obligation according to the commitment in the letter of credit in compliance with the due date of the letter of credit as stipulated in the entrustment contract;

c) Providing the entrusted party with relevant documents, information, and data as stipulated in the entrustment contract and being responsible for the truthfulness, accuracy, completeness, and timeliness of such information, documents, and data;

d) Paying the entrustment fee and interest penalty (if any) to the entrusted party as stipulated in the entrustment contract;

e) Other obligations as stipulated in the entrustment contract in compliance with the law.

Article 51. Rights and Obligations of the Entrusted Party

1. The entrusted party shall have the following rights:

a) To refuse requests from the entrusting party that are not within the scope and content stipulated in the agency agreement or are not in accordance with the provisions of the law;

b) To receive the agency fee, interest, and penalties (if any) as stipulated in the agency agreement;

c) To request the entrusting party to provide information, documents, and data related to the agency as stipulated in the agency agreement and at the request of relevant parties;

d) Other rights as stipulated in the entrustment contract in compliance with the law.

2. The entrusted party shall have the following obligations:

a) To review and assess the scope of activities of the entrusting party to ensure that the entrusting party is permitted to perform documentary credit transactions in accordance with the law;

b) To carry out the content and scope of the agency as stipulated in the agency agreement;

c) To promptly and fully inform the entrusting party about the situation regarding the issuance of the letter of credit and payment to the beneficiary as stipulated in the agency agreement;

d) To transfer all legitimate benefits, related documents, and papers (if any) to the entrusting party as stipulated in the agency agreement;

đ) To fulfill other obligations as stipulated in the agency agreement.

Chapter III

OTHER BUSINESS ACTIVITIES RELATED TO LETTERS OF CREDIT

Article 52. Purchase of Documentary Sets Free of Recourse under Letters of Credit

1. Conditions for documentary sets under letters of credit to be purchased free of recourse:

a) Issued in accordance with international trade practices on letters of credit;

b) Legally belonging to the customer;

c) Not yet paid;

d) The documentary set has been issued by or accepted for payment by the issuing bank.

2. In cases where the customer is a non-resident, the bank may only purchase documentary sets free of recourse under letters of credit when the issuing bank or confirming bank is a resident.

3. Currency for purchasing documentary sets:

a) For documentary sets under letters of credit issued in Vietnamese dong, the bank may purchase in Vietnamese dong;

b) For documentary sets under letters of credit issued in foreign currency, the bank shall purchase in the foreign currency stated on the letter of credit or convert it into Vietnamese dong or another foreign currency at an agreed exchange rate.

4. The bank shall evaluate risks associated with the issuing bank (except in cases where the bank purchases documentary sets free of recourse under letters of credit issued by itself) or the confirming bank if the letter of credit is confirmed, to negotiate and agree with the customer on the purchase of documentary sets, including: purchase price, currency, certain circumstances allowing recourse from the customer (if any), and other contents agreed upon by the parties based on the payment value at maturity, the due date of the letter of credit, and other contents.

5. Procedures and formalities for purchasing and paying for documentary sets shall be carried out according to agreements between the parties, in compliance with international trade practices on letters of credit, and must be specifically provided for in internal regulations on other business activities of the bank.

6. The total balance of documentary sets purchased free of recourse under letters of credit shall be included in the total credit limit granted by the bank purchasing the documentary sets to the issuing bank or confirming bank if the letter of credit is confirmed, except in cases where the bank purchases documentary sets free of recourse under letters of credit issued by itself.

Article 53. Other Services Related to Letters of Credit

Banks shall provide customers with other services related to letters of credit in accordance with point e, Clause 1, Article 114 of the Law on Credit Institutions, in compliance with international trade practices regarding letters of credit, including:

1. Services provided for customers who are sellers exporting goods or services:

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

b) Examination, processing, and presentation of documentary sets;

c) Amendment and adjustment of demand drafts at the customer's request;

d) Payment of documentary sets;

đ) Cancellation of letters of credit upon request;

e) Assignment of letters of credit; amendment of letter of credit assignment; cancellation of letter of credit assignment;

g) Telegraphic charges;

h) Delivery of documentary sets;

i) Preparation of documentary sets according to letters of credit;

k) Draft examination;

l) Advisory services on letter of credit operations;

m) Refund of letters of credit with customer funds;

n) Assignment of documentary sets according to letters of credit;

o) Notification of acceptance of documentary sets;

ô) Other services in compliance with international trade practices regarding letters of credit.

2. Services provided for customers who are buyers importing goods or services:

a) Advisory services on letter of credit operations;

b) Guarantee of receipt of goods, endorsement of bills of lading, authorization to receive goods;

c) Telegraphic charges;

d) Delivery of documentary sets;

đ) Other services in compliance with international trade practices regarding letters of credit.

Chapter IV

IMPLEMENTATION

Article 54. Accounting Entries and Reporting Information

1. Banks shall make accounting entries for letter of credit transactions in accordance with current laws governing accounting systems.

2. Banks shall report on the implementation of letter of credit transactions in accordance with the reporting and statistical system regulations of the State Bank of Vietnam.

1. The Department of Economic Credit has the responsibility:

a) To monitor, compile, and examine the implementation of letter of credit transactions and other related business activities of banks for resident customers;

b) To be the focal point and coordinate with relevant units to handle issues arising from letter of credit transactions and other related business activities for resident customers.

2. The Department of Foreign Exchange Management has the responsibility:

a) To monitor, compile, and examine the implementation of letter of credit transactions and other related business activities of banks for non-resident customers;

b) To be the focal point and coordinate with relevant units to handle issues arising from letter of credit transactions and other related business activities for non-resident customers.

3. Banking Inspection and Supervision Authorities have the responsibility to be the focal point and coordinate with relevant units to conduct inspections, audits, and supervision of letter of credit transactions and other related business activities of banks and to handle violations that arise within their authority.

4. The Department of Finance and Accounting has the responsibility to guide banks in implementing accounting systems for transactions related to letter of credit operations and other related business activities in accordance with this Circular.

5. Branches of the State Bank of Vietnam in provinces and centrally-administered cities have the responsibility to supervise, inspect, and audit banks in their compliance with this Circular within their authority.

Chapter V

IMPLEMENTING PROVISIONS

Article 56. Transitional Provisions

1. Contracts, agreements, commitments, and other transactions related to letter of credit business concluded, agreed upon before the effective date of this Circular shall continue to be implemented and monitored until their expiration and the completion of the obligations of the parties involved. Any amendments, supplements, or extensions of contracts, agreements, commitments, and other transactions may only be carried out if the contents of such amendments, supplements, or extensions comply with the provisions of this Circular.

2. Banks that have been granted permission to conduct letter of credit business prior to the effective date of this Circular may continue to carry out letter of credit business and other related commercial activities without amending or supplementing their licenses.

Article 57. Effectiveness

The Director of the Office, the Head of the Payment Department, the Heads of relevant units under the State Bank of Vietnam, credit institutions, foreign bank branches, and other related organizations are responsible for implementing this Circular./.

The Director of the Office, Heads of the Department of Credit for Economic Sectors, Heads of the Department of Foreign Exchange Management, Heads of units under the State Bank of Vietnam, credit institutions, and foreign bank branches are responsible for organizing the implementation of this Circular.