Currency and financial conditions of foreign trade transactions. Foreign exchange conditions of foreign trade contracts. Check form of payments
The monetary and financial terms of a foreign trade contract, in addition to the forms of payment and terms of payment, must necessarily include the principles of choosing the currency of the price and the currency of payment, means of payment, as well as a system of guarantees of insurance against the risk of currency losses, etc. (Figure 1.1)
One of the specific features of international trade is the absence of a means of payment generally accepted for all countries. National currency is not always legal tender in other states.
Figure: 1.1.
The author believes that the development of national payment system in the Russian Federation is especially relevant today, when all world trade is conducted in US dollars. It's no secret that after the September 11, 2001 terrorist attacks, the CIA and the US Treasury Department gained access to SWIFT financial information in order to track possible terrorist financial transactions (despite the fact that SWIFT's "homeland" is Belgium). By decrypting SWIFT traffic, they receive information about dollar interbank transactions on a global scale. financial system... The possibility of financial espionage by the United States could be minimized by the creation and operation of an alternative platform - a national payment system, to which the US competent authorities would not have access. In September 2014, a proposal to create a Russian analogue of SWIFT was put forward by the Russian Union of Industrialists and Entrepreneurs (RUIE) and the Rossiya Banking Association, when MEPs proposed to disconnect the Russian Federation from the system as part of the next sanctions package. And just three months later, the Central Bank of the Russian Federation launched an analogue of the Western SWIFT system in test mode. According to experts, new service will allow commercial banks exchange payment orders without transferring information outside the country. Thus, the Bank of Russia assumed the function of transferring interbank messages, including currency.
As you know, one of the most important conditions for the implementation of an international trade and financial transaction is the definition of the type of payment, which is determined by the ratio of the moment of payment for the goods to the time of delivery:
- 1) settlements in cash;
- 2) payments with an advance;
- 3) settlements with payment by installments (on credit).
Cash payments are understood as direct payment for the goods, which is made within a period of time from the readiness of the goods for dispatch to the buyer's address until the transfer of ownership of it to the buyer.
The advance payment is a direct payment by the buyer to the seller of some amount before the goods are manufactured against payments due under the contract. Most often, the size of the advance payment ranges from 5 to 15% of the contract value. In international trade practice, most often 50-100% prepayment is provided for the goods that are supplied under the contract, or its batch. In Russia, this type of payment is most often used for the supply of food and agricultural goods to Russia from abroad and the CIS countries, as well as in the presence of affiliation of the parties under a foreign trade contract.
Payments on credit in accordance with the prevailing norms in foreign trade are used mainly in the sale of machinery and equipment. When selling goods on credit, payments have approximately the following structure: advance payment is 5 - 10% of the transaction amount (maximum - 1/3 of the transaction); the buyer pays in cash 10-15% of the price of the goods under the contract; the rest of the amount under the contract is paid on credit minus the advance and cash payment, that is, 75-80% of the transaction value.
In addition to a bank guarantee, the following can also act as a guarantee of payment for international settlements:
- - an aval is a surety, a guarantee under which the avalist (the guarantor) takes responsibility for the payment of the bill to its owner;
- - acceptance is a form of non-cash payments between economic entities for shipped inventory items, work performed and services rendered. Acceptance is an agreement to pay or guarantee payment of cash, commodity or settlement documents. Acceptance can be applied when paying for services and goods in domestic and international trade.
The break-even point of a foreign trade operation largely depends on what currency, at what time, in what place and in what form the exporter will receive (the importer will pay), i.e. which of the terms of the contract will facilitate the timely receipt of payment in the amount agreed by the parties. The totality of the listed positions and elements is united by the concept of monetary and financial terms of the contract. Thus, the monetary and financial terms of the contract include: forms of payment; currency of price and payment; foreign exchange risk insurance system (safeguards); guarantees against non-payment and unjustified delay.
Payment form. The choice of specific terms of settlement between the exporter and the importer is achieved in the process of agreement and taking into account the provision of guarantees for each of the parties. For example, for exporters (all other things being equal), the most advantageous form of payment is, first of all, an advance transfer, then a letter of credit, in which payment for the goods arrives before or at the time of its shipment to the buyer's address. The letter of credit gives the exporter an additional guarantee in the form of a corresponding bank commitment. At the same time, such forms of settlements as collection and transfer (subsequent) are much easier to implement in terms of the execution technique both for the bank's client and for the bank itself, however, they are less profitable for the exporter. Accordingly, for the importer, the subsequent transfer and collection with preliminary acceptance is more profitable than the letter of credit, because payment only follows after receiving the goods.
To ensure the most favorable currency conditions of the contract for any of the partners and, above all, the correct choice of the currency of the price and payment, it is necessary to carefully monitor the status exchange rates both in the international and in the domestic foreign exchange markets of the counterparty countries, predicting the direction of their changes.
Determination of the price currency. The exporter, selling products, is interested in obtaining a hard, stable currency. Therefore, for fixing the price in the contract, any of the importer's or third country's hard currency can be selected, which is used in international settlements. The price currency can be set on the basis of interstate and trade agreements concluded between the states of the counterparties. In addition, according to the rules and customs prevailing in international trade practice, the price currency can be set depending on the methods of selling specific goods on the world market (through international exchanges or auctions, etc.). For example, for such commodities as oil, rubber, grain, etc., price quotations are published in stock exchange bulletins in US dollars. Accordingly, in the contract, export prices must be fixed in the same currency.
It should be remembered that the currency of the price and the currency of payment are different conditions of the contract. In foreign trade agreements, the price can be fixed in one currency, and the payment in a completely different one. In such cases, at the time of making a payment, its amount is calculated based on the exchange rate of the price in relation to the exchange rate of the payment currency.
Currency loss risk insurance system. The principle of nominalism is generally recognized in the practice of concluding and executing currency terms of foreign trade contracts. According to this principle, if the currencies of the price and the payment under the terms of the contract do not match, the amount of payment is calculated at the exchange rate of the price currency at the time of payment. In this case, one of the parties may incur losses arising from fluctuations in exchange rates. When the exchange rate of the price depreciates in relation to the exchange rate of the payment currency, the exporter remains at a loss, and when the price rises, the importer, respectively.
The desire to avoid financial losses in the process of converting the exchange rate forces partners, when coordinating the currency of the price and the currency of payment, not only to take into account the conjuncture of the commodity market, the nature of the goods and trade customs, but also to provide for specific measures to prevent possible losses. Otherwise, it may turn out that the price indicated in the contract will be lower than the actual costs incurred for manufacturing the product. International practice knows cases when in some years fluctuations in exchange rates reached 20-30%. Foreign exchange losses most often occur during the execution of export contracts designed for long delivery periods, for example, machinery and equipment, or when selling on credit terms. Therefore, one of the ways to neutralize currency risks is to reduce the time between the conclusion of the transaction and the payment. Protection clauses are also among the special measures.
A protective clause is understood as a special condition of a foreign trade agreement providing for a change in the contract price in the event of a change in the exchange rate of the payment.
Safeguard clauses are built on the principle of linking the size of payments with changes in the currency and commodity markets. Protective clauses are especially frequent when concluding contracts with partners from developing countries, whose currency is inconvertible. For Belarusian exporters, however, contracts with partners from Western countries pose no less risk if their national currency is used in foreign trade transactions, since this greatly increases the risks of the Belarusian side.
The practice of international trade distinguishes among the protective clauses: the golden clause; currency clause; multi-currency clause; clause on rolling prices.
The gold clause links the amount of the payment to the change in the gold content of the payment currency. However, due to the fact that currently none of the current currencies has a gold content, the gold clause is not used in practice.
Foreign exchange clauses are the linking of the amount of the payment to the change in the exchange rate. For example, the currency of the price and payment is fixed in US dollars, and the price and amount of the payment are made dependent on the yen rate. Or the price will be fixed in a more stable currency, and the subsequent payment - in a weaker currency. Such clauses are quite often used by Belarusian exporters.
To increase the efficiency of currency clauses, a multi-currency clause is applied, which provides for the recalculation of the payment amount in the event of a change in the arithmetic average rate of a set of several most stable currencies in relation to the payment currency. However, since this form of clause is cumbersome, it has practically been replaced by a clause to change the amount of payment depending on fluctuations in the euro and SDR (SDR) exchange rates.
In addition to the above, foreign trade contracts may use clauses on moving prices (escalator), which provide for fixing a conditional price in the contract with subsequent revision depending on changes in pricing factors.
The currency terms of the contract include:
- a) determination of the currency of the price and the method of determining the price;
- b) determination of the payment currency;
- c) setting the conversion rate in case of mismatch between the currency of the price and the currency of payment, determining the type of protective clauses.
The following factors influence the choice of price currency:
conditions for the sale of goods practiced in the international market;
conditions accepted for trading in exchange commodities;
the state of the conjuncture in a specific commodity market;
intergovernmental agreements;
legislation of a number of countries;
relationships between specific enterprises.
The payment currency may differ from the price currency. Then the sides use currency clauses. The main purpose of a currency clause is to avoid losses from fluctuations in exchange rates.
Types of safeguards:
1. Golden clause
It is based on fixing the gold content of the payment currency on the date of the conclusion of the contract and recalculating the payment amount in proportion to the change in gold content on the date of execution.
There were direct and indirect gold clauses.
- - with a direct clause, the amount of the obligation was equal to the weight of gold;
- - for indirect - the amount of the obligation, expressed in currency, was recalculated in proportion to the change in the gold content of this currency (usually the dollar).
- 2. Currency clause
Foreign exchange clause - a clause in an international contract stipulating the revision of the payment amount in proportion to the change in the exchange rate of the clause in order to insure foreign exchange or credit risk.
Classification of currency clauses:
Direct currency clause - the currency of the price and the currency of payment are the same, but the rate of this currency is fixed to a more stable one at the time of signing the contract. If the exchange rate changes by the time of payment, then the contract amount will also change.
Indirect currency clause - the price is fixed in a stable currency, and the payment is in another currency, usually the national one. The contract amount changes if the exchange rate between the price currency and the payment currency changes.
Single currency reservations - the contract currency rate is related to the rate of another, more stable currency. When the exchange rate of the price changes, the amount of the payment changes accordingly.
Multi-currency clause - involves the recalculation of the price and amount in the event of a change in the arithmetic mean rate of several pre-agreed currencies in relation to the currency of the price or payment.
Currency baskets can be the arithmetic mean of the rates of several currencies with varying degrees of stability, as well as the SDR, which is quoted daily by the International Monetary Fund.
The multi-currency clause hasadvantages before single currency:
- 1. Reduces the risk of a sharp change in the payment amount;
- 2.the most consistent with the interests of the counterparties of the transaction .
However, to disadvantages multi-currency clauses include:
- 1) the complexity of the wording of the clause in the contract, depending on the method of calculating exchange rate losses, the inaccuracy of which leads to different interpretation by the parties of the conditions of the clause;
- 2) the difficulty of choosing a base currency basket.
Unilateral currency clauses - act in the interests of one of the parties: the exporter - in case of depreciation of the payment currency, or the importer - in the event of an increase in the rate of the payment currency.
Bilateral currency clauses - the recalculation of the payment amounts is carried out both with an increase and a decrease in the exchange rate.
3. Sliding price clause
Sliding price clause - provides for the possibility of change when selling goods on credit. As a rule, a reservation comes into force if market price grows by more than 2% compared to the agreed price.
- 4. The clause on the possibility of exchange of goods (barter transaction) in the contract stipulates that for the goods sold, the exporter purchases for the entire amount of the contract or for a part of it any other goods by agreement.
- 5. Index clause - the change in the price of goods and the amount of payment occurs depending on the movement of the agreed index of prices for raw materials, imported goods used to manufacture products for export.
Item price currency - is the currency in which the price of the goods is expressed in
international contract. Since the ruble is not freely convertible
foreign currency (hard currency), therefore foreign trade operations with other state
donations are carried out in FCC countries with developed market economies,
as well as in special international and regional monetary units
tsakh. In theory, any hard currency can be the currency of the price of a product. However,
interests of exporters and importers in the formation of currency conditions
are always opposite.
Exporters should strive to fix the prices of goods in hard currency, the exchange rate
which is stable or has a tendency to increase. This will provide semi-
the largest amount of the payment currency. Practically during export, the price of the goods is fixed in one of the hard currency. These are the currencies in which the
xia the vast majority of international trade transactions: the dollar
USA, German mark, British pound sterling, French franc,
japanese yen and Swiss franc. In trade in finished goods, foreign currency
that price is subject to agreement between the seller and the buyer;
in the trade of raw materials and food, the standard conditions are applied, including
the procedure for determining prices, payments and settlement documentation.
The opposite situation occurs when importing. In the interests of importers, one should strive to fix the prices of purchased goods in currencies that have
with a tendency towards depreciation. The meaning of this boils down to the fact that by the time
nor settlements with the seller, the exchange rate will fall and the importer will be able to
spend less discounted money.
Payment currency for goods - this is the currency in which the payment takes place
goods under a foreign trade contract. Basically, payments are made in hard currency.
At the same time, in trade with countries with developed market economies, both
as a rule, these are the national currencies of these countries (Danish kroner in trade with
Denmark, Belgian francs - with Belgium, etc.). In trade with developing
countries - either the US dollar or other hard currency, depending on whether
in the banks of which countries with developed market economies and in which currency
storage of export earnings by developing countries
Conversion of price currency into payment currency is carried out when the payment currency does not match the price currency. Especially often inconsistent
a fall occurs when conducting clearing operations, when
prices in traditional currencies (for example, in the trading of exchange commodities -
rami). Price currency and payment currency do not match also when fixing
currencies prices in special international and regional currency
units - ECU, SDR, EURO. In these cases, the conversion rate is determined
currency prices into payment currency. In particular, the exchange rate of which money market is indicated (exporter, importer or third country); course
what kind of means of payment (telegraphic or postal order) will be
children used for payment; seller, buyer or average rate between
them. Considering the opposing interests of the exporter and importer, in
the practice of international settlements is most often used a compromise
a smart option. The market of the country of the payment currency is taken as the conversion market, the exchange rate for the day preceding
on the day of payment, the rate of payment is taken as the
literal translation and, finally, the average rate between the
the seller and the buyer. For example, when selling goods to a French company
me and when fixing the price in US dollars with payment in French
francs, the contract must provide that the transfer of dollars in
francs will be produced at the average rate between the seller's and
the buyer of the wire transfer in the Paris currency market per day,
marching Day of Payment.
Protective currency clauses used against the risk of foreign exchange
losses in the event of a change in the exchange rate. Due to the instability of exchange rates,
most trading partners face the problem of currency risk. Holy
foreign exchange losses associated with this, and for the counterparty, benefits may arise with a fall in the exchange rate, as well as with a decrease in its purchasing power.
So, when exporting, a fall in the exchange rate of payment leads to foreign exchange
losses on those contracts that were concluded before its depreciation.
When exchanging foreign exchange earnings for the monetary units of their country of export
ter will receive a lower amount of funds in comparison with the stipulated amount
at the time of the transaction.
As for the decrease in the purchasing power of the currency, the losses are expressed
are in the fact that as a result of an increase in prices for the purchase of the same amount of goods
you will have to spend more money.
Most exposed to foreign exchange risk export and import
finished products, especially machinery and equipment (due to long
terms of manufacture and delivery, credit sales).
Exporters and importers of raw materials and foodstuffs are less dependent on foreign exchange risks, because they are delivered on a cash basis
calculating and for short periods of time. These risks warn-
it is easier, because most forecasts of exchange rate movements are
it takes up to one year on average and this is easily taken into account in contracts.
For long-term contracts, the problem of preventing currency
risks are complicated because it is required to correctly assess the direction of movement
exchange rate.
To minimize currency risks in contracts, it is necessary to provide
matting protective clauses. The meaning of currency clauses is
the fact that if the currency of the price of the goods depreciates, the exporter receives
the number of units of the payment currency in accordance with the exchange rate indicated
in the currency clause.
Distinguish between bilateral and unilateral reservations. With bilateral
reservations in the event of a change in the exchange rate of the payment, losses and benefits of one
the same applies to both the exporter and the importer. Unilateral
clauses protect the interests of one of the parties.
The most common in export contracts with developed countries
we and the developing countries received the following currency clauses
1. Currency clause based on the current exchange rate. It can be straight and
indirect. The direct form is used when the price currency and currency
that payments are the same, but the price of the goods and the amount of payment are
from the exchange rate of another currency, more stable (for example, the Swiss
franc). More often, a currency clause based on the current exchange rate is applied in
military form, when the price of a commodity is expressed in one currency, the rate
which is stable or has a tendency to increase (for example, German stamps), and the payment is in another, national currency of the buyer (for example
u.S. dollar).
2. Currency clauses based on the international currency unit SDR or the regional European unit ECU (EURO)... The advantages of SDRs and ECUs (EURO) are that they are quoted and published on a daily basis.
are the International Monetary Fund and European banks.
If the payment is made in cash and if currencies with a stable exchange rate are used in the contract, then the currency clauses are not required to include
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Monetary and financial conditions are the procedure for determining currency and payment, settlement system, currency clauses.
Price currency- the currency used to express the price in the contract. Typically, the price currency is five developed country currencies (US dollar, British pound sterling, euro, Swiss franc, Japanese yen). It should be noted that for most exchange-traded raw materials and food products, standard standard conditions are applied, including the procedure for determining prices, payments, settlement documentation, and when trading in machinery, equipment, finished goods, the price currency is determined on the basis of an agreement between the parties. Exporters are interested in concluding deals with "hard" currency prices, which protects them from foreign exchange losses; when imported with "soft" currency, its rate decreases. There can be no unequivocal recommendations on this issue, because, firstly, exchange rates are constantly changing, and rather abruptly, and secondly, the price currency is a subject of mutual agreement.
Payment currencyis the currency used to pay for goods, services. When making settlements in freely convertible currency, in trade and economic relations with developed countries, as a rule, the national currencies of these countries act. The currencies of developed capitalist countries are also used in trade between Belarus and developing countries and the CIS countries.
Conversion of currencies.If the payment currency and the currency do not match, the prices determine the conversion rate, the parties agree on the conversion date, conversion rate, and type of payment document. When agreeing on the date of recalculation, various options may be considered:
Chapter 14. Monetary and financial relations and international settlements in foreign economic activity
On the day of payment;
On the day preceding the day of payment;
Evening of the previous working day.
Currency Conversion Application seller rateprofitable for the exporter, as it is per unit foreign currency will receive more of the national currency of the buyer's country, and, therefore, such a rate is the least beneficial for the importer.
For this reason, the average exchange rate between the rates of the seller and the buyer is often used for conversion.
As payment documentscan be telegraphic transfer, postal order, rate of drafts.
Safeguard clausesare aimed at eliminating or limiting foreign exchange risk in foreign economic transactions with countries, all settlements with which are carried out in hard currency. Ways to limit or eliminate risk include the following:
Fixing the price of an export product in a “hard” currency with subsequent payment in a “softer” one;
Multi-currency clause. The contract fixes the exchange rate, at which the price of the commodity-subject of the transaction remains unchanged, and in the event of a change in the rate, the price is adjusted by a correction factor corresponding to the change in the rate. If we are talking about one currency, then this is a unilateral clause, and if the exchange rate is indicated for several currencies, then this is a multi-currency clause;
The clause on "rolling" prices provides for the fixing of the starting price in the contract, which can be revised by the time of calculation depending on changes in pricing factors. When providing a commercial loan, exporters, seeking to preserve the purchasing power of the currency of the contract, in an inflationary environment, insist on the inclusion of a price slip clause in the contract;
Index clause. As a price revision clause, it provides that the price of the goods and the amount of payment change in accordance with the change at the time of payment of a certain price index (for example, wholesale prices) specified in the contract compared to the time of the transaction;
Commodity exchange and compensation transactions are also an effective method of limiting currency risks;
conclusion of forward transactions by the bank at the request of the applicant. Their essence consists in the purchase by the bank at the request of the applicant on the stock exchange at the current exchange rate of the obligation to pay the currency of interest to the applicant by the due date. The risk of currency depreciation, as well as the potential profit from
14.3. Lending
in foreign economic activity
the increase in the exchange rate of the purchased currency in relation to other currencies, the seller receives such an obligation.
When performing a forward transaction, the bank or firm buys the required currency at the current exchange rate (spot rate) and simultaneously sells at the forward rate that differs from the spot rate. If the spot rate is lower than the forward rate, then this difference is called prize,and if higher - discount.
Forward trades are the most commonly used method hedging,the purpose of which is to carry out foreign exchange transactions until the moment of a possible unfavorable change in the exchange rate.
Along with forward transactions, hedging methods include options transactions, futures transactions with foreign currency.
Currency optionis a privilege acquired upon payment of a commission by one person (bank, company) in order to provide another person with the right to buy or sell currency at an agreed rate on any day within a certain period or to refuse a transaction without compensation for losses. The option gives its buyer the right to choose between the execution of the transaction or the refusal to fulfill the obligations upon the occurrence of the appropriate conditions, i.e. make calculations at the current rate.
The use of options is most justified in conditions of significant changes in exchange rates, because this operation is quite expensive (up to 5% of the transaction value).
