Letter of Credit Forum

Balance of payments.

As the rest of the board is ‘slow’ I have placed this thread also on the ‘education’ page on the assumption it will last as a current post on there for longer. For now, if you are able to answer the following questions, could you do so here? Please head your message/reply with the name of the country you are located in/talking about and then your answers as per the numbers below.

I will keep in brief: when payment comes in to an exporter (with or without a credit) are they obligated in your country to complete any paperwork to indicate why they have received the money? For example, in South Africa, a recipient of proceeds has to complete a “Balance of Payment” (BoP) form where they indicate if the proceeds are for export of goods, or of services, or from cross-trading/merchanting (or divorce settlement or a deceased estate etc). If your client must complete a given form – does it ask them to indicate the nature of the export price by way of a customs valuation symbol – I am specifically looking for the use of the two customs valuation points FOB and C&F (or CIF). Lastly, when your exporter actually exports, do they have to pre-declare through the banking system how much they will receive (intend to receive) and if so, do they again use a customs valuation term? (The declaration may be via either a branch or if not – and you have the knowledge – through the Central or Reserve Bank directly or via customs). Again, for example, a South African exporter must declare two values, both a transaction value (what are they being paid) and the customs statistical value (for Balance of Payment reporting) using the customs FOB value. This is done through banks and simultaneously for cross-checking through customs, although the system is to be replaced by a customs-driven process alone in the near future.

So, in your country;

1. Does the exporter complete a declaration when they receive foreign funds?
2. If “Yes” to 1, do they indicate a ‘trade term’ on the declaration?
3. At the moment of export, does the exporter pre-declare an intention to receive funds?
4. If “yes” to 3, do they indicate a ‘trade term’ on the declaration?

The reason I ask is that I believe the use of the customs valuation points FOB and C&F/CIF is central to a country’s balance of payment reporting and such valuations are normally drawn from customs statistics.  A customs invoice (the commercial invoice) uses these terms for duty and customs statistical purposes (along with ‘ex works” and “FAS” for bulk cargoes”).

From a balance of payment point of view, a central bank would use the authorised dealers i.e. the banks, to accumulate parallel statistics to verify the customs figure or would use the banks figures alone if the customs stats were not viable (banking always being more accurate that customs in respect of monetary activity).

I believe that a commercial invoice will therefore always have an FOB or C&F/CIF value detailed on it. I think this was true of much of the world before the 1920’s and is almost now exclusively true today.

I further believe that it is these symbols that the credit should be concerning itself with and NOT the commercial terms used by sellers and buyers. Balance of Payments is far more bank-orientated that the contractual details the seller and buyer, two parties with whom the bank have no legal connection, have entered into – would you agree?

Please, all of your input will help me gather information in this regard.

Please title your reply with your country and in the body, begin with items 1-4 and add any comments you may want to make after the four replies. Even if your reply is “1. No, 2 N/A, 3 No and 4 N/A”, it will STILL help me, so don’t think it isn’t useful. And even if you are replying for a country someone else has already replied on – it will ALL help me.

I thank you in advance and no, there is no cash prize for the best answers...

cheers

phill doran

"...in armour bright, the merchant men..."