In the foreign economic activity of any state, payment under interstate agreements occurs in the currency of payment. This definition and its role in trade transactions will be discussed in more detail in the article.
World settlement system
Before moving on to the issue of payment, we define the term “international payments”. They are an interconnected system in which payments are regulated by monetary claims and obligations arising from participating countries and their residents, represented by legal entities and individuals.
The world payment system includes payment for:
- export and import of goods;
- non-commercial services and operations, including the costs of cultural events, the administration of embassies, travel expenses, etc .;
- service work on credit operations, loans, etc.
Settlement Regulation
The regulatory framework for the procedure of settlements between countries is provided by both the national laws of the states participating in foreign economic operations and foreign trade contracts signed by payers of the recipient of funds. In addition, the theses of international unified rules and customs in the external economic environment are taken into account in the calculations.
Contracts for interstate contracts are usually held in hard currency of the most developed countries, since settlement participants usually do not have a single means of payment.
Calculations are impossible without the presence of two categories of materials:
- Commercial, they are also called trading. This group is represented by transport, warehouse and insurance documents: invoices, bills of lading, waybills, warehouse certificates, etc.
- In the financial (payment) group, documents are represented by promissory notes, drafts, checks, bonds, and other documents expressing a monetary claim.
Currencies of the price-payment may not coincide: for example, one financial unit may appear in an international contract, and payment may take place in another or even in commodity form.
Features
The currency of the price is the one in which the value of the goods is indicated. Choosing the optimal currency for fixing the price of the product, circumstances that are significant for settlements between countries are taken into account. In particular, we are talking about the conditions of interstate relations and international customs. Sometimes the transaction price appears in two or more currencies, or a standard financial basket is used to minimize financial risks.
An important factor in the currency effectiveness of the transaction is the correct choice of the currency price and the payment currency. This is explained by the variety of export and import contract prices, as well as the dependence on the inclusion of additional costs along the way of the goods from the supplier to the recipient.
Five main options are known for determining the price of a product:
- By firmly fixing the value at the stage of signing the contract - in this case, it remains unchanged during the implementation of the contract. This method is optimal when a downward trend in world prices is visible.
- When a transaction is concluded, determine the principle by which to set the price, based on the quotes of the relevant market at the time of delivery. And the clarification of the cost itself occurs during the execution of the contract. This option is used with the expected increase in market quotes.
- The price is clearly fixed at the stage of signing the contract, but can be changed in case of a jump in market value in relation to the contract value by more than 5 percent.
- A moving price can be set if cost components change, for example, when ordering equipment. Given the current high conjuncture, taking into account the interests of the buyer, restrictions are introduced (by establishing a general limit for price changes or extending its variation only to a part of expenses and a short period).
- In the mixed case, one part of the cost is fixed clearly, and the other can slide depending on the conditions.
Conditions
Special conditions determine the price and quotation, and in case of their inequality - payment with currency conversion. With unstable exchange rates, these conditions largely determine how effective the foreign trade transaction is.
By currency, prices mean a financial unit in which the value of the goods sold is specified. Here, each party to the transaction has its own interests: the exporter is interested in a currency with a steadily growing rate, the importer is more interested in an analogue, the rate of which tends to decrease.
In order to minimize financial risks, the currency of prices is usually one of the stable national currencies of developed countries. There is also the practice of expressing the price of goods in several forms.
The currency of payment is the unit by which the exporter and the importer settle down with each other. It is not necessarily equal to the currency of the price, especially often found in the calculations of developing countries.
Foreign trade turnover in developed countries is also characterized by settlements in the form of payments in the national currencies of these states, when they are freely convertible. If the monetary unit of the importing country does not have this property, then a reserve analogue is used. In the case of economic clearing, the payment currency coincides with that prescribed in the relevant agreement.
Translation Rules
When concluding a contract between settlement participants, it necessarily agrees and fixes the conditions under which the currency of the price will be converted into the currency of payment. This implies an indication in the contract:
- a recount date, usually equal to the day of payment or the previous day;
- type of course - current market rate, wire transfer rate or other;
- foreign exchange market, whose quotes are used in calculating quotes.
The depreciation of the price currency is fraught with losses for the exporter, who gets a smaller amount in the payment currency. The appreciation, on the contrary, hits the pocket of an importer who is forced to pay a large amount
Reservations
If the contract price is fixed not in the currency basket, but only in one national currency, there are reservations that prevent participants from the influence of financial risks. According to them, a proportional adjustment of the price of the contract is possible in case of an adverse change in the rate or a decrease in the purchasing power of certain types.
Accounting for export operations
In foreign economic activity, quite often there are cases when the currencies of the contract and payment do not coincide. And if suddenly the agreement does not indicate the above terms of recounting and reservations, banks are guided by the following rules:
- the official exchange rate of the national currency to foreign ones established by the head bank of the state on the day of payment;
- if one of the currencies of the Commonwealth of Independent States or the Baltic States is used, the conversion is carried out at the rate set by the Moscow Interbank Currency Exchange;
- the course indicated in the latest issue of the Financial Times, in all other cases.
When conditions are not specified in the contract and the above methods are used, the bank runs the risk of missing revenue. This threatens the company with penalties (0.3% of the amount of lost revenue). The maximum amount of interest is limited to the amount of revenue not received.
Customs payments
They are one of the most important components in determining the profitability and feasibility of concluding an import-export contract as a whole. Customs charges are:
- VAT;
- import and export duties;
- excise taxes;
- payments for storage of goods.
Payment is also taken upon the occurrence of customs formalities arising from the import and export of goods into the territory of the state. The amount is usually paid by the owner of the transported goods or a company with a brokerage license that provides such services. The currency of customs payments can be either the Russian ruble (in the case of the importation of goods into the territory of the Russian Federation) or a foreign currency quoted by the Central Bank. And they can be paid in the following forms:
- cashless - in the form of a payment order, customs cards, offsetting advance amounts, cash collateral;
- cash - in this case, the corresponding receipt order is issued.