Circular Camex 1-541: Single and Free Foreign Exchange Market. Export Advances and Pre-financing

"2005 - Year of Homage to Antonio Berni"
CENTRAL BANK OF THE ARGENTINE REPUBLIC
COMMUNICATION "A" 4443 22/11/2005
TO FINANCIAL ENTITIES:
Ref.: Circular
Camex 1 - 541
Single and Free Foreign Exchange Market.
Export Advances and Pre-financing.

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We address you to inform you that it has been decided, with effect from November 24, 2005, inclusive, to replace the norms made known by Communication "A" 4415 with the following:

1. Debt operations may be imported by the local foreign exchange market as customer advances and export pre-financing, provided the following conditions are met:

a. Documentation requirements regarding future shipments:

i. There is a contract, purchase order, or supply order from buyers of goods from abroad, documented according to the usages and customs of the activity, whose timely and proper fulfillment will allow servicing the new debt with shipments within the maximum periods established in this norm; or

ii. the value resulting from adding the total owed for advances and local and foreign pre-financing as of the date of contracting new imports, plus the new debt for the funds to be imported through the foreign exchange market, must not exceed 25% of the exports with completed shipments registered by the exporter in the last twelve calendar months prior. As total owed, the exporter must consider the pending cancellation balances registered by the banks designated for the monitoring of advances and pre-financing, and any debt for these concepts that for any circumstance does not yet have a designated bank.

The maximum debt percentage for the import of new operations will be raised to 50% in cases where all goods shipped in the last twelve months correspond to categories of goods included in shipment periods not less than 365 days. If the exporter registers exports of goods with different maximum periods for the shipment date, the debt limit will be calculated by weighting the exports of the last 12 months by the limits of 25% and 50%, as applicable to the shipment period applicable to the type of good. The formula applicable for the purposes of calculating the maximum debt in these cases is as follows:

LAP = XA + Xb * 0.25 * (1 - A/B)

Where:

LAP = limit value in US dollars of debt for export advances and pre-financing for exporters covered in point 1.a. ii.
XA = value exported in US dollars of products from subpoints b. and c. of point 2 in the twelve calendar months prior.
Xb = value exported in US dollars in the twelve calendar months prior.

In these cases, the financial entity must verify, based on the sworn statement presented by the exporter, the classification of the operation and the reasonableness of the timely and proper realization of future shipments to cancel the new import for export advances or pre-financing.

In the case of operations in currencies other than the US dollar, the prevailing swap rates at the close of the fifth business day prior to the contracting of the foreign exchange transaction must be used. A copy of the documentation used must be archived at the financial entity, available to this Central Bank.

b. Pending debts as of September 8, 2005, for export advances and pre-financing with non-residents and/or local financial entities, must be backed by contracts, purchase orders, or supply and shipment orders with pending collections to be applied to the cancellation of debts; or the level of debt must fall within the limits established in point 1.a. ii.

c. The exporter must not register delays in the execution of shipments according to the periods established in this norm as of the date of contracting the foreign exchange settlement.

d. From March 1, 2006, inclusive, in cases of fund imports for export pre-financing, there must not have been cancellations of local pre-financing without application of advances or foreign exchange collections from shipments, or constitutions of the deposit of point 6 of Communication "A" 4359, in the 60 calendar days prior, due to the exporter having opted to cancel obligations with foreign parties without the realization of future shipments.

2. New customer advances and export pre-financing must be cancelled with foreign exchange from export collections with a customs shipment completion date within the following periods, counted from the date of foreign exchange contracting for the settlement of foreign exchange in the foreign exchange market as advances or pre-financing:

a. 90 calendar days, when it concerns exports of goods that, according to the classification established in Resolution No. 120/2003 of the Secretariat of Industry, Commerce and Mining, were assigned a foreign exchange import and settlement period not greater than 60 calendar days.

b. 365 calendar days, in the case of exports of goods included in the annex of this document.

c. 540 calendar days, for exports of capital goods, technological goods, and the turnkey export regime included in Annex 19 of Decree 690/02 and complementary regulations.

d. 180 calendar days, for the rest of the goods.

The financial entities responsible for monitoring export advances and pre-financing may grant an additional period of 30 calendar days for the realization of the shipment, when there are causes unrelated to the exporter's will that justify delays in the realization of shipments, such as plant stoppages due to strikes, internal transport problems, lack of warehouses, or climatic disasters.

This period will be extended for the total period during which activities are suspended, when so ordered by pertinent state regulations.

The entity granting the additional period must record the reasons and documentation provided that justify its decision. Such documentation must be archived at the entity, available to this Central Bank.

3. Debts for export pre-financing in effect as of September 8, 2005, must be cancelled with foreign exchange from shipments with a shipment completion date prior to the shipments with whose collections the new imports for the same concept registered through the foreign exchange market from that date are cancelled, except if the granting of the financed debts is explicitly tied to shipments with a specific destination. In the latter case, as in the case of export advances, the application of shipment collections to the cancellation of debts must be assigned by first cancelling the debts in effect as of September 8, 2005, granted to finance shipments with that specific destination.

It is understood that a debt for pre-financing is tied to shipments with a specific destination when the pre-financing granting contract explicitly establishes that it will be cancelled with exports to a market, or to a client, or to the export of a specific product.

In this sense, the ordering in the realization of shipments is as follows:

a. Shipments affected to cancel pending debts as of September 8, 2005, for export pre-financing that do not have a specific destination, must have a customs shipment completion date prior to the date of shipments affected to cancel new pre-financing that also do not have a specific destination.

b. In the case where the exporter ships goods with different maturity periods to realize the shipment, the ordering exposed in the preceding point must be verified for shipments subject to the same period.

c. When pending debts as of September 8, 2005, for export pre-financing have a specific destination, no ordering of shipment realization is established in relation to new pre-financing that is not related to that specific destination.

d. If the new export pre-financing is related to the same specific destination as the debts in effect as of September 8, 2005, the order established in point a. of the preceding point applies.

4. The entity designated for the monitoring of the advance or pre-financing must report to the Central Bank through the corresponding information regime, the status of each operation regarding compliance with the periods to realize the shipment permit, according to the purchase orders or contracts backing such debt.

In the case where what is provided in point 1.a.ii applies, the exporter will indicate by sworn statement to the financial entity the types of goods to be exported by applicable periods. If the exporter carries out exports of goods subject to different shipment periods, the ratio of the amounts owed affected to shipments with longer periods relative to the total owed for export advances and pre-financing, calculated by period, cannot exceed the ratio in the total shipments of the last twelve calendar months of that group of goods in the total exported.

5. In cases where it is necessary to modify the allocation of export advances or pre-financing to the type of exported good, implying such a change a modification in the maximum period for the shipment, the exporter must necessarily demonstrate to the entity designated for the monitoring of the advance or pre-financing, the firm new purchase order that allows modifying the maximum period for the realization of the shipment, which will always be counted from the date of foreign exchange contracting for the import of the foreign exchange.

6. In cases of using foreign credit lines for export pre-financing that meet the following conditions:

i. That they have been firmly granted for a term of no less than 3 years by International Organizations, or banks from abroad that have representatives in the country accredited before the Central Bank,

ii. the acceleration causes provided for in the contract do not include the creditor's faculty to revoke and/or accelerate the loan, without there being a breach in relation to commitments, manifestations, or obligations on the part of the debtor, as established in the respective contract,

iii. its instrumentation provides for the use of a specific account of the exporter abroad, determined in the line granting contract, through which part of the export collections must be channeled to demonstrate to the creditor the fulfillment of the export activity,

iv. the entity designated for the monitoring of the pre-financing has a sworn statement from the exporter and the local representative of the foreign creditor entity, in which it is expressly manifested that the medium or long-term pre-financing framework contract meets all the exposed requirements.

In these cases, the following will additionally apply:

a. To the extent that the shipments whose collections are credited in the account indicated in point iii. of the preceding point have been realized within the periods established in this Communication, the requirement regarding shipment periods established in this norm will be considered satisfied.

b. When the exporter makes such imputation, and the import and settlement of foreign exchange for export collections corresponding to those shipments occurs, these funds will be considered for the purposes of monitoring the compliance periods of shipments of advances and pre-financing of exports, as if the import corresponded to a new disbursement of pre-financing within the framework of the line granted, as the application of such collections to the cancellation of the pre-financing owed abroad and the disbursement by the creditor of an equivalent amount of a new pre-financing would have been considered.

7. The exporter must, within 45 calendar days of the shipment completion date:

a. apply the collections to the total or partial cancellation of the debt, or

b. inform the entity designated for the monitoring of the export advance or pre-financing, the future allocation of the foreign exchange of that shipment to the cancellation of the pre-financing. In the latter case, when the collection has been made and the obligation for pre-financing cancelled, it will correspond that the entity proceeds to the effective application of the funds to cancel the obligation with foreign parties in total or in part.

If the exporter did not comply with what is established in the preceding subpoints, for the purposes of this norm, it will be considered that the shipment has not been realized, until the exporter regularizes the information with the bank monitoring the operation.

8. If shipments are not made within the maximum periods established by type of good, respecting the established ordering, the exporter cannot settle new operations for the concepts of advances and pre-financing in the local foreign exchange market, until they regularize their situation. This regularization is materialized with:

a. the realization of pending shipments with expired periods, or

b. the constitution of the deposit of point 6 of Communication "A" 4359, if opting to cancel obligations with foreign parties by any modality other than the application of foreign exchange from future shipments, or

c. the cancellation of the debt with the local financial entity by any modality, without the application of advances or export collections.

In these last two cases, from March 1, 2006, compliance with the minimum period established in point 1.d. must be given to be able to import new funds for export pre-financing.

9. Exporters can apply shipments to the cancellations of export advances and pre-financing, regardless of whether they correspond to the orders or purchase contracts used to back the debt. In all cases, the maximum period for the realization of the shipment is given by the type of product shipped.

10. In cases of export pre-financing cancelled directly with the application of foreign exchange from customer advances, the periods and norms for the realization of the shipment will be governed by those applicable to the export pre-financing being cancelled. In these cases, non-currency movement tickets will be issued at the entity designated for the monitoring of the pre-financing, for the import of the foreign exchange by the export advance and the cancellation of the export pre-financing.

11. Shipment dates of goods on consignment will be considered for the fulfillment of the periods established in these norms, with the same effects as definitive shipments.

12. The periods established for the realization of shipments are counted from the date of foreign exchange contracting for the settlement of foreign exchange as export advances or pre-financing. In the case of export pre-financing, this period does not affect the period of the financing granted, which may extend to the maturity period for the import and settlement of foreign exchange of the shipped good, according to the norms in effect in the matter.

13. Those operations with foreign parties that are not cancelled with the application of export collections will be governed for their cancellation by the norms in effect for the cancellation of financial loans. In these cases, what is provided in point 11 of Communication "A" 4359 for any modality of cancellation other than the application of export collections to the cancellation of debt applies to operations with foreign parties.

14. The financial entities responsible for monitoring export advances and pre-financing from abroad according to the norms made known by Communication "A" 3493, Title II (Communication "A" 3609), and the financial entities creditors for local pre-financing in foreign currency, will grant certifications of compliance with the requirements established in point 1.b., clarifying in the case of export pre-financing, the existence or not of specific allocations to future shipments of the financing granted.

15. Operations that do not meet the requirements established in this norm must have the prior approval of this Central Bank before the settlement of foreign exchange through the foreign exchange market, to be able to be imported as export advances or pre-financing.

16. Imports into correspondent accounts of financial entities for export pre-financing that cannot meet the conditions established in this norm, must be retransferred to the foreign creditor or imported into the country as financial loans within 30 calendar days of the date of import to the correspondent account. In the case of advances, the funds may remain in the correspondent account and be settled as export collections after the shipment.

17. From November 24, 2005, inclusive, dispose to incorporate into the corresponding information regime of Title II of Communication "A" 3493:

a. by the entity granting the loan, the pending debts as of November 23, 2005, and contracting of foreign exchange settlements for new export pre-financing operations granted by local entities, regardless of the source of financing;

b. the monitoring of export collections included in point 6 of this document.

18. The entity through which the settlement of export advances and pre-financing from abroad is processed will be the entity designated for its monitoring under the terms of what is provided in Title II of Communication "A" 3493, who at the request of the exporter within 2 business days of the foreign exchange settlement contracting, may transfer this responsibility to another financial entity that accepts the monitoring of the operation.

19. Separately, the modifications that banks designated for the monitoring of advances and pre-financing must apply according to what is provided in Title II of Communication "A" 3493 and this norm will be made known.

We salute you respectfully.
CENTRAL BANK OF THE ARGENTINE REPUBLIC
Jorge L. Rodríguez Raúl O. Planes
Main Manager of
Foreign Exchange and Changes
General Manager of
Operations

ANNEX

Common Nomenclature of MERCOSUR (N.C.M.) of goods included in point 2. b. of this norm:
Chapter 8: Edible fruits and nuts; peels of citrus fruit or melons.
Chapter 9: Coffee, tea, mate, and spices.
10.06: Rice.
15.09: Olive oils and their fractions.
20.05: Other prepared or preserved vegetables, not frozen.
20.09: Fruit juices or other fruit juices (including grape must) or vegetable juices (even wild) unfermented and without addition of alcohol, even with addition of sugar or other sweetener.
22.04: Wine of fresh grapes, even fortified; grape musts.
24.01: Tobacco in leaf or unmanufactured, tobacco refuse.
33.01: Essential oils.
52.01: Cotton, not carded or combed.
52.02.91.00: Linters.
52.02.99.00: Cotton waste, other.
52.03.00.00: Cotton, carded or combed.
B.C.R.A.
Annex to
Comm. "A"