Circular External Collections and Payments - COPEX 1 - Countertrade Operations

CENTRAL BANK OF THE ARGENTINE REPUBLIC

COMMUNICATION "A" 825 30/12/85

TO FINANCIAL INSTITUTIONS AUTHORIZED TO OPERATE IN FOREIGN EXCHANGE AND EXCHANGE BROKERS:
EXCHANGE RES:

Ref.: Circular EXTERNAL COLLECTIONS AND PAYMENTS - COPEX-1-90. Countertrade operations. compensated.

We address you with reference to the operations of the heading, authorized by Decree No. 176/85, whose regulations were issued by Resolution No. 551/85 of the Ministry of Economy, provisions of which copies are attached.

On the matter, the Central Bank has resolved to establish the following foreign exchange and financial rules applicable to exports and imports of goods and services included in the countertrade operations approved by the Secretariat of Foreign Trade, comprised in the regime of the aforementioned Decree.

1. Exchange of products of equal economic classification (capital goods, durable and semi-durable goods, other products)

a) The foreign buyer must open an irrevocable and confirmed letter of credit, payable or to be offset within a maximum term of 180 days from the date of shipment, documenting the payment of the Argentine export of the respective goods or services, for the corresponding amount, including a clause according to which that amount must be allocated to cover the value - within the established maximum period of 180 days - of letters of credit or collections - with similar offset clauses - covering the Argentine import of the intended products. The offset shall be made by processing the corresponding foreign exchange operations, without transfer of foreign currency to and from abroad. In the event that the Argentine import is not made or is made for a lesser amount, the amount of the letter of credit corresponding to the Argentine export, or the difference, as applicable, must be settled at its maturity.

b) If the import is made prior to the export, the local buyer must open an irrevocable letter of credit, or use the collections system, payable or to be offset within a maximum term of 180 days from the date of shipment, documenting the payment of the Argentine import of the respective goods, for the corresponding amount, including a clause according to which that amount must be allocated to cover the value - within the established maximum period of 180 days - of irrevocable letters of credit - with similar offset clauses - covering the Argentine export of the intended goods or services. The offset shall be made by processing the corresponding foreign exchange operations, without transfer of foreign currency to and from abroad. In the event that the export is not made, or is made for a lesser amount, the payment corresponding to the import or to the difference, as applicable, shall be made no earlier than the terms established by the general rules in force at the time of opening of the respective letter of credit.

c) The payment or offset instruments must specify the following data related to the respective products: unit of measure, unit prices and currency. Likewise, when applicable, they shall contain a clear statement on the services to be exported.

d) All foreign exchange operations related to the exports and imports that make up the authorized countertrade operation shall be processed by the same local bank. If it is essential to complete the exchange, two local entities may participate, in which case both shall exercise control over all operations keeping the special records referred to in subsection f) of this point and the bank that processes the exports shall be responsible for reporting to the Central Bank the lack of offset or the inflow of the corresponding foreign currency through Form 1519, while the one involved in the import shall report any eventual non-compliances that occur, processing the usual information.

The FOB values shall be offset, while payments for consular expenses, freight and insurance shall conform to the general provisions in force. Freight may be offset provided that the transport to be carried out by Argentine means and payable in the country in australes represents an amount not less than 50% of the value of the freight corresponding to the total countertrade operation. Insurance may receive equal treatment, when those corresponding to imports are contracted with Argentine means.

e) Within the established term (maximum 180 days) and no later than the moment when all the required documentation is available, both for the export and for the import, the intervening authorized entity shall collect from the local buyer the australes equivalent to the foreign currency value of the import and shall apply them to settle to the local seller the australes equivalent of the export - eventual interest corresponding to the financing of the exports and/or imports may form part of the offset amounts -, using for both operations the seller's or buyer's exchange rate, as the case may be, corresponding to that moment. Such settlements shall be made through the simultaneous purchase-sale of foreign currency, on which the entities shall inform the Central Bank in the usual manner, concept 080 (offset exports) and 580 (offset imports), indicating the number of this Communication.

f) The intervening local entity shall report to the Central Bank - Form 1519 - in the event that at the maturity established by the letter of credit (maximum 180 days from shipment), the amount of the sale abroad is not covered by the value of the respective imports and/or the corresponding foreign currency, mentioning the number of this Communication.

In addition, it shall keep a special record in which, for each countertrade operation, it shall record at a minimum the identifying data of the following aspects:

• Authorization from the Secretaría de Comercio Exterior.

• Local importing and exporting companies involved.

• Foreign importing and exporting companies.

B.C.R.A. COMMUNICATION “A” 825 30.12.85

• Imported and exported goods, with their respective FOB amounts.

• Completion of shipment and customs clearance of the respective products.

• Instrumentation and terms used in the compensation operation.

• Where applicable, total or partial settlement in foreign currency.

  g) Specific countertrade operations with countries that are members of the Asociación Latinoamericana de Integración, once approved by the Secretaría de Comercio Exterior, shall be processed through the respective Reciprocal Payments and Credits Agreements, with an automatic reimbursement regime. In the case of reciprocity, compensations may be made in cash.

If duly substantiated reasons prevent the use of said mechanisms, authorization shall be requested from the Banco Central to apply the procedures indicated in sections a) or b) above.

When in a countertrade operation, in addition to a country that is a member of ALADI, a country from outside the zone is involved, the operation may be processed in accordance with the procedures cited in sections a) or b) above.

h) When the payment terms usual in international trade for the goods and services (the latter only for export) being exchanged are similar and exceed 180 days, the operation may be compensated through the installments in which the exports and imports are financed. In these cases, the aspects regulated in the remaining sections of this point shall apply.

2. Exchange of products of different economic classification

The operations must be implemented according to the following procedures:

a) Imports of capital goods, including complete or incomplete plants or other goods, with payment terms in accordance with those required by the general rules, compensated with exports of goods or services on a cash or short-term financing basis:

The irrevocable letter of credit, as well as the documents that, according to it, instrument the payment of the financed import, shall contain a clause according to which, upon maturity of the payment terms, the respective amounts must be used to cover the value of irrevocable letters of credit covering the Argentine export of goods or services. The compensation, which shall be effected without transfer of foreign currency to and from abroad, processing the corresponding foreign exchange operations, may be carried out within a period of up to 60 days before or after the maturity date of each installment, an aspect that must be agreed between the contracting parties.

b) Exports of capital goods, including complete or incomplete plants or other goods or services, with extended payment terms, compensated with imports of goods on a cash or short-term financing basis:

The irrevocable and confirmed letter of credit covering the export, as well as the documents that, according to it, instrument its payment, shall contain a clause according to which, upon maturity of the payment terms, the respective amounts must be used to cover the value of letters of credit or collections covering the Argentine import of goods. The compensation, which shall be effected without transfer of foreign currency to and from abroad, processing the corresponding foreign exchange operations, may be carried out within a period of up to 60 days before or after the maturity date of each installment, an aspect that must be agreed between the contracting parties. The term of the letters rediscounted by the Banco Central as indicated in the following paragraph shall be adapted to this operation.

In this case and in order to make financing abroad viable, the Argentine exporter may discount the respective letters through the general regime for financing promoted exports, complying with the provisions established by Circular OPRAC-1, Comunicación "A" 49 of 24.7.81 and complementary provisions. Upon maturity of each of the aforementioned documents, which must coincide with the payment in products of the respective imports, the intervening bank must collect the australes from the importer, an amount with which it shall go to the foreign exchange market to buy the necessary foreign currency in order to cancel the letters that instrumented the payment of the export, rediscounted by the Banco Central. When the FOB values are compensated, the documents corresponding to freight and insurance of Argentine origin may also be discounted according to the provisions in force.

These operations may also be compensated within the maximum period of 180 days, under the conditions set forth in sections a) and b) of point 1. above.

c) When the value of exports exceeds that of imports or vice versa, the corresponding inflow or outflow of foreign currency, as applicable, for the difference shall be made in accordance with the general rules in force on the matter.

d) For this type of operations, the aspects regulated in point 1. above shall apply.

3. Bilateral countertrade agreements

Operations formalized in accordance with countertrade programs signed with countries that are members of ALADI shall be processed through the respective Reciprocal Payments and Credits Agreements, with an automatic reimbursement regime.

In the case of reciprocity, compensations may be made in cash, that is, without taking into consideration the minimum payment terms established for imports by the general rules. When said exchange programs are formalized with other countries, the procedure to be followed shall conform to the provisions of the respective agreements.

4. Benefits of a credit nature

In countertrade operations, promoted Argentine exports shall be eligible for the benefits of the general pre-export financing regimes

B.C.R.A. COMMUNICATION “A” 825 30.12.85

for promoted exports and export financing. The financing regime for promoted exports may be applied in all countertrade operations in which foreign sales must be financed at more than 180 days' term, a situation that may arise in the operations set out in point 1., subsection h) and in point 2., subsection b).

For reasons imposed by the modality of the operation and provided that the export financing regime is not used, interested parties may request from the Central Bank, through the intervening bank, an extension of the prefinancing term (including the 60 days after shipment), attaching a certified copy of all the information required by the Secretariat of Foreign Trade to authorize the operation.

5. Other provisions

a) External debt survey:

a.1. Imports shipped prior to the exports. Obligations contracted abroad must be declared at their total value, in accordance with the rules established by Communications "A" 433 and "A" 461, breaking down in the payment schedule the amounts corresponding to compensated and non-compensated concepts, as applicable.

a.2. Imports shipped after the exports. Obligations contracted for the non-compensated amount must be declared as commercial debts, provided that it exceeds the minimum amounts regulated by the rules of the external debt survey.

b) Authorized financial institutions participating in countertrade operations must adopt the following precautions:

b.1. When granting the bank endorsement, they must state as an integral part thereof, in the respective shipping permit, that the export is carried out under the countertrade regime.

b.2. In the import documentation, which they must formally intervene in, they shall record that it is carried out under the countertrade regime.

We greet you very attentively.

CENTRAL BANK OF THE ARGENTINE REPUBLIC

Oraldo N. Fernández
Manager of Foreign Trade and Exchange
Antonio E. Conde
Deputy General Manager

B.C.R.A.
RESOLUTION No. 551 Annex II to
Com. “A” 825
MINISTRY OF ECONOMY

Buenos Aires, 28 June 1985

"WHEREAS the provisions of Decree No. 176 of 25 January 1985, and

CONSIDERING: That it is appropriate to adopt the regulatory measures for the application of the regime established by the Decree cited in the WHEREAS.

That this Resolution is based on and issued in use of the powers conferred by Decree No. 176 of 25 January 1985 and by Article 16 of Decree No. 4070 of 28 December 1984.

Therefore,

THE MINISTRY OF ECONOMY

RESOLVES:

Article 1. - Countertrade shall be understood as international purchase and sale operations in which Argentine export goods or services are exchanged for import goods of similar values.

Article 2. - Countertrade operations may be carried out by shipping the export goods or services first, or the import goods first.

Article 3. - For the purposes of the provisions of Article 2 of Decree No. 176/85, promoted export goods shall be understood as those included in the regulatory rule issued pursuant to Article 8 of Law No. 23.101.

Article 4. - Countertrade operations may be approved when the financing terms of the export goods or services being exchanged are similar to those of the import goods.

Article 5. - When the goods to be imported have customary financing in their international marketing with longer terms than the goods and services to be exported, the compensation operations must be structured in such a way that the import goods enjoy a financing regime that enables periodic amortizations to be settled with exports for values equivalent to those of each installment until the obligation is extinguished.

Article 6. - When the goods and services to be exported have customary financing in their international marketing with longer terms than the goods to be imported, compensation operations may be structured in which the export goods are financed, enabling the periodic amortizations to be settled by the importation of goods for values equivalent to those of each installment until the obligation is extinguished.

Article 7. - Import or export goods that are prohibited or suspended are excluded from this regime. In all cases, the import goods and the export goods or services must comply with the legal regime in force in the matter.

Article 8. - When there are no technical or financial difficulties limiting the application of the countertrade regime, companies and public agencies may make use of it, complying in all cases with the provisions of Decree Law No. 5.340/63, incorporating clauses to that effect in international tenders for the acquisition of goods.

Article 9. - Import operations of goods carried out under the countertrade regime shall be exempt from the bank deposit established by Article 13 of Resolution M.E. No. 1.325 of 29 December 1984.

Article 10 - Compensated exchange operations exceeding TWENTY MILLION UNITED STATES DOLLARS (U$S 20.000.000,00) shall require the prior intervention of the National Council for International Economic, Monetary, Commercial and Financial Affairs, created by Decree No. 944 of 29 March 1984.

Article 11 - Compensated exchange operations with countries that are members of the Latin American Integration Association may be processed through the respective Reciprocal Payment and Credit Agreements. The Central Bank of the Argentine Republic shall regulate the use of alternative mechanisms when said agreements cannot be used. Likewise, clearing accounts and payment and credit agreements with other countries may be implemented.

Article 12 - The Central Bank of the Argentine Republic shall have responsibility regarding the exchange and financing provisions applicable to compensated exchange operations.

Article 13 - The bank guarantees referred to in Article 3 of Decree No. 176/85 shall be those customary for international trade operations, with the aim of covering payment for imports and ensuring collection for exports.

Article 14 - The National Customs Administration shall intervene regarding the valuation of import and export operations, applying the rules in force on the matter at the date on which they are documented.

Article 15 - The Secretariat of Foreign Trade, in accordance with the powers conferred by Articles 8, 19 and 41 of Resolution M.E. No. 1.325 of 28 December 1984, when it determines it appropriate, shall grant automatic treatment to goods imported under Bilateral Compensated Exchange Programs or Agreements.

Article 16 - The Secretariat of Foreign Trade shall authorize or deny individual operations and those framed within bilateral compensation agreements, for which purpose it shall issue the pertinent rules, without prejudice to the provisions of Article 10 above.

Article 17 - Let it be communicated, published, given to the National Directorate of the Official Registry and archived.

RESOLUTION No. 551

Juan Vital Sourrouille
Minister of Economy

B.C.R.A.
DECREE No. 176/85 Annex I to
Com. "A" 825
MINISTRY OF ECONOMY

Buenos Aires, 25 January 1985

"WHEREAS Decree No. 2581 of 10 April 1964, and

CONSIDERING: That it is advisable to establish an instrument that contemplates, among others, the following objectives: to increase export levels; to open new markets; to facilitate the placement of Argentine products that have difficult access to international markets; to use the external purchasing power of the Nation as a whole and of the State in particular as a tool that enables and favors the country's exports and tends toward a rational use of external means of payment.

That this requires seeking new alternatives in the conceptions and practices of foreign trade, contemplating the creation of mechanisms that make commercial exchange possible without transfer of foreign currency or with minimal transfer thereof.

That for this reason, it is necessary to amend Decree No. 2581 of 10 April 1964 in order to exempt from the inflow of foreign currency those exports that are processed within the framework of commercial exchange.

Therefore,

THE VICE PRESIDENT OF THE ARGENTINE NATION
IN EXERCISE OF THE EXECUTIVE POWER
DECREES:

Article 1 - Argentine export goods and services may be exchanged for import goods and services needed by the country, under the modality of compensated exchange, in which Argentine companies, goods and services shall participate with companies, goods and services from one or more countries.

Article 2 - The products and services of promoted export and the products originating from regional economies that are included in the promotional regime established for these goods may be subject to the operations defined in Article 1.

The implementing authority may establish lists of goods whose imports may only be carried out in the form of compensated exchange. Likewise, it may draw up lists of goods that are included in or excluded from this regime, should reasons of commercial policy so advise.

Article 3 - For the carrying out of the exchange operations set forth in Article 1, it shall be necessary to constitute bank guarantees that ensure compliance with the operations approved in each case by the Implementing Authority.

Article 4 - In cases where the value of the goods or services to be exported exceeds the value of the goods or services to be imported or vice versa, the corresponding inflow or payment of foreign currency, as applicable, must be made for the difference, in accordance with the rules in force.

Article 5 - The Implementing Authority, through the corresponding dependent agencies for the application of this exchange regime, shall authorize or deny individual operations and those framed within bilateral compensation agreements, for which purpose it shall issue the pertinent rules.

When the amounts of each individual operation or those resulting from bilateral agreements exceed the values determined by the Implementing Authority, they shall require the prior intervention of the National Council for International Economic, Monetary, Commercial and Financial Affairs created by Decree No. 944 of 6 April 1984.

Article 6 - Operations shall be valued in freely convertible foreign currency and carried out at normal values and in accordance with quality standards current in international markets.

For the purposes of the control required by the provisions of this article, the Application Authority shall determine the Participation of the pertinent public and private bodies.

Article 7. - The total or partial entry of foreign currency is excepted from the provisions of Article 1 of Decree No. 2581 of 10 April 1964, for those exports carried out within the framework of the exchange established by this decree.

Article 8. - The settlements of reimbursements, import or export duties, exchange taxes and any other levy or service remuneration fees shall be made effective in accordance with the legal rules in force and the exchange regulations in force and/or those established for that purpose by the Central Bank of the Argentine Republic, without prejudice to the provisions of Article 7 of this decree.

Article 9. - The Ministry of Economy, in its capacity as Application Authority, shall issue the regulations and shall be responsible for matters relating to the implementation and application of this decree.

Article 10. - Let it be communicated, published, given to the National Directorate of the Official Registry and filed.

Decree No. 176
MARTINEZ
Bernardo Grinspun