Decision No. 802/TTg dated September 24, 1997 of the Prime Minister on solving the existing problems in opening letters of credit
THE PRIME MINISTER OF GOVERNMENT
SOCIALIST REPUBLIC OF VIET NAM
Independence - Freedom - Happiness
Hanoi ,September 24, 1997
ON SOLVING THE EXISTING PROBLEMS IN OPENING LETTERS OF CREDIT
THE PRIME MINISTER
Pursuant to the Law on Organization of the Government of September 30, 1992;
At the proposal of the Governor of the State Bank of Vietnam,
Article 1.- An import enterprise guaranteed by a bank to open deferred payment letters of credit shall, when the payment is due, have to strictly perform the obligation of paying debts to its foreign creditor(s). In cases where the enterprise delays the payment or is not yet capable of paying foreign debts, the guarantor bank shall have to pay such debts on the enterprise's behalf in order to preserve its credibility in international payment and the enterprise shall have to acknowledge its obligatory debts to the bank.
Article 2.- The debt amounts compulsorily acknowledged by the enterprise and paid by the guarantor bank shall not be accounted for in the enterprise's debt limit and shall be classified and solved as follows:
a) For equipment, supplies and goods imported to directly serve a project, which, due to objective reasons, is not commissioned on schedule, thus being unable to pay foreign due debts, the guarantor bank shall consider and provide ordinary loans for paying the foreign debts. The lending terms shall be agreed upon by the bank and the enterprise and decided on the basis of production and business cycle and the time limit for capital recovery.
b) For deferred payment import goods not yet sold, the bank shall base itself on the volume and value of unsold goods which are saleable to consider ordinary loans (not to be converted into over-due debts) and set the time limit for debt recovery depending on the enterprise's sale capability.
c) If an enterprise has used the deferred payment import goods capital for real estate business or other activities, the commercial bank shall be entitled to coordinate with specialized agencies in inventorying and evaluating the import goods, mortgaged assets and other relevant property, filling the procedures to take the debtor's assets as lien and/or auction them, as prescribed by law in order to recover debts.
d) If the loss is caused to the capital for importing deferred payment goods due to embezzlement, the embezzlers must be prosecuted as prescribed by law.
e) If the loss is caused to import goods by objective reasons such as: natural calamities, fire...and verified by the specialized agencies, the State Bank, the Ministry of Finance and the superior agency of the enterprise shall be assigned to inspect, verify and report the case to the Prime Minister for considering and deciding the settlement of the enterprise's debts.
f) For enterprises which have imported deferred payment goods under the direction of the Government and suffered losses due to the exchange rate fluctuation, the Ministry of Finance shall be assigned the task to directly inspect, verify and report the cases to the Prime Minister for considering and providing subsidies for the loss caused to the enterprise by the exchange rate risk.
Article 3.- In case the enterprise have remitted money to the bank before the foreign debt payment through deferred payment letters of credit turns due, the commercial bank shall bear full responsibility for paying the foreign debts to foreign creditor when letters of credit become due.
Article 4.- Organizations or individuals that provide guarantee for enterprises to open deferred payment letters of credit or for domestic enterprises to purchase goods imported on deferred payment by enterprises shall have to pay on behalf of import enterprises which are incapable of paying due debts. If the guarantor organizations or individuals fail to pay, the bank shall be entitled to inventory the assets and put them on auction to recover the debts. In case of serious violation, the violator must be prosecuted as prescribed by law.
Article 5.- For assets and goods mortgaged or pledged at banks by enterprises to open letters of credit for importing deferred payment goods or mortgaged as security for on-credit purchase of deferred payment import goods or debtor's assets taken as liens, the commercial banks shall be entitled to put them on auction so as to recover the debts.
The Supreme People's Procuracy, the Ministry of the Interior and the People's Committees of the provinces and cities directly under the Central Government are requested to direct the specialized agencies to coordinate with and create conditions for commercial banks to conduct the auction of assets and goods as prescribed by law so as to recover debts already paid by such commercial banks on behalf of the enterprises.
Article 6.- This Decision takes effect after its signing. The Governor of the State Bank and the Minister of Finance shall base themselves on this Decision to provide detailed guidance for its implementation and report to the Prime Minister the result of payment settlement.
Article 7.- The ministers, the heads of the ministerial-level agency, the heads of the agencies attached to the Government and the presidents of the People's Committees of the provinces and cities directly under the Central Government shall have to implement this Decision.
FOR THE PRIME MINISTER
DEPUTY PRIME MINISTER
Phan Van Khai