Law Summary
Authorized Modes of Payment for Imports
- Authorized Agent Banks (AABs) and AAB-forex corporations may sell foreign exchange for import payments using these modes:
- Letter of Credit (L/C)
- Documents Against Payment (D/P)
- Documents Against Acceptance (D/A)
- Direct Remittance (DR)
- Advance Payment
- Open Account (O/A) including intercompany netting arrangements among non-bank related parties
- Intercompany netting can be used for settling trade in services but not for foreign currency loans or investments.
- Definitions:
- Related parties include non-bank parent, subsidiaries, affiliates, head office, or branch between residents and non-residents.
- Affiliate defined by ownership (10%-50%), interlocking directorship, common stockholders (10%-50%), management contracts with control power, or voting trusts/proxies in the same ownership range.
Procedures and Reporting under D/A and O/A Arrangements
- Guidelines for reporting, payment, and extensions of maturities for importations settled via D/A or O/A are detailed in Appendix 6.
- For intercompany netting settlement of imports, guidelines are in Appendix 6.1 covering sale, remittance, and reporting.
Authorized Modes and Currency of Payment for Export Transactions
- Payments for exports can be made without BSP prior approval under various modes, including:
- Open Account (O/A) arrangements including intercompany netting among non-bank related parties
- Consignment
- The definitions of related parties and affiliates for export payments mirror those for imports.
Regulation of Foreign Currency Loans
- BSP regulates foreign currency loans to ensure orderly servicing of principal and interest in accordance with the economy’s overall debt capacity.
- Private sector non-bank borrowers must maintain a long-term debt-to-equity ratio of 75/25 or better throughout the loan’s duration unless BSP explicitly allows otherwise.
Loans Not Requiring Prior BSP Approval
- Short-term interbank loans, such as interbank call loans, may be granted without prior BSP approval as allowed under BSP rules.
Reportorial Requirements
- Authorized Agent Banks (AABs), Offshore Banking Units (OBUs), and AAB-forex corporations must submit periodic reports, including:
- Monthly report on foreign exchange purchased from refunds of advance payments for importations (due within five banking days after the month end).
- Weekly report on transactions under intercompany netting arrangements (due within five banking days after week end).
- Reports are submitted via hard copy or email to the BSP’s International Operations Department (IOD).
Appendices and Annexes
- New Appendices/Annexes introduced include:
- Appendix 6.1: Guidelines for Reporting Foreign Exchange Obligations and Sale/Remittance under Intercompany Netting Arrangements.
- Annex Z: Report on Transactions Under Intercompany Netting Arrangements.
- Annex Z.1: Statement of Receivables and Payables.
- Revised Appendices include minimum documentary requirements for foreign exchange sales for non-trade purposes, trade transactions, reporting under D/A and O/A arrangements, and guidelines for foreign exchange forward and swap transactions.
Repealing Clause and Effectivity
- This Circular supersedes, amends, and modifies inconsistent provisions of previous BSP circulars, memoranda, or regulations.
- The Circular took effect 15 calendar days after publication in the Official Gazette or a newspaper of general circulation in the Philippines.