What changed
Exim Bank signed a credit agreement with Vietnam on Aug 12, 2004, effective Nov 1, 2004, for a USD 27 million line of credit. This circular informs authorised dealers about the facility, including last dates for LC opening (Oct 31, 2006) and disbursement (Apr 30, 2007). It also specifies rules on agency commission, limiting it to 5% for after-sales service exports, payable only in Vietnam.
What it means for you
Banks can now facilitate Indian exports to Vietnam under this credit line, which covers capital goods, machinery, consumer durables, and other Exim Policy-eligible items. The commission rules require careful handling: for after-sales service exports, commission up to 5% is allowed but must be deducted from the invoice and reimbursed at 90% of value; otherwise, exporters must pay from their own funds. This opens a structured financing channel for exporters targeting the Vietnamese market.
What you must do
- Inform exporter customers about the USD 27 million Exim Bank line of credit to Vietnam and its terms.
- Advise exporters to contact Exim Bank for full details and ensure LCs are opened by Oct 31, 2006.
- Ensure shipments under this credit are declared on GR/SDF forms as per existing instructions.
- Verify that any agency commission for after-sales service exports does not exceed 5% and is paid only in Vietnam by invoice deduction.
- Remind exporters that commission for non-after-sales service exports must be paid from their own resources.
Who it affects
Authorised dealer banks handling foreign exchange, Indian exporters to Vietnam, Exim Bank
What is the total amount of the line of credit to Vietnam?
The line of credit is for an aggregate sum of USD 27 million, effective from November 1, 2004.
What are the key deadlines for this credit facility?
Letters of credit must be opened by October 31, 2006, and disbursements completed by April 30, 2007.
Can agency commission be paid under this line of credit?
Yes, but only for exports requiring after-sales service, up to 5% of f.o.b./c&f/c.i.f. value, and must be paid in Vietnam by invoice deduction. For other exports, commission must be paid from the exporter's own resources.