Under conditions where more than 60 Russian banks are under U.S. sanctions, and many foreign financial institutions refuse to accept payments from Russia due to fears of secondary sanctions, Russian entrepreneurs face serious difficulties in settling accounts with foreign suppliers. In such circumstances, businesses are increasingly turning to the services of foreign trade payment agents.
Who is a foreign trade payment agent?
A foreign trade payment agent is an intermediary company that uses its own accounts to carry out international transfers between countries. These agents are often groups of companies with bank accounts in various countries. They can be foreign organizations or Russian companies affiliated with foreign structures. The primary task of a payment agent is to facilitate settlements under foreign trade contracts—usually limited to delivering the payment, and rarely accompanying the entire contract process.
Example:
A Russian entrepreneur cannot directly pay a Chinese supplier because the Chinese bank refuses to accept a payment from Russia. In this case, the entrepreneur turns to a Serbian payment agent, who transfers the funds to the Chinese supplier using its own accounts.
Transfer schemes via payment agents may vary depending on the type of goods, the current situation in the global banking system, and exchange rates across banks. However, a typical import payment scheme usually includes the following steps:
- Transferring funds to the agent. The entrepreneur sends the agent the amount in rubles, including the agent’s commission.
- Currency conversion. The agent converts the received rubles into the currency of the supplier’s contract.
- Transferring funds to the supplier. The agent sends the converted currency to the foreign supplier’s account, deducting their fee.
- Receiving funds by the supplier. The foreign supplier receives the payment for the goods or services under the foreign trade contract.
The agent’s commission typically includes their service fee, currency conversion costs, and bank transfer expenses. On average, the total cost for the importer ranges from 5% to 20% of the payment amount, depending on the goods and the transfer scheme.
Example:
An entrepreneur needs to pay a Chinese supplier $20,000. Including commission and conversion expenses, they transfer 1,931,350 rubles to the agent (at an exchange rate of 95 rubles per dollar). The agent converts the rubles into dollars and transfers $20,000 to the Chinese supplier. The agent’s fee is 1.5%, which equals $300 or 28,500 rubles.
What documents are required when working with a payment agent
To ensure transparency and protect your interests when working with a payment agent, the following documents should be prepared:
- Supplementary agreement to the foreign trade contract. This document confirms the supplier’s consent to receive payment from the agent. The agreement can be tripartite (between you, the supplier, and the agent) or bilateral (between you and the supplier). It should include the name and banking details of the payment agent, the supplier’s consent to accept payment from the agent, the transfer scheme, and the currency of the transaction.
- Agreement with the payment agent. Sign an agency agreement or a power of attorney contract with the agent, clearly outlining the cooperation terms: subject of the contract, rights and obligations of both parties, agent’s fee, currency conversion procedures, liability, and dispute resolution.
- Service completion report. After the payment is made, the agent should provide a service report confirming the execution of the order. This document should include the agent’s details, a description of the services provided, the payment amount for the goods, the supplier’s banking details, and the agent’s commission.
Thorough preparation and documentation will help avoid potential disputes and ensure successful currency control procedures.
Conclusion
In the face of restrictions and sanctions, the use of foreign trade payment agents has become an effective tool to ensure the stability of international business operations.
