Chilean Central Bank and International Trade Regulations
Chilean Central Bank
First unit
The Chilean Central Bank is a self-constitutional, legal, technical, equity-ensuring entity created on August 21, 1925. It manages the money supply and has the authority to issue banknotes and coinage.
Maximum Conventional Rate
This is set by the BCCH, and conventional banks cannot exceed it when charging their creditors.
BCCH Features
- Issuing banknotes and coins
- Regulation of the quantity of circulating money
- Credit and financial system regulation
- Macroeconomic and prudential stability of the financial system
- Acting as a fiscal agent
World Trade Organization (WTO)
Established in 1995, the WTO administers trade agreements negotiated by its members, providing procedures for commercial dispute resolution.
International Chamber of Commerce (ICC)
The ICC promotes growth and prosperity, sets rules and standards, and oversees the steps and obligations in international trade. It is the most important agency determining rules for foreign trade and customs between countries.
Clauses of Purchase and Sale
These define the rights and obligations of sellers and buyers (importers and exporters).
- EXW (Ex Works): The seller (exporter) agrees to make the goods available to the buyer (importer) at their establishment.
- FCA (Free Carrier): The seller must deliver the goods, cleared for export, to the carrier.
- CPT (Carriage Paid To): Carriage paid to the named place of destination.
- FAS (Free Alongside Ship): The seller must place the goods alongside the ship at the pier or on barges.
- CFR (Cost and Freight): The seller pays the cost to transport the goods needed to reach the agreed port.
- (Handling = expenditure for stevedores, e.g., forklift operator)
- FOB (Free On Board): The seller is required to load the goods on board the ship at the embarkation port specified in the sales contract.
- C&I (Cost and Insurance): The seller pays the international FOB insurance policy plus all expenses.
- CIF (Cost, Insurance, and Freight): The most widely used Incoterm. The seller is obliged to CFR plus marine insurance for the buyer’s goods.
- DES (Delivered Ex Ship): For merchandise sent by sea, the buyer takes possession when the ship reaches the agreed destination port.
Modalities of Purchase and Sale
- DUS (Sale with Output Discount): Only a discount is applied.
- Firm Sale: The value of the merchandise remains unchanged.
- Sale on Condition: The price depends on meeting certain requirements between the buyer and seller. Examples include wood, fruit, and seeds.
- Free Sale on Consignment: Sale on condition with a firm minimum.
International Exchange Operations
- Buying and selling foreign currency.
- Transactions that create, modify, and extinguish obligations payable in foreign currency.
- Any transactions involving stocks, bonds, or any instrument denominated in foreign currency.
- The transfer and certificate transactions of gold or gold-denominated instruments.
Formal Exchange Markets (MCF): Banks, exchange houses
Informal Exchange Market: Not authorized by the Central Bank
(Exchange Rate = Multiplication – Parity = Division)
Dollar Types
- Agreed Dollar: Given by the BCCH for debts, transactions, and specified foreign trade operations.
- Observed Dollar: The average of all purchases and sales made the previous business day in the MCF.
- Customs Dollar: Derived from the observed dollar.
- JD: The observed value of 30.03 days is considered, then adjusted according to the month of April.
Dumping: An accusation that an agent does not comply with international commitment rules.
Shipping Documents
Second unit
These documents are used in imports and exports, in what is called invisible trade (merchandise flow).
Key Documents
Bill of Lading: (Main document) Certifies the permanence of goods (property). Used for transport via waterways, sea, land, and air. Can be delivered to order, registered, or bearer. In the case of credit cards, it is required to be issued by the issuer. Bill of Lading for sea transport, Air Waybill (AWB) for air transport. All bills of lading have an identification number and date. Sometimes, more than one date appears, such as the issue date and the “on board” date, which is the most relevant. In AWB, the issue date and flight date must appear, along with the ship’s name, destination point, and point of origin.
Commercial Invoice: In exports, four documents are used: a) export invoice, b) export debit note (when claiming more), c) export credit note (when charging less), d) export clearance guide. VAT is exempt because the tax is for the internal market. It is approved and stamped by the SII and issued by the exporter. It must include the following information: 1) issue date, name, and address of the importer, 2) quantity and description of the merchandise, 3) unit price and total amount payable by the importer, 4) payment method, 5) delivery condition, 6) origin of the merchandise.
In Chile, these certificates can be issued by Cochilco, SAG, and the Chamber of Commerce.
The following documents may be issued electronically: electronic export invoice, electronic export credit note, and electronic export debit note.
Insurance Policy: Must indicate the insured amount, the risks covered, and the premium paid. It is issued by the insurance company. The risk policy is backed by the SVS and is expressed in the premium.
Other certifications: 1) certificate of origin, 2) health certificate, 3) quality certificate, 4) certificate of weight, quality, etc., 5) shipping list – issued by the exporter and contains the relevant data.
Payment Policy in Foreign Trade
Foreign Collection: Used when there is a relationship between the buyer and seller.
Key Players: Exporter (drawer-donor), Exporter’s Bank (sender bank), Importer’s Bank (collecting or presenting bank), Importer (drawee-recipient).
The exporter issues: Letters of Credit and invoices.
Payment Date: By custom and usage, payment is typically requested 120 days from the date of shipment.
Protest: Can be made for non-payment and non-acceptance.
At Sight: Payment upon presentation.
Shipping Document: Commercial paper.
Principle of Good Faith: Believing the other party.
Financial Documents: Bills, notes, etc. (Here, banks do not review commercial documents. Collections are done in English).
Currency Arbitration: Exchange of currency.
Merchandise: The goods must not be sent directly to the bank, and the bank has no liability for the state of the goods.
Fees Receivable: Charges made by the bank.
Photocopies
Foreign Collection: Banks are not required to deal with a collection or any instruction for it that they may receive later.
Definition of Collection: Processing by the bank of documents with instructions to: 1) obtain payment and/or acceptance, 2) submit documents against payment and/or acceptance, 3) deliver documents on other terms and agreements. These can be: a) financial documents such as bills of exchange, promissory notes, checks, or others, b) commercial documents such as invoices, transport documents, title documents, or others.
Simple Collection: A collection of financial documents not accompanied by commercial documents.
Documentary Collection: A collection accompanied by financial documents and commercial documents, or only commercial documents.
Export Collection
The exporter issues a letter of instruction along with other documents. The commercial sender bank verifies each instruction and forwards the letter in the appropriate format, along with the commercial documents and payment instructions, to the presenting bank. The presenting bank delivers the commercial documents and the letter of instruction to the importer, who pays the presenting bank. The presenting bank then pays the sender bank, and the latter returns the currency to the exporter. Collections are posted to order accounts, and banks earn commissions and also charge for currency exchange.
Bank Position: The amount of currency purchased or sold in a day by the bank. The Central Bank requires the position to be 0 or greater than 0; it cannot be below 0 because that would mean selling something the bank does not have.
Accounts: Assets, liabilities, results, order.
Credit Cards
Credit cards are the most used instrument in foreign trade because they are safe for both exporters and importers. One party receives the money, and the other receives the merchandise under the agreed conditions and time.
Steps or Stages
1) Cover Letter Collection: The issuing bank must register (number, reference, value, etc.).
Debtor: USD 20,000 credit to the debtor
Creditor: USD 20,000 credit to the issuer
2) Negotiation of Collection: Placement of troops. Booking the opening account (actual placement).
Debit: Negotiable debt debtors (advance to the importer)
Credit: Credit (correspondent bank)
3) Coverage: Reserve the negotiation account. Imports are dollar sales from the bank’s point of view.
Debit: Conversion USD 20,000
Credit: Advance to the importer
Credit Account
Any transaction issued by a bank per the customer’s account and order obliges the bank to supervise the delivery of commercial documents (bill of lading, commercial invoice), customs documents (certificate of origin), or technical documents (quality certificate). These vary according to the instructions of the party that ordered the opening of this credit.
Parties Involved
a) Purchaser, Importer, Applicant: Requests the opening of the credit and instructs the bank on the conditions for doing so.
b) Issuing Bank: The bank that bears the primary obligation to the beneficiary.
c) Beneficiary Exporter: The party entitled to charge based on compliance with the requirements imposed on the credit.
d) Correspondent Bank, Paying Bank: Must pay the beneficiary against compliance with the obligations (at sight).
Types of Credit Cards
1) Revocable or Irrevocable: By default, a letter of credit is considered “irrevocable,” meaning that once delivered and accepted by the counterpart, it cannot be changed without the consent of all parties involved. For revocable letters of credit, it must be expressly stated, provided it has not been used, acquired, or obligations have been incurred. Irrevocable credit cards require agreement between the parties.
2) Commercial or Financial: In international trade, commercial letters of credit are used. Financial credit cards are used in invisible trade.
3) Nominative or Negotiable: The bank is expressly authorized to confirm, inform, and negotiate the instrument. Negotiable letters of credit do not explicitly state the nominees for management to intervene in the hearing, by acceptance, or deferred payment. According to the letter of credit, availability may be at sight when payment is made immediately upon presentation of documents, by acceptance when payment is made through the acceptance of a bill of exchange at a later date, or by deferred payment when payment is set for a specified period after the use of the instrument. Most credit cards are registered. Invoices are most commonly used at sight or with deferred payment.
4) Specific Credit Cards:
4.1 Transferable: If expressly stated, the credit allows the beneficiary to make the credit available to a third party, in whole or in part, under the same terms, conditions, obligations, and benefits, except that the value and price of the goods may be reduced. If this indication is not respected, it is considered non-transferable (these letters are important to the exporter).
4.2 Revolving: These letters are open over time, similar to a credit line.
4.3 Advance: Allows full or partial prepayment against a simple receipt and a document.
Export
Liquidation of Return: Obtaining currency from abroad.
The most common methods are: 1) transferring the funds, 2) leaving the funds in a foreign currency account and taking a DAP (fixed-term deposit), 3) leaving the foreign exchange abroad (any method used must be reported to the BCCH).
Most Important Financing for Exporters
a) PAE (Export Loan): Guarantees are required by the bank, similar to those required of importers, because the bank holds the goods and the capital. It is more active for the bank.
b) Credit to Supplier or External Credit: The importer advances money to Chilean exporters (5%).
c) L/C between Banks (rare): Used when money is needed for importing, and money is lent to someone.
Export Promotion
Law 18,634: The state allows the import of capital goods (vehicles, machines, tools used directly or indirectly, equipment), allowing deferred payment of customs duties for up to 7 years. If, instead of importing, the goods are purchased in Chile, the buyer obtains a tax credit of 73% of the net worth. The credit amount is 4.38% of the net invoiced value, equivalent in national currency to $4,000. To obtain this credit, the imported or purchased products must be on the list provided by the Minister of Finance.
Law 18,480: A reimbursement mechanism for charges related to inputs for non-traditional exporters. The drawback is 3% of the FOB value. Goods that were exported in 2003 in amounts equal to or less than $18,000,000 FOB value are eligible for reinstatement. Goods are considered entirely processed if they contain imported inputs where the value represents less than 50% of the FOB value of the product.
Law 18,708: Allows exporters to enter the international market more competitively by recovering customs duties on raw materials, intermediate processing, components, and parts used. The term is 9 months from the export date, and income statements cannot exceed 18 months from the export date. The minimum amount is US$100.
Law 825: Tax recovery is added when paying for goods, services, or supplies for export. This benefit is only accessible when services are provided to individuals without a domicile or residence in Chile and are qualified as an export.