How a payment agent works in foreign trade: agreement, order, report

A payment agent in foreign trade is a company that pays a foreign supplier on your instructions and at your expense. You hand over roubles, and the supplier receives foreign currency. Everything that happens between these two points rests on three documents: the agency agreement, the payment order, and the agent’s report with the completion certificate. Let’s look at what each of them contains and what to watch for.

On what basis the agent pays for you

The basis is Chapter 52 of the Russian Civil Code, “Agency”. For a fee, the agent performs actions on the principal’s instructions and at the principal’s expense. The agent may act in its own name or in the principal’s name. In import payments it is usually the former: the payment message names the agent or its foreign company as the payer, not your company.

For the supplier, this is performance of an obligation by a third party. Article 313 of the Civil Code allows a debtor to entrust performance to a third party. So it helps to state explicitly in the contract with the supplier that payment may come from a third party. Then the beneficiary’s bank has fewer questions about why the money did not come from the buyer.

The terms are often confused. Federal Law No. 103-FZ covers payment agents that accept payments from individuals, for example for phone services or utilities. The Law on the National Payment System deals with bank payment agents engaged by a bank. An agent in foreign trade works under an ordinary agency agreement. More about the term: payment agent.

The agency agreement: a framework for the whole contract

The agreement is signed once. It describes the relationship, not a specific payment. It should cover:

• the subject: on your payment orders, the agent pays foreign counterparties for goods and services;
• how a payment order is issued and when it is deemed accepted;
• the execution term for a payment order;
• the agent’s fee and how it is calculated;
• reporting: which documents the agent provides and when;
• whether the agent may engage a sub-agent and on what terms;
• what happens if the payment is not executed or comes back.

The Civil Code allows a sub-agency agreement unless the agency agreement prohibits it. The agent remains liable to the principal for the sub-agent’s actions. Check that a sub-agent is engaged only with your consent. More about the document: agency agreement.

The payment order: the terms of a single payment

A payment order is issued for each payment. For the money, this is the key document. It records:

• the beneficiary and its bank details;
• the basis: the contract number and date, the invoice number;
• the payment amount and currency;
• the exchange rate used to calculate the roubles;
• the agent’s fee;
• who sends the foreign currency: the agent itself or an approved sub-agent.

The idea is simple. Everything that affects the final rouble amount is written down before the roubles leave. If you are promised that the rate and fee will be “confirmed later”, you will learn the cost of the payment after the fact. About the document: payment order to the agent.

The agent’s report and completion certificate: how a payment is closed

After execution, the agent provides a report. Under the Civil Code the report is mandatory; the procedure and deadlines are set by the agreement. The principal raises objections to the report within the period set in the agreement. If the agreement sets no period, the law allows thirty days from receipt of the report. After that, the report is deemed accepted.

A good report shows how many roubles were received, at what rate they were converted, how much foreign currency was sent, what fee was withheld, the payment date and the document that confirms the payment. A completion certificate for the services rendered is attached to the report. Your accounting department needs these documents, and so does the bank where your contract is registered. More: the agent’s report and completion certificate.

What the agent does and does not do

The agent checks you and the deal. This is required by Federal Law No. 115-FZ on anti-money laundering. The agent requests the contract, the invoice, sometimes the specification and information about the goods. If the documents do not match, the agent is entitled to refuse the payment.

An agent’s services usually include paying suppliers for goods and services, paying for transportation, receiving export proceeds from a foreign buyer, currency conversion and documents for each payment. The scope of services differs from agent to agent, so check it in the agreement, not on the website.

The agent does not lend you money and does not open an account for you. It does not choose the supplier and is not responsible for the quality of the goods. Its job is to get the money to the beneficiary on the terms of the payment order and to report.

Each agent has its own channels. If a bank in the beneficiary’s country stops accepting payments from its route, the payment waits. Within a single agent, there is nothing to compare the terms with.

Where the broker comes in

An international settlements broker does not make the payment itself. It maintains its own network of agents and, for a specific payment, selects one whose route to the required country works right now, then compares the terms. You sign the agency agreement and the payment order with the agent, and the broker prepares them: the execution term is set in the agreement, the rate and fee in the payment order before the roubles are debited. The payment confirmation, the completion certificate and the report come from the agent; the broker assembles them into the currency control package.

This is how VEDmost works. Under the usual scheme, you transfer the roubles to the agent under the agency agreement. If you need a guarantee, the payment goes through a special escrow account at a Russian bank: the roubles wait there until the foreign currency has gone to the beneficiary. This scheme is available on request, for an additional fee. Our fee is paid by the executing agent; you don’t pay the broker separately. The full payment path is described step by step on the “How we work” page. If you want to understand what works out better for your payment, a bank, a single agent or a broker, start with the “Broker, agent or bank” page.