Netting

Netting: offsetting mutual monetary claims. If company A owes company B 100, and B owes A 70, one transfer is made instead of two: A pays B 30. Netting reduces the number of payments, the volume of conversion and bank charges.

Types

• Bilateral. Offsetting between two parties.
• Multilateral. Offsetting among several participants through a settlement center, for example within a group of companies.
• Payment netting. Only payments falling due on the same day are offset, and the difference is transferred.

Netting is not barter. In barter, goods are exchanged for goods. In netting, money is offset, and deliveries remain ordinary.

Pros and cons

Pros: fewer transfers and conversions, lower costs, easier liquidity planning. Cons: it requires precise records and the parties’ consent, and if one participant fails to perform its obligation, the offset falls apart.

Netting and currency control

For a Russian company, offsetting with a foreign counterparty is a currency transaction. It is possible in the cases permitted by the law on currency regulation (Federal Law No. 173-FZ). An offset affects the obligation to receive export proceeds, or the goods for a paid advance. That is why it is documented and reported to the bank where the contract is registered. The bank may treat an offset without proper grounds as a failure to receive proceeds.

If you pay through an agent

Your payment must leave a complete set of documents tied to your contract: the agency agreement, the payment order, the payment confirmation, and the agent’s report and completion certificate. When VEDmost arranges the payment, they go into the package we put together for your bank: Currency control.

This is a general overview. We decide on your deal after reviewing the documents.