Exchange Contract

Each time a commercial or financial transaction is realized with residents abroad an exchange operation is necessary, which consists of the exchange between the national and foreign currency.  Sales abroad are effected by means of Exchange Contract between the exporter – seller of the foreign currency - and an authorized bank to operate with exchange – foreign currency buyer.

	The exchange operation involves the following agents: At the present time there is an option of intermediation by an exchange agent.  The participation of an exchange agent, however, can imply additional costs for the exporter. The exporter who sells the foreign currency The bank authorized by the Central Bank to realize the exchange operation The exchange agent when required by the foreign currency seller The Exchange Contract contains the following data: Name of the bank authorized to contract the exchange Name of the exporter Value of the operation Exchange rate negotiated Time period for liquidation Name of the exchange agent if applicable Exchange agent’s commission Name of the importer Exporter’s bank details Financing conditions

Completing the exchange

In exports with a period of 180 days or less, counting from the load date of the goods: The Completion of exchange with an authorized bank and chosen by the exporter is formalized with the completion of form BACEN - TIPO 01. The form must be completed and registered with the Central Bank

	The completion of the exchange implies the following responsibilities on the part of the exporter:   Negotiate the amount obtained with the chosen financial institution, at a determined exchange rate. Deliver, at an arranged date, the documents of proof of the export and other proof, these if requested by the importer. It is important to remember that the agreed date cannot exceed the maximum limit of 15 days after the loading of goods for abroad, according to the determination of the Central Bank. Effect the liquidation of the exchange on a determined date, which is marked by the effective entrance of the foreign currency. Obeying this determination evidently depends on payment on the part of the importer. The finalizing of the Exchange in imports can be effected up to 180 days before the loading of the goods, or up to 180 after loading. The date of loading is defined by the date of the Bill of Lading. The Central Bank establishes the period of 15 days counting from the loading date for the delivery of documents corroborating the export to the authorized bank, which after due examination shall make the remittance to the issuing bank abroad. The definition of the most appropriate moment for the Closing of Exchange depends on the necessity of financial resources for the elaboration of the product to be exported, of the current nominal interest fees and the expectation of alterations in the exchange rates, between the date chosen for the contract and the liquidation date of the exchange contract.

Exchange Liquidation

The final obligation of the exporter related to the exchange operation is the delivery of the foreign currency to the bank, which in its turn, effects the payment of the equivalent value in national currency at the exchange rate agreed upon at the date of the exchange contract. This procedure is known as Exchange liquidation.

	The delivery of the foreign currency can be effected in the following ways:   The importer effects the payment in the account of the bank that contracted the exchange. It is important to note that Brazilian legislation establishes a maximum of 10 days for the Exchange Liquidation, counting from the date of the delivery of the documents, in the case of a cash transaction, or after the date the Letter of Credit is due when the sale is payment by term In operations supported by Letter of Credit, the delivery of the corroborating documents of export to the bank is considered the equivalent of the delivery of the foreign currency. The bank must liquidate the exchange within 10 days, counting from the date of delivery of the document by the exporter

Alterations to the Exchange Contract

The Exchange Contract can be modified as long as the modifications are agreed to by both parties, by means of completing the form BACEN – Tipo 07. However, Central Bank only permits the alteration of dates due of obligations of the exporter such as:

	The date of the delivery of the documents   The date of the delivery of the documents, as long as is does not pass the total of 180 days counting from the date of closing the exchange. The extension, however, is only permitted for exchange contracts of less than 180 days. In cases of factors out of the control of the exporter and 180 have already expired, a period of not more than 30 days can be conceded to the exporter to effect the loading of the goods. In reality, the date that is altered is that of loading, as the time limit for delivering the documents continues to be 15 days maximum, counting from the load date. Note that the exporter must request the extension before the original date is due. The date of the liquidation of the Exchange contract, that does not exceed the total of 180 days counting from the load date: To obtain this extension, the exporter must obtain the agreement of the importer in paying the corresponding interest on the additional time, and substitute the previous Letter of Exchange for a new one which includes the mentioned interest.

The Exchange Contract can be cancelled

	The Exchange Contract can be cancelled within the following periods:   The goods were not loaded: until 20 days, counting from the due date for the delivery of the documents. The exporter must pay the financial costs, payment of the Tax on Financial Operations (IOF), if he received anticipated, and other expenses. The goods were loaded: until 30 days, counting from the date due for liquidating the exchange contract. This case depends on the following factors: legal action underway against the debtor abroad, return of the goods with the corresponding clearance related to the Export Register in SISCOMEX, or reduction of the price of the goods exported (SECEX). The exporter must also pay the interest, fees and other expenses. The canceling of an Exchange Contract, after the goods are sent abroad, demands thus, that the exporter takes all necessary steps to obtain payment, maintain the monetary authorities informed of the progress of the process of reimbursement and arrange the sale of the foreign currency to the authorized bank, if payment is obtained.

	Fonte: Departamento de Promoção Comercial (DPR) do Ministério das Relações Exteriores