What is a foreign trade loan?
Foreign trade loans are a general term for Chinese banks' loans to foreign trade enterprises. The loan recipients are enterprises belonging to the foreign trade system.
Loan types include:
(1) Commodity circulation loans. It is based on commodity funds and is a short-term loan. A quota supply is implemented and the loans are managed in three accounts: quota loan, temporary loan and special loan.
(2) Medium-term special loans. The loan is used for small and medium-sized technological transformation projects for the production of export products, such as the renewal and transformation of production equipment by enterprises producing export industrial products, agricultural and sideline products, etc. The loan term is 1-3 years.
(3) Seller’s credit. It is a medium to long-term loan. This loan is used by foreign trade enterprises to meet their capital needs for the distribution of mechanical products and export of ships. When the loan can only be recovered more than one year after the sale of goods to the buyer, they can apply for this type of loan.
What are the characteristics of foreign trade loans?
(I) The sources of funds for foreign trade enterprises' operations, in addition to a certain amount of their own working capital allocated by the state, are mostly loans issued by state banks.
(2) In principle, the non-commodity funds of foreign trade enterprises shall be provided by their own funds. However, before the own funds are sufficient, the bank can provide loans for the funds needed for packaging materials. This is because the packaging requirements for exported goods are relatively strict, and the packaging costs account for a large proportion of the price of exported goods. When completing export tasks, foreign trade must reserve a certain amount of packaging materials. Therefore, the packaging materials of foreign trade enterprises also have the nature of commodities. Therefore, banks can provide loans for packaging materials before the foreign trade enterprises have sufficient funds.
(3) The packaging supplies stored by the packaging companies of the foreign trade department for the export commodities of the foreign trade import and export companies are of a commodity nature and the bank shall grant loans in accordance with the approved loan plan.
(iv) Banks shall not provide loans to foreign trade trust companies and warehousing enterprises. This is because trust companies act as agents for trust business to distribute goods and materials for others. The required funds are allocated by the competent authorities, and banks do not provide loans. The warehousing company stores materials for import and export companies and does not engage in export business itself, so the bank is reluctant to grant loans.
For the excess capital needs of the foreign transport company due to the centralized purchase of parts and spare parts, the bank verifies and lends them one by one according to the plan.
(V) In principle, the fixed working capital of foreign trade processing plants, repair shops, breeding farms and other independent accounting units serving foreign trade business shall be provided by the enterprises' own funds. For temporary and seasonal capital needs, processing plants and repair shops shall follow the People's Bank's industrial loan procedures. For breeding farms, the loan procedures for state-owned agriculture shall be followed and foreign trade loan quotas shall be used.
(VI) Based on the characteristics of the foreign trade sector in operating export commodities, the regulations on charging interest on foreign trade enterprises are also different from those on domestic trade. The scope of interest charged on foreign trade loans:
1. The portion of the loan exceeding the quota for commodity circulation of foreign trade enterprises that cannot be repaid on time after maturity or extension;
2. For export purchase business arranged and operated by local governments, the foreign exchange received belongs to the local governments, and the part of the loan required for the purchase funds that cannot be repaid when due;
3. Loans for goods in stock that are damaged, spoiled, or do not meet export specifications;
4. Loans for industrial products with sales exceeding one year, and agricultural and livestock products with sales exceeding one and a half years in inventory;
5. Loans for the portion of inventory raw materials used in excess of one year’s usage.
6. Loans to support the portion of production materials that is used for more than one year or has been stored for more than one year.
No interest will be charged in the following special circumstances:
1. Agricultural, local and livestock products that are uniformly managed by foreign trade within the country or a province, municipality or autonomous region;
2. Certain special commodities and a few valuable handicrafts purchased with the approval of the competent authorities, such as antiques, calligraphy and paintings, old porcelain, ivory carvings, etc.;
3. Foreign trade enterprises are not allowed to occupy bank loans for a long time if they incur losses, and they must pay them off before the end of the month following the month of the following year when the losses occur. If the funds are not fully paid out by the due date, the bank should actively urge the payment. However, due to the complex reasons for the losses in the foreign trade sector, no additional interest will be charged for the time being.
This is the end of the introduction to foreign trade loans in this issue. If you want to get more information about foreign trade loans, please pay attention and we will continue to answer your questions~
