Covering Clients in an Exchange Contract

Forward exchange contracts are subject to relatively uncomplicated exchange control regulation. The first and most important requirement is that a forward exchange contract can only be entered into when there is a firm commercial contractual commitment expressed and payable (or receivable) in a foreign currency. This requirement therefore rules out any exchange or any exchange or gold clauses which may be incorporated into a commercial contract whereby sterling is to be paid away at some future date, the amount of sterling to be paid out depending upon the rate of exchange ruling on that day. For example, a customer may import form Germany and has agreed that he will pay in sterling, but that the actual amount of sterling will depend upon the rate ruling for Deutschemarks against sterling on the date of payment. No forward exchange contract may be entered into for this type of transaction and there is no way in which the banks can protect their customers against fluctuations in the rate of exchange.

Forward exchange cover must be in currency of the commercial contract, i.e. if the payment is to be in dollars the customer is not permitted to purchase a stronger currency.

Let us look at or two practical examples. A customer is importing machinery from West Germany. He signs a contract that he will receive two machines per month, delivery starting in six month time and finishing in one year’s time. He is quite entitled therefore to enter into a forward contract whereby he buys forward Deutschemarks for these machines for die various periods he requires, namely from six months up to twelve months. In addition, if he so wished he can go further as he is allowed by Exchange Control Regulations up to six months after the date of importation. All he has to do is to produce to his bank documentary evidence that he is importing these goods. In other words that there is a firm commercial contract; that the amount to be paid out is expressed in Deutschemarks and the bank will then provide him with the forward cover.

Another customer may export capital goods. He enters into his contract whereby he is going to export goods and will receive x amount of American dollars. The goods will not be exported perhaps for another twelve months, and he is giving credit to his buyer for a further six month. Therefore he may arrange now to sell to his bank dollars delivery eighteen months forward.

It is important to note that whether the customer is buying or selling a foreign currency is to be paid or received. There are very heavy penalties for anyone who tries to speculate.

ВАРИАНТ III

I. Перепишите и письменно переведите предложения на русский язык. Подчеркните в каждом из них глагол-сказуемое и определите его видовременную форму и залог.

1. They will have sent the cheque before the end of the month.

2. The firm usually sends the customers its catalogue's.

3. Most companies have helped to coordinate the advertising program with the sales program.

4. Our new trade list was available last week.

5. The descriptive brochures on new services are regularly given to the bank customers.

6. Lower prices were quoteв by other companies.

7. The Insurance Policy was faxed two days ago.

II. Перепишите и письменно переведите предложения на русский язык. Подчеркните Participle I, II и укажите, является ли оно определением, обстоятельством или составной частью глагола-сказуемого.

1. A State is not allowed tom alter the natural conditions to the disadvantage of the natural conditions of the neighboring state.

2. The prices for all silk fabrics have increased considerably.

3. Spot markets (рынки наличного) are buying and selling goods available for immediate delivery.

4. Insurable risks include losses to property resulting from fire, explosion, windstorm, etc.

5. The detected defects will be eliminated by the seller.

III. Перепишите и письменно переведите предложения на русский язык. В каждом из них подчеркните модальный глагол или его эквивалент.

1. The state could reduce the period for which patents were granted.

2. The passenger fares of this year might be different from those of the previous year.

3. Lack of knowledge may result in imperfect competition.

4. The railway companies are able to increase their profits by cutting rates on long-distance business.

5. The monopoly had to form a cartel not to let the competition spread.

6. The product is to be microwaveable.

7. The economist must value the time of the manager.

III. Прочитайте и письменно переведите текст.

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