Payment agent for foreign trade: how payments work and what to check in the agreement

Quick answer

Suppose the agent has confirmed that the money was sent, but the supplier has not yet confirmed payment under the contract. To connect these events, agree on the participants, costs and documents for each stage before transferring money to the agent. A payment agent for foreign trade must receive clear instructions: who pays, whom they pay, which invoice the payment covers and what outcome confirms completion.

Who is involved in payment through an agent, and how do their roles differ?

Distinguish the roles: the Russian importer instructs the agent to pay for the goods; the agent accepts the instructions; the actual payer sends the money; the supplier credits the payment. If the recipient of the money is not the supplier, request the basis for paying that party.

The agent and the payer may be different companies. The agency arrangement must disclose the basis for the service provider's involvement, the actions assigned to it and the documents the agent will obtain from it.

Where Russian law applies, Article 1005 of the Civil Code of the Russian Federation distinguishes between an agent acting in its own name and acting in the principal's name. In the first case, the agent acquires the rights and obligations under the transaction with a third party; in the second, the principal does. Check that this model matches the scope of the agreement.

1. Importer

   Provides the agent with instructions, the contract and the invoice.

2. Contracted agent

   Engages a service provider on the agreed basis.

3. Actual payer

   Makes the payment and provides confirmation to the agent.

4. Supplier

   Confirms receipt and crediting of the payment; the agent passes the documents to the importer.

An intermediary for international payments, a bank payment agent under Law No. 161-FZ and a currency control agent have different roles. If the service is called a "currency agent," clarify in the agreement what actions the service provider performs and on what basis.

How do you verify the agent's company and the authority of those signing the agreement?

Request the company's full name, country and registration details. Compare them with the agreement, the bill and the recipient's payment details. If another party receives the money, obtain a documented explanation of its role and the basis for receiving the funds.

The scope of the agency agreement must make clear whose interests the agent represents and whether it only arranges payment or also enters into specific transactions. Separately agree on the right to engage other service providers and the procedure for replacing them. Clarify who provides you with documents and remains responsible for the agreed outcome when such providers are engaged.

If the intermediary says it has its own infrastructure, ask it to identify the participants involved in your transaction. A general description of the network does not explain a particular company's role. Check authorization requirements against the actual activities and jurisdiction: the label "payment agent for foreign trade" does not in itself determine which authorization is required.

What should you clarify if the payment agent is a non-resident?

Distinguish between a foreign agent, a foreign payer and an overseas supplier. They may be separate participants with different obligations. Residency status must be established for the applicable rules; the transfer currency and the location of the account do not replace this check.

Request the foreign counterparty's registration documents and the terms on which it receives money. Find the governing law, notification procedure and dispute resolution provisions in the agreement. Clarify which documents the agent will issue, in what language and in what form.

Check separately the agent's country of registration, the country where its account is held, the actual payer and the recipient. This information is needed to assess the specific transaction. A transfer in rubles does not in itself determine the parties' currency control and tax obligations.

This article covers payments by companies for goods. If an individual is involved, assess their role, authority and grounds for receiving or transferring money separately. Discuss tax matters with your accountant based on the services provided and the participants' status, as described below.

How do you agree with the supplier on payment by another company?

Start with the payment section of the foreign trade contract. Check who must pay, which payment details have been agreed and how the parties amend the terms. The supplier must understand which buyer the money is being paid on behalf of and which obligation it should be credited against.

1. Check the payment terms

   Find the requirements for the payer, currency, amount and method of agreeing on changes.

2. Identify the actual payer

   Give the supplier the company's details and explain that it is paying on behalf of the importer.

3. Link the payment to the shipment

   Agree on the contract, invoice and payment reference. Clarify how to link the documents if the bank's field cannot accommodate all the information.

4. Define the confirmation required

   Agree on how the supplier will confirm the amount received and its allocation toward payment for the goods.

Whether an addendum is needed depends on the contract and the governing law. A letter from the supplier may record its consent, but check whether it meets the agreed requirements for amending the terms.

If the obligation is governed by Russian law, consider Article 313 of the Civil Code of the Russian Federation: it provides for performance by a third party and exceptions involving personal performance. This rule cannot automatically be applied to every foreign contract. Check the governing law, the terms of the obligation and the form of consent for the transaction.

How do you check the currency calculation, exchange rate and payment agent's fee?

Ask for the quote to be broken down into separate amounts. The invoice currency may differ from the currency you use to pay the agent. Before paying, you therefore need to understand how much you will transfer and how much the supplier must receive.

What makes up the total amount?

1. Funds to pay the invoice

   The amount converted as agreed at a specified exchange rate.

2. Agency fee

   A separate amount or an agreed method for calculating it.

3. Additional costs

   Agreed costs charged by banks and other participants.

This is a framework for reviewing an intermediary's quote, not ATM24's pricing. Record the amount the supplier is to receive separately: whether it will equal the invoice amount and who will cover any deductions.

Clarify the source of the exchange rate, when it is fixed, how long the quote remains valid and the recalculation procedure. Where currency conversion is involved, agree on who bears the exchange rate risk and when an additional payment will be required. There must be a clear approval procedure for new costs.

To compare costs with the service provider's actions, review how a payment agent works in foreign trade payments and ask for each cost item to be linked to your instructions.

Which documents link your transfer to the agent with payment of your invoice?

The supporting documents must allow the funds to be traced from the importer to the supplier. Check the participants, contract, invoice, amount, currency and payment reference. If the information is spread across several documents, agree on how they will be linked.

The documents required and their format depend on the agreement, the payment method and the bank's requirements.

The table helps you agree on the document package, but it is not an exhaustive list. Clarify the form of bank confirmation for the chosen payment method. A notification that money has been sent does not automatically establish that the supplier has received and credited the payment.

Where Russian law applies, Article 1008 of the Civil Code of the Russian Federation provides for agents' reports. Agree on the procedure, deadlines and attachments in the agreement. Also check the deadline for objections to the report so that the responsible employee has time to review the documents.

What should you discuss in advance with your bank, accountant and customs representative?

Give the specialists the same version of the arrangement, identifying the participants and documents. This will allow each of them to assess the specific actions and allow you to incorporate their responses into the agreement before transferring money.

The Federal Tax Service describes the documents for foreign exchange transactions and refers to Instruction No. 181-I. Clarify the applicable procedure based on the current version and the transaction terms. Bank compliance checks cover participants and documents; also discuss applicable sanctions restrictions in advance.

For a foreign agent, the accountant needs to classify the income under Article 309 of the Tax Code of the Russian Federation and check tax agent obligations under Article 310 of the Tax Code of the Russian Federation. A general conclusion based solely on non-resident status is insufficient.

Who is responsible for carrying out the instructions, and how should you agree on refunds?

Find the clause defining the outcome of the instructions. Sending the money, crediting it to the recipient's account and allocating payment to the invoice are different events. Agree on which event fulfills the agent's obligation and how the agent will confirm it.

Set out the steps for additional checks and partial payment: who requests documents, who passes them to the participants and how further actions are agreed. Clarify responsibility for the actions of any service provider engaged.

For a payment refund, agree on the currency, the method of determining the amount, the costs and how the fee will be treated. Distinguish between returning funds still held by the agent and refunding a payment already received by the supplier: in the latter case, the relationship with the recipient must be considered. Check the claims and dispute procedures against the governing law.

How can you review a payment arrangement using a worked example?

A Russian importer is buying equipment; the invoice is issued to the importer. Instead of a direct transfer, payment through an agent and another company is proposed. The draft agreement does not identify this company or provide for confirmation from the supplier.

This is a training example, not a description of an ATM24 transaction or confirmation of an available payment route.

Conclusion on the draft: the scope of the instructions can be agreed once it is linked to the invoice; before transferring money, obtain information about the payer, the supplier's consent and revisions to the performance terms. The review procedure remains the same for a supplier in China or Turkey. The correspondent account and other payment details are considered together with the participants and terms: on their own, they do not confirm that a payment route is available.

What should you check before transferring money to the agent?

1. Verify the participants

   Check the parties' registration, the signatories' authority and the recipient of the money. Identify the actual payer and obtain the basis for its involvement.

2. Agree on the payment

   Obtain the supplier's consent in the appropriate form. Link the instructions to the contract and invoice.

3. Record the costs and outcome

   Agree on the exchange rate, fee, additional costs, documents, the outcome of the instructions and refunds. Mark each term as ready based on the confirmations received.

4. Incorporate the specialists' responses

   Discuss the arrangement with your bank and accountant; refer questions about the shipment of goods to your customs representative.

For your discussion with ATM24, prepare the supplier's country, the goods, the amount and currency, the invoice and the contract terms. This information is needed to discuss the transaction. ATM24 helps pay overseas invoices and for supplies; a manager will agree on the terms before the transaction.

Questions and answers

Who should sign the agreement with the agent?

The agreement is signed on the importer's behalf by the company head or a representative with appropriate authority. To verify this, request documents confirming the authority of both parties' signatories and check them against the type of instructions.

Can another company pay the supplier without an addendum?

Check the governing law and the contract terms, including the required form of consent to such payment. If the contract requires amendments to be made through an addendum, a separate letter may be insufficient; identify the payer and invoice to the supplier in advance.

What else should you request if the payment agent is a non-resident?

Request registration documents and information about the recipient of the funds and the actual payer. Before signing, agree on the governing law, dispute procedure and documents the foreign agent will provide upon completion of the instructions.

Are proof of sending the money and the bank's SWIFT code sufficient?

A SWIFT code identifies a participant in the banking messaging system, but does not confirm that a specific transfer is possible. Proof of sending the money must be checked against the transaction status and the supplier's confirmation that the funds have been credited against your invoice.

Must tax be withheld from a foreign agent's fee?

Ask your accountant to assess the nature and location of the services, the parties' status and whether they are related, the applicable rules and international agreements. Based on this information, the accountant will determine the tax withholding and reporting obligations; the label "agency fee" alone is insufficient.

What should you agree on in case the money needs to be refunded?

Define the responsible party, the grounds and procedure for a refund, the currency, the calculation of the amount and the costs. Separately record how the fee will be treated and what the parties will do if the supplier has already received the money.