DOCUMENTARY REMITTANCE
How do you settle a foreign trade transaction?
In addition to documentary credit, foreign trade transactions can be settled by documentary remittance, also known as documentary collection. This is a transaction whereby an exporter mandates his bank to collect, according to his instructions, a sum due or the acceptance of a negotiable instrument from a buyer in exchange for the remittance of documents. These are commercial documents (invoices, transport documents, title deeds, etc.).
This technique involves four parties:
- The principal (or remitter): the seller
The seller gives a mandate to his bank. He gathers the documents relating to the collection and sends them to his bank with the collection order.
- The remitting bank: this is the principal’s bank.
It verifies the documents submitted by the seller and forwards them to the corresponding foreign bank responsible for collection in accordance with the principal's letter of instruction to the buyer. The remitting bank is only responsible for properly executing the given instructions. It assumes no liability if the instructions are not followed, nor for delays, transmission losses, translation quality, or the correspondent bank’s performance.
- The presenting bank: This is the foreign bank responsible for collection, which presents the documents to the buyer and only hands them over upon receipt of payment or acceptance of a bill of exchange, in accordance with the instructions of the remitting bank.
- The drawee: This is the party on whom the bill of exchange is drawn according to the collection order. It refers to the importer.
What is a documentary remittance?
A documentary remittance is essentially based on trust between the importer and supplier because it does not involve any financial commitment from the banks. The banks act only as intermediaries between the two parties (seller and buyer) and deliver the documents to the importer in exchange for payment or acceptance of a bill of exchange not exceeding 59 days.
How does documentary remittance work?
In practice, the Documentary Remittance operation takes place as follows:
- A commercial contract is concluded between an importer and an exporter;
- The exporter sends the goods (as per the contract) and obtains the transport documents (bill of lading, AWB, waybill…);
- He submits all documents to his bank;
- The remitting bank, mandated by the exporter, presents the documents in exchange for payment in the case of sight remittance, or against acceptance of a bill of exchange in the case of deferred payment;
- Once the documents are received, the collecting bank notifies its importer client;
- The importer goes to the bank counter, which hands over the documents only in exchange for payment or acceptance;
- Once payment is made or the bill accepted, the bank transfers the funds to the seller’s bank.
How are documentary remittance documents transmitted?
Clients must provide their suppliers with all the necessary details for forwarding the documents to the agency for collection.
Is documentary remittance a payment method for all foreign trade transactions?
The 2014 Supplementary Finance Law reinstated documentary remittance for all imports, including goods intended for resale in their original condition.
Is there a limit on the amount for documentary remittance?
The amounts for documentary remittances are not capped.
Are banks authorised to settle documentary remittances on foreign currency accounts?
You may settle a documentary remittance from your foreign currency account provided that you also carry out export operations (bringing foreign currency into the country).
What is the first step in opening a documentary remittance?
The first step is domiciliation, which is required before any transfer, financial commitment or customs clearance.
What is domiciliation?
- It is a regulatory procedure whereby authorised intermediary banks carry out transactions for an importer in accordance with foreign trade and exchange regulations.
- Domiciliation is governed by Banque d’Algérie Regulation 07/01 of 23/02/2007, Instruction 02/07 of 31/05/2007 and Instruction 03/07 of 31/05/2007.
How to proceed with domiciliation?
The customer must submit a duly signed domiciliation request containing:
- date of request;
- address, name or corporate name of the importer;
- importer's account number;
- nature of products;
- country of origin;
- amount in foreign currency;
- payment terms agreed by both parties.
Which documents must be submitted to the bank?
- A specific application form completed and signed by the client with the transaction details;
- An undertaking not to process this transaction with another bank or branch;
- An import commitment;
- Import domiciliation tax certificate;
- A commercial contract;
- Or a pro forma invoice.
What mandatory information must these documents include?
These documents must include the following (see Article 26 of Regulation 07/01 of 23/02/2007):
- The contract or document proving transfer of ownership or service provision must state:
- Pro forma invoice number or contract number;
- Supplier and importer names and addresses;
- Nature and details of goods or services;
- Country of origin, provenance and destination;
- Amount, currency, and Incoterms (FOB, CFR, etc.);
- Payment terms.
What should I expect from the bank?
Once formalities are completed, the bank gives the importer copies of the domiciled invoice.
Which agents are authorised for this operation?
- Foreign trade operators covered by Article 1 of Regulation 07/01 of 23/02/2007;
- Individuals or legal entities conducting economic activities (Commercial Register);
- State administrations, bodies and institutions;
- Associations according to their statutes.
If goods do not conform to the contract, may I refuse the documentary remittance?
Yes, the client may refuse to pay or accept the documentary remittance.
How to proceed with this refusal?
The client’s bank informs the supplier’s bank of the refusal and waits for a response. If no reply is received within 2 months and 10 days, the remittance is automatically rejected.
How to modify a documentary remittance?
Any modification must be issued by the supplier’s bank via SWIFT to the domiciliation agency.
Can foreign trade transactions be conducted with any country?
The Bank of Algeria regularly provides lists of foreign suppliers and banks in countries where domiciliation is prohibited.
Free transfer / invoice settlement
What can be settled by free transfer / invoice settlement?
The following operations are eligible:
- Import of goods for resale in the same condition up to 100,000 DZD/FOB per transaction and 4,000,000 DZD per year, on presentation of a domiciliation invoice;
- Service payments, upon presentation of an invoice and proof of service rendered;
- Tuition fees up to 9,000 DZD/month, with school certificate and proof of non-scholarship. Amounts may be grouped for up to 3 months with prior approval;
- Payment of notary and lawyer fees;
- Subscriptions to research journals and conferences;
- Medical expenses abroad with prior authorization and supporting documents;
- Foreign currency account-to-account transfers;
- Salary transfers for foreign workers upon payslip and tax authority certificate.
Currency exchange
-
Tourist Allowance / Once per year: €750 for persons aged 19 and over, and €300 for persons aged 12 and under 19, limited to two (02) children per family, upon presentation of the following documents:
- Holding a bank account opened with our brunch.
- A valid passport.
- Land travel tax receipt.
- Proof of payment of the fuel tax for vehicles leaving the national territory by land.
- A copy of the first page of the passport.
- A copy of a valid visa.
- Medical treatment abroad allowance up to 120,000 DZD without authorization; above that, Bank of Algeria authorization is required with medical report.
+ Appointment
+ Valid passport
+ Plane ticket
+ Hospital bill upon return
Banking identity statement (RIB)
The RIB is a document containing the full identity details of a bank account holder and is required for financial operations (transfers, etc.).
It contains 20 digits:
- 004: IBAN code
- 00XXX: Branch code
- Account number + key
SWIFT code
The SWIFT code is the bank’s BIC code and is found on the RIB.
CPA SWIFT code: CPALDZAL
Our foreign correspondents:
- For EUR: BNP Paribas, Société Générale, Natixis, Deutsche Bank, Fortis Bank, Crédit Agricole, ABC Bank, Commerzbank, Byblos Bank, UniCredit UBAE Bank.
- For USD: JP Morgan Chase, Standard Chartered, Citi Bank, Bank of America.
- For GBP: Barclays Bank, Midland Bank.
- For CHF: Credit Suisse, UBS.
- For CAD: National Bank of Canada.
