Laos Regulates Management Of Foreign Currency From Exports – Export Controls & Trade & Investment Sanctions – International Law

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On March 7, 2024, Laos moved to regulate the management of foreign-currency income from the exportation of goods and services.


Lao Peoples Democratic Republic
International Law


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On March 7, 2024, Laos moved to regulate the management of
foreign-currency income from the exportation of goods and services.
Effective March 29, 2024, Decision No. 333 (formally the Decision
on Management of Income in Foreign Currency from Exportation of
Goods and Services No. 333/BOL) from the Bank of Lao PDR (BOL) aims
to incentivize the inflow of such foreign currency into Laos and
its sale to licensed commercial banks.

Decision No. 333 sets minimum required proportions for importing
income in foreign currency derived from the exportation of goods
and services, as well as the timeframe for doing so. It also
stipulates the requirements for selling such foreign currency to
commercial banks in Laos and the minimum proportions that must be
sold.

Importing Foreign-Currency Income

Exporters must receive payments from abroad via bank transfer
into a dedicated bank account designated for import-export business
activities within the timeline specified in the sale-purchase
agreement, but not exceeding 180 days from the date of export. Each
sector must import income in foreign currency into the Lao PDR
according to the minimum proportion of currency to be imported, and
it must be done within the required timeframes, as specified in the
table below.

1477362a.jpg

The ratios and timeframes are subject to change depending on the
circumstances. If exporters cannot comply with the required ratio
and timeline, exporters must provide relevant explanatory documents
for the BOL’s consideration.

Selling Foreign-Currency Income

Exporters of goods and services must sell at least the minimum
required proportion of their foreign-currency income (see table
below) to a commercial bank in Laos. This foreign currency exchange
must occur within three working days of receiving the foreign
currency into the dedicated bank account in Laos. The selling rate
will be determined by the prevailing rate of the commercial bank on
the day of the transaction.

1477362b.jpg

In conducting these transactions, commercial banks are required
to carefully consider and manage their reserves and overall
liquidity to ensure that they can meet public demand.

If an exporter does not sell at least the minimum required
amount of foreign currency within three working days, the relevant
commercial bank must proceed with the minimum required exchange and
notify the exporter that they are doing so.

These requirements do not apply to re-exporters, such as
importers of unprocessed raw materials for re-export to other
countries, as determined by the Department of Foreign Currency
Management (DFCM).

After selling the minimum required amount to a commercial bank,
the remaining foreign-currency income must be used for
foreign-currency exchange purposes, such as payments to parties in
foreign countries, fulfilling obligations to the state, and so
on.

Exporters can sell foreign currency to the BOL by notifying it
of the need to sell the foreign currency to the DFCM in the BOL,
after which they can sell the currency to the BOL through a
commercial bank.

Registration

Decision No. 333 requires service exporters to register as
importers and exporters to bring in income generated from exporting
services. Although it doesn’t specify the types of service
businesses that need to register, a March 2024 notice from the
Ministry of Industry and Commerce offers examples of such
businesses, including those in international transport, insurance,
tourism and hotels, construction, and consulting.

Violations

First-time violations of Decision No. 333 that do not cause
damage are subject to training on the importance of complying with
Lao law or a warning. If the violation persists after the training
or warning, the violator will face suspension of its ability to
export goods and services.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.



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