Currency blocking seen from the receivable's side

Two unpaid items look alike on a bank statement and have nothing in common. In the first, the debtor will not pay: it disputes, it lacks the funds, it prefers other creditors. In the second, the debtor wants to pay, has paid in its own currency, and the money does not leave the country. The exporter's statement shows the same thing in both cases, a maturity not honoured, and that is the source of most notification errors. The cover that responds is not the same, the evidence to assemble is not the same, and the periods before indemnification often differ threefold. Separating the two situations is the first step, and it is done on verifiable facts rather than on impressions.

The fact that separates them is the local currency deposit. A buyer who has paid the counter-value to its bank, or into a dedicated account, and who produces the transaction advice, has done what the contract asked within the limits its country's regulation allows. What is then missing is an administrative act, the authorization to convert and transfer, and that act depends neither on it nor on the exporter. This is the domain of non-transfer, and the cover responding to it is distinct from non-payment cover, even where both appear in the same policy. The practical consequence is immediate: the central document of the file is not a formal demand, it is proof of the deposit, and the exporter must ask for it while the commercial relationship is still cordial.

One must then ask what that deposit does to the commercial debt, a question of sales law rather than insurance, but one that decides what follows. Depending on the governing law and on the drafting of the payment clause, payment in local currency may amount to performance, in which case the buyer is discharged and the exporter no longer has a claim against it but a transfer problem, or may count for nothing until the creditor has received the agreed currency, in which case the buyer remains a debtor and bears the exchange risk. The two readings produce opposite files. A contract stipulating discharging payment at the buyer's place transfers the risk to the seller without anyone having explicitly intended it, and that line is read before shipment because it is no longer renegotiated afterwards.

Timing is the third point, and it is the one that surprises treasury departments. Non-transfer covers provide for waiting periods appreciably longer than non-payment ones, often several months after the deposit, for an understandable reason: a delayed transfer authorization is not yet a refusal, and the insurer does not want to indemnify an administrative queue. This asymmetry has a perverse effect on the insured's conduct, which has an interest in characterizing its file as non-payment to be paid faster, while the facts say otherwise. It is a costly temptation: a misclassified notification turns against its author during the review, and an insurer discovering an undisclosed deposit no longer argues about the waiting period alone, it argues about the good faith of the file.

One must also look at what becomes of the deposited sum, because it does not sleep peacefully. It is denominated in a currency that often depreciates at the very pace of the crisis that caused the block, it sits in a local institution whose soundness is correlated with that crisis, and it may be subject to later measures, forced conversion, extended blocking, levy. Who bears that degradation between deposit and transfer is a contractual point, rarely addressed, and its amount can exceed the deductible that will have been argued over at length. A well-advised exporter asks at which exchange rate its indemnity will be computed, that of the deposit or that of the settlement, and asks before the loss.

One last case deserves mention because it deliberately blurs the boundary. Some states do not prohibit transfer, they ration it, through official queues, sectoral priorities or foreign currency auctions. The buyer is then neither prevented nor served: it is registered. That situation is neither a refusal, which delays the triggering event, nor normal operation, which makes the wait open-ended. It is handled by documenting the queue itself, the rank, the delays observed for other operators, the texts organizing it, and that is local intelligence work only the exporter or its agent on the ground can carry out.

The resulting discipline amounts to few steps. From the first unpaid maturity, distinguish the debtor that will not from the debtor that cannot, by asking for proof of deposit rather than by interpreting a silence. Notify under the right characterization, even when it is the slower one. Check in the sale contract whether local payment discharges the buyer, because that line decides who carries the exchange risk. And document the rationing where it exists, since it is the only material that will later establish that a wait was in reality a refusal.