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  • Error Concerning a Third Party Accounts Payable
    • 담당부서 : 외투기업고충처리실(고상원)
    • 조회수 : 4,482
  • Organization : the Bank of Korea
  • Regulation : Regulations for Foreign Exchange Transactions
Grievance
Grievance
The mother company E receives parts from its Korean subsidiary B containing a chip purchases locally from company Q. A company must be registered in Korea to directly buy chips from company Q. However, Company E is not registered to do so.

Subsidiary B is experiencing financial difficulties, but needs to buy chips from Company Q. USA Company E needs to make account payable to the subsidiary, but Company E, instead of paying the loan, wants to directly wire payment for the chips to company Q.

However, the amount that Company E owed subsidiary B exceeds the amount required by company Q. Company E had planned to wire payment to its subsidiary (including accounts payable to Company B’s with a third party loan) however, KEB will not allow payment from the US mother company, so they can not receive payment before gaining approval from the Bank of Korea.

So Company E requested assistance from OFIO.
Resolution and Results
Resolution and Results
BOK consultation on third party payment:
When conducting transactions between a resident and non-residents in which a third party is involved in the transaction, and the third party non-resident (Company B) pays the resident third party (in this case, Company Q), then Foreign Exchange Transactions Act Article 5-10 does not apply.

Since the headquarters will be sending payment to its Korean subsidiary’s registered partner, the aforementioned regulation does not apply.

After receiving Bank of Korea’s explanation, since KEB has the authority to receive the funds, they decided to approve the transaction.

Calculations:
Since an offset payment involves a mother company and subsidiary transaction settling accounts, the aforementioned transaction does not apply since the mother company is paying the due amount directly to the third party.

Outcome:
Company B is looking for a way to receive the money from the US headquarters; the problem must be solved internally by KEB.

Resoultion and Results
Resolution and Results
BOK consultation on third party payment:
When conducting transactions between a resident and non-residents in which a third party is involved in the transaction, and the third party non-resident (Company B) pays the resident third party (in this case, Company Q), then Foreign Exchange Transactions Act Article 5-10 does not apply.

Since the headquarters will be sending payment to its Korean subsidiary’s registered partner, the aforementioned regulation does not apply.

After receiving Bank of Korea’s explanation, since KEB has the authority to receive the funds, they decided to approve the transaction.

Calculations:
Since an offset payment involves a mother company and subsidiary transaction settling accounts, the aforementioned transaction does not apply since the mother company is paying the due amount directly to the third party.

Outcome:
Company B is looking for a way to receive the money from the US headquarters; the problem must be solved internally by KEB.