Settlement Currency refers to the currency agreed upon by both buyer and seller in international trade for paying for goods and settling debts. It can be the exporter's currency, the importer's currency, or a third-country currency (such as USD or EUR). Usage scenarios include letters of credit, telegraphic transfers, documentary collections, etc. Note: When choosing a settlement currency, consider exchange rate fluctuation risk, currency convertibility, and political and economic stability; if a soft currency is used, exporters may face exchange losses and usually need to hedge through forward foreign exchange contracts or price markups. Unlike the Currency of Account, which is used to calculate commodity prices, the Settlement Currency is used for actual payment; the two may be the same or different. For example, a contract may be denominated in USD but settled in RMB. In addition, the settlement currency also affects a company's foreign exchange management costs and tax treatment.
📝 Examples
1. All payments under this contract shall be settled in USD as the settlement currency, and the buyer shall remit the payment by telegraphic transfer to the seller's designated account within 30 days after receiving a copy of the bill of lading. (Note: This specifies USD as the settlement currency and stipulates the payment method and deadline.)
2. Due to the high volatility of the EUR exchange rate, we recommend changing the settlement currency to RMB to mitigate exchange rate risk. (Note: This proposes changing the settlement currency during negotiations to reduce risk.)
💡 Foreign Trade Tips
Foreign trade terms are the foundation of international business communication
Trade practices may vary slightly by country; pay attention when using them
When using terms in contracts, specify the applicable version (e.g., Incoterms 2020)
For unfamiliar terms, use GlobalSync's multilingual email helper to confirm with your partner