Advising on whether waiving an export receivable owed by an overseas customer is lawful under the Foreign Exchange Transactions Act

A Korean company wished to write off for accounting purposes, and waive, an unpaid receivable arising from export transactions with a U.S. customer. We advised on its obligation to collect the receivable and its potential exposure to sanctions under the Foreign Exchange Transactions Act.

The key issue was whether a Korean company that waives, rather than collects, a receivable owed by a non-resident arising from a transaction for which an export declaration had been completed would face sanctions for breaching a collection obligation under the Foreign Exchange Transactions Act.

We reviewed the history of amendments to the Foreign Exchange Transactions Act and its subordinate regulations, and compared the former obligation to collect external claims with the regulatory framework under the current law.

In particular, we analyzed how the general obligation to collect export receivables had been abolished and the legal requirements under which collection of a claim may still be ordered in exceptional cases, and reviewed whether those requirements applied to the transaction in question.

We provided a legal opinion that, because the current Foreign Exchange Transactions Act does not impose a blanket collection obligation on export receivables arising from ordinary commercial transactions, waiving the receivable would not in itself trigger sanctions under that Act.