MANAGEMENT OF CURRENCY EXPOSURE/

FOREIGN EXCHANGE EXPOSURE

Content for this Unit
Management of Currency Exposure

 Measurement of exposure and risk,

 Managing transaction exposure,

 Operating exposure,

 Short-term financial management in multinational

corporation(NP).

 Currency Derivatives –Netting – forfeiting.

Introduction

 With market liberalization and rapid technological advancement, finance managers in corporate houses are
exposed to enhanced risk.
 Volatile political and economic conditions keep the exchange rate fluctuating, which is again a concern for
the company treasurers.
 It is primarily due to significant increase in international capital flows and exposure to different currencies.
 An international firm deals in foreign currency. It expects to receive or make payment in the foreign
currency.

 The exchange rate between the firm’s domestic currency and the foreign currency may rise or fall by the
time the firm receives or pays the cash flows in the foreign currency.

 This exposes the firm to risks associated with the foreign exchange.
FOREIGN EXCHANGE EXPOSURE / CURRENCY EXPOSURE

“An Exposure can be defined as a Contracted, Projected or Contingent Cash Flow whose magnitude is not certain at the moment.
The magnitude depends on the value of variables such as Foreign Exchange rates and Interest rates.”
 In other words, exposure refers to those parts of a company’s business that would be affected if exchange rate changes.
 Foreign exchange exposures arise from many different activities.
 The term foreign exchange exposure is relevant for the companies involved in import or export of goods or
services, or having transactions denominated in foreign currency.
 If a company has foreign exchange exposure then there is always a risk that the rate of foreign currency may
fluctuate adversely and that may also cause serious losses to the company.
Foreign exchange exposure may be in the form of a transaction or asset or liabilities of the company.
For example,
ABC Ltd, an Indian Company, bought machinery from the USA for $ 1, 00,000. Current rate of exchange is
$1 = Rs. 70, accordingly ABC Ltd is required to pay Rs. 70,00,000 for buying the machine. Payment is required to
make within 1 month.
Due to unforeseen circumstances exchange rate change adversely within the period of 1 month. At the end of the
1 month exchange rate is $1 = Rs. 75, therefore the company is required to pay Rs. 75, 00,000.
FOREIGN EXCHANGE EXPOSURE / CURRENCY EXPOSURE

fluctuation in exchange rate how badly affected the above transaction. Now ABC Ltd is required to pay
additional Rs. 5,00,000 (Rs. 75,00,000 – Rs. 70,00,000).
Every company, having foreign exchange exposure, is required to maintain a proper foreign
exchange risk management system to mitigate the risk of fluctuation in exchange rate.

Foreign Exchange Exposure refers to the risk of foreign exchange rates that change quickly and frequently.
When this happens, it can greatly affect financial transactions with foreign currency rather than the
domestic currency of a company.
Fund Managers and companies who own foreign assets are exposed to
fall in the currencies where they own the assets.
 This is because if they were to sell those assets their exchange rate would have a negative effect on the home currency
value.
 Other foreign exchange exposures are less obvious and relate to the exporting and importing in ones local currency
but where exchange rate movements are affecting the negotiated price.
FOREIGN EXCHANGE EXPOSURE / CURRENCY EXPOSURE

For examples of foreign exchange exposure / currency exposure,

• Travellers going to visit another country have the risk that if that country's currency appreciates
against their own their trip will be more expensive.
• An exporter who sells his product in foreign currency has the risk that if the value of that foreign
currency falls then the revenues in the exporter's home currency will be lower.
• An importer who buys goods priced in foreign currency has the risk that the foreign currency will
appreciate thereby making the local currency cost greater than expected.
Types of Foreign Exchange (Currency) Exposure
There are two broad types of foreign exchange exposures:
 Economic exposure
 Accounting exposure or Translation exposure
Economic exposure has been further divided into:
 Transaction exposure
 Operating exposure
Source & Copyright©2012 - Eaton
Corporation
Economic exposure

Change in the value of a company that accompanies an unanticipated change in exchange rates is called
economic exposure risk. Of all the three exposures, economic exposure is the most important as it has an
impact on the valuation of a firm.
For example, a Japanese company imports children’s toys from India. The same product is also available
from China but it is costly. If the rupee appreciates against the yen and the Chinese currency decreases
against the yen, Japan will prefer to import the toys from China as it will be cheaper for Japan.
Shapiro (1992) in defining economic exposure as the sensitivity of the real value of a company
to fluctuations in environmental contingencies.

Shapiro has classified economic exposure into two components:

transaction exposure risk and
operating exposure risk .
The essence of economic exposure is that exchange rate changes significantly alter the cost of a firm’s inputs and
the prices of its outputs and thereby influence its competitive position substantially.
Transaction Exposure

It measures the effect of an exchange rate change on outstanding obligations that existed before exchange rates changed but
were settled after the exchange rate changes. Thus, it deals with cash flows that result from existing contractual obligations.
Example: If an Indian exporter has a receivable of $100,000 due in six months hence and if the dollar depreciates relative, to the
rupee a cash loss occurs. Conversely, if the dollar appreciates relative to the rupee, a cash gain occurs.
The above example illustrates that whenever a firm has foreign currency denominated receivables or payables, it is subject to
transaction exposure and their settlements will affect the firm’s cash flow position.
 It measures the changes in the value of outstanding financial obligation incurred prior to a change in exchange rates but not
due to be settled until after the exchange rates change.
 Thus, it deals with the changes in the cashflow which arise from existing contractual obligation.
Various types of transactions that contribute to transaction exposure are as follows:
 Accounts payable in foreign currencies
 Accounts receivable in foreign currencies
 Non-recorded commitments to pay in foreign currency
 Non-recorded commitments to accept payments in a foreign currency
 Debt payments to be made in foreign currency
 Commitments to accept loan-re-payments in foreign currency
 Anticipated payments from foreign subsidiaries
 Unperformed forward exchange contracts
Techniques of Managing Transaction Exposure

Management of transactions exposure has two significant dimensions.

 First, the treasurer must decide whether and to what extent any exposure should be explicitly hedged. The
nature of the firm’s operations may provide some natural hedges. Its market position may occasionally permit it to
entirely avoid transactions exposure.
 At other times, these internal hedges may be quite imperfect or too costly because of their adverse effects on
sales or profit margins. Having decided to hedge whole or part of an exposure, the treasurer must evaluate
alternative hedging strategies.
Transaction exposure arises due to unpredictable movement of exchange rate and the open positions in assets or
liabilities or both. Therefore, hedging involves entering into a financial counter-transaction to offset the risk
associated with long or short unhedged positions in a foreign currency at a future point in time.
Techniques of Managing Transaction Exposure

An MNC can hedge its transaction exposure using the following four Most accepted hedging techniques:
 Forward contract hedge
 Money market hedge
 Future contract hedge
 Currency option hedge
Other Supportive hedging techniques are :
 Currency invoicing
 Exposure netting
 Currency risk sharing
 Leads and Lags
 Cross Hedging
 Currency Diversification
 Currency swaps
 Parallel loans
 Risk sharing
 Pricing of transactions
 Matchning of Cash flows
 Long term Forward contract
Hedging with forward contract

Forward market hedge is one such technique. The term hedging refers to mean a transaction undertaken specifically to
offset some exposure out of the firm's usual operations.
 A forward market hedge refers to a transaction specifically undertaken in the forward market. The transaction is
normally a forward contract with an authorized dealer, i.e., one authorized to deal in foreign currency - that is, sell
or purchase foreign currency.
 Basic Rule of Hedging- The payables in a currency in the future should to be hedged with buying in the same
currency in the forward, whereas, receivables in a currency in the future should be hedged with selling the same
currency in the forward.
 Most commercial banks have been authorized to deal in foreign currency by the Reserve Bank of India.
 Firm in which is expecting a receivable or a payable sometime in the near future can enter into a forward contract
with an authorized commercial bank to fix the rupee rate vis-a-vis the foreign currency in which the receivable or
the payable will materialize.
This effectively avoid the uncertainty of the future exchange rate; for whatever the rate prevailing at that time, the
firm has locked in a rate for itself. There are a few things you should note about forward contracts.
 Firstly, a forward contract cannot be entered into for an unlimited period.
 The maximum period was earlier directly related to the maximum credit period permissible, i.e., six months.
 Under the new RBI guidelines, the maximum period has now been extended to one year.
 A firm may, therefore, enter into a one-year forward contract or of any shorter duration.
 Now, you will wonder as to what will happen if the firm's transaction for which a forward hedge is desired
extends beyond a period of one year. It is typical in case of foreign currency loans wherein not only the
principal amount but also the series of interest payments is likely to extend beyond a period of one year.
 In such a case, there is the facility of roll-over contracts. Look at Example -:
Forward Rate –Spot Rate domestic rate times
X X 100
Spot Rate foreign rate times

Calculation for an annualized forward premium - {(63.70-62)/62} x {12 month / 1 month} X 100 = 32.90%
Money market hedge
 As opposed to the forward market, one may use the money market for the purpose of hedging transaction
exposures.
 The money market hedge would be executed by: Buying the current value of the foreign currency
transaction amount at the spot rate. Placing the foreign currency purchased on deposit with a money market
and receiving interest until payment is made. Using the deposit to make the foreign currency payment.
 Essentially, money market hedge involves arbitrage between the Euro deposit market and the spot &
forward foreign exchange market.
 A money market hedge is a technique used to lock in the value of a foreign currency transaction in a
company’s domestic currency. Therefore, a money market hedge can help a domestic company reduce its
exchange rate or currency risk when conducting business transactions with a foreign company. It is called a
money market hedge because the process involves depositing funds into a money market, which is the
financial market of highly liquid and short-term instruments like Treasury bills, bankers’ acceptances,
and commercial paper.
Money market hedge
Money market hedge involves mixing of foreign exchange and money markets to hedge at the
minimum cost. It involves taking advantage of the disequilibrium between money and foreign
exchange market. The importer has two possibilities: to take advantage of interest rate differentials in
the money markets and the premiums and discounts existing in the forward foreign exchange market.

Example: Suppose an American company knows that it needs to purchase supplies from a German company in
six months and must pay for the supplies in euros rather than dollars. The company could use a money market
hedge to lock in the value of the euro relative to the dollar at the current rate so that, even if the dollar weakens
relative to the euro in six months, the U.S. company knows exactly what the transaction cost is going to be in
dollars and can budget accordingly.
The money market hedge would be executed by:
 Buying the current value of the foreign currency transaction amount at the spot rate.
 Placing the foreign currency purchased on deposit with a money market and receiving interest until
payment is made.
 Using the deposit to make the foreign currency payment.
Suppose you live in the U.S. and intend on taking your family on that long-awaited European vacation in six months.
• You estimate the vacation will cost about EUR 10,000 and plan to foot the bill with a performance bonus that you
expect to receive in six months.
• The current EUR spot rate is 1.35, but you are concerned that the euro could appreciate to 1.40 to the USD or even
higher in six months, which would raise the cost of your vacation by about US$500 or 4%.
• Therefore, you decide to construct a money market hedge, which means you can borrow U.S. dollars (your
domestic currency) for six months at an annual rate of 1.75%, and receive interest at an annual rate of 1.00% on
six-month EUR deposits. Here's how that would look:
1. Borrow U.S. dollars in an amount equivalent to the present value of the payment, or EUR 9,950.25 (i.e. EUR 10,000 / [1
+ (0.01/2]). Note that we divide 1% by 2 to reflect half a year or six months, which is the borrowing period. At the spot
rate of 1.35, this works out to a loan amount of US$13,432.84.
2. Convert this USD amount into euros at the spot rate of 1.35, which from step 1 is EUR 9,950.25.
3. Place EUR 9,950.25 on deposit at the 1% annualized rate for six months. This will yield exactly EUR 10,000 when the
deposit matures in six months, in time for your vacation.
4. The total amount repayable of the US$ loan including interest (1.75% annual rate for six months) is US$13,550.37
after six months. Now all you have to do is hope that you receive a performance bonus of at least that amount to
repay the loan.
By using the money market hedge, you have effectively locked in a six-month forward rate of 1.355037 (i.e., USD
13,550.37 / EUR 10,000).
Hedging with future
Differences Between The Forward Market Hedge And Future Hedge
Hedging with Currency Options
 Hedging is one of the key benefits of the trading in currency options.
 There are many people in the country who hold foreign currency in substantial amounts.
 Exporters and Importers also get impacted by increase/decrease in the exchange rates of the currency. You can take a position in
the currency options market to protect your existing holdings from any unwanted price movements. Such positions in the Options
is called currency hedging.
Example: Currency Option Hedging Strategy For Import Transactions
 you want to import goods from the United States. Your order will be delivered after 3 months and you will pay for it on delivery.
Now any increase in the exchange rate of USD will result in increasing the price of your order. To protect yourself from such an
increase, you buy a USD/INR “Call Option” at a strike price of 65.00. The current spot price of USD is Rs 63.00. The premium is
Rs 0.30 and the option will expire in 3 months. The lot size is 1000.
When you buy a Call option, you gain when the spot price is higher than the strike price of the option.

Now let's see how your trade gets affected in various scenarios-
Scenario—1 : If USD exchange rate increases to Rs 67.00, You bought the Call option when the dollar value was Rs 63.00. Now,
on the date of expiry, the dollar value is Rs 67.00, an increase of Rs 4. Your strike price for the option was Rs 65. So, your profit
would be- [(Closing Price of USDINR on expiry-Strike Price)-(Premium)] X Lot Size
-> [(67-65)-(0.30)] X 1000= 1700.
Scenario—2 : If USD exchange rate decreases to Rs 62.00. You bought the Call option when the dollar value was Rs 63.00. Now, on
the date of expiry, the dollar value is Rs 62.00, a decrease of Rs 1. Your strike price for the option was Rs 65. So, your loss should be-
[(Closing Price of USDINR on expiry-Strike Price)- (Premium)] X Lot Size
->[(62-65)-(0.30)] X 1000= -3300
However, since Options gives you the right but not the obligation to exercise the contract so you choose to allow the contract to
expire worthlessly. The premium of Rs 300 will only be your loss.
Example: Currency Option Hedging Strategy For Export Transactions

 Suppose you want to export goods to the United States.

 You will deliver the order after 3 months and you will be paid for it on the delivery. Now any decrease in the exchange rate of USD will
result in decreasing the value of your order. You will earn less than expected from the order. To protect yourself from such a movement
in the exchange rate, you buy a USD/INR “PUT Option” at a strike price of 65.00. The current spot price of USD is Rs 63.00. The
premium is Rs 0.30 and the option will expire in 3 months. The lot size is 1000.
When you buy a Put option, you gain when the spot price is lower than the strike price of the option and accumulate losses when the spot price is
higher than the strike price of the option.
Now let's see how your trade gets affected in various scenarios-
Scenario—1 : If USD exchange rate decreases to Rs 62.00
You bought the Put contract / options when the dollar value was Rs 63.00. Now, on expiry, the dollar value is Rs 62.00, a decrease of Rs 1.
The strike price for your Put contract was Rs 65.
So, your profit would be- [(Strike Price-Closing Price of USDINR on expiry) - (Premium)] X Lot Size
->(65-63-0.30) X 1000= 1700
Scenario—2 : If USD exchange rate increases to Rs 68.00
You bought the Put contract / options when the dollar value was Rs 63.00. Now, on the date of expiry, the dollar value is Rs 68.00, an increase
of Rs 5. Your strike price for the option was Rs 65.
So, your loss should be-[(Strike Price-Closing Price of USDINR on expiry) - (Premium)] X Lot Size
->[(65-68) - (0.30)] X 1000= -3300
However, since Options gives you the right but not the obligation to exercise the contract so you choose to allow the contract to expire
worthlessly. The premium of Rs 300 will only be your loss.
 So currency hedging helped you completely or partially negate the losses which you could have incurred in your business due to

an increase in the dollar value. The increase in the cost of your order is recovered by earnings from the Call option.
 So currency hedging helped you negate the losses which you could have incurred in your business due to a decrease in the dollar
value. The decrease in the value of your order is recovered by earnings from the Put option.
Currency risk sharing

Currency risk sharing is a way of hedging currency risk in which the two parties of a deal or a trade agree to
share in the risk from exchange rate fluctuations.
 An agreement to share currency risk between an international seller and buyer to spread out the impact of
currency rate changes is called currency risk sharing. This is done by developing customized hedge in
which the base price is adjusted to reflect certain exchange rates.
 Investors or companies that have assets or business operations across national borders are exposed to
currency risk that may create unpredictable profits and losses.
 By entering into a currency sharing agreement, two or more entities can mutually hedge against those
possible losses.
 Currency risk sharing generally involves a legally binding price adjustment clause, wherein the base price of
the transaction is adjusted if the exchange rate fluctuates beyond a specified neutral band or zone.
Hedging through currency invoicing

In initial phase invoicing, domestic-currency invoicing allows to eliminate transaction risk, much like hedging with an
exchange-rate forward. Invoicing is then a substitute to derivative hedging, and firms would be expected to opt for
the one or the other depending on the relative cost of these strategies.
sophisticated models of invoicing, firms consider transaction risk and economic risk when deciding on the
currency for invoicing. This also makes the decision on hedging more complex. As argued by Friberg (1998), the
existence of forward currency markets may make foreign-currency invoicing more attractive; hedging and invoicing
may become complements.
An exporting firm faced with price-sensitive demand can use foreign-currency invoicing to reduce economic risk
while at the same time eliminating transaction risk through derivative hedges.

During the negotiation of an import contract, if an importer of a country with weak currency get goods invoiced
in domestic currency and the exporter invoice the goods in strong currency, the risk shifts from one company to
the other.
Exposure Netting
The net of payables and receivables is termed as netting. The exposure is reduced, if it is possible to net the payables
and receivables. In this case, the cost of hedge is also reduced.

Exposure netting is the offsetting of exposure in one type of currency with exposure in the same or another type
of currency. The objective of this is to protect against exchange rate risks. The gains or losses from the first
exposure can be offset against the gains or losses from the second exposure.

Companies having subsidiaries in different countries or the parent company having subsidiaries across the globe can
effectively practice internal techniques to minimize foreign exchange exposure and the eventual need for its active
hedging.

Exposure netting is usually carried out by large companies who deal with a huge number of international clients. As it is
not possible to hedge each and every client's currency risks individually, all currencies exposure can be managed as a
single portfolio.
Example Exposure Netting
A US company has exported machinery to a company in Spain for 1.85 million Euro ($2 million USD). The US
company manufactures its machinery in India and owes its supplier Rs.7 crore ($1 million USD), which needs to
be paid in two months' time.
The US company’s exposure is $3 million USD ($2 million USD + $1 million USD). If the US company is aware that
the USD will appreciate over the next two months for sure, it will not need to hedge the risk, as the Euro will
become cheaper. However, if the company fears that the USD will depreciate against the Euro, it will need to
hedge the risk, by locking in the exchange rate through a forward contract.

Benefits of Exposure Netting

1.Exposure netting helps the holistic management of a company's currency risks.
2.Due to this process, various currencies can be managed under a single portfolio, thus saving costs and time
involved in hedging each currency risk.
3.It eases risk management for the company as a whole, especially large corporations with a high volume of
international transactions.
Operating Exposure
Translation Exposure

It refers to gains or losses caused by the translation of foreign currency assets and liabilities into the currency of the parent
company for consolidation purposes.
Translation exposure, also called as accounting exposure, is the potential for accounting derived changes in owner’s equity to
occur because of the need to “translate” foreign currency financial statements of foreign subsidiaries into a single reporting
currency to prepare worldwide consolidated financial statements.
Translation exposures arise due to the need to “translate” foreign currency assets and liabilities into the home currency for the
purpose of finalizing the accounts for any given period. A typical example of translation exposure is the treatment of foreign
currency loans.
Consider that a company has taken a medium term loan to finance the import of capital goods worth dollars 1 million. When the
import materialized, the exchange rate was, say, USD/INRR-55.
The imported fixed asset was, therefore, capitalized in the books of the company at ` 550 lacs through the following accounting
entry:
Debit - Fixed Assets ` 550 lacs Dr.
Credit To Dollar Loan 550 lacs

In the ordinary course assuming no change in the exchange rate, the company would have provided depreciation on the asset valued
at 550 lacs, for finalizing its account for the year in which the asset was purchased.
However, what happens if at the time of finalization of the accounts the exchange rate has moved to say USD/INR-58. Now the dollar
loan will have to be “translated” at 58, involving a “translation loss” of a 30 lacs. It shall have to be capitalized by increasing the
book value of the asset, thus making the figure 580 lacs and consequently higher depreciation will have to be provided, thus
reducing the net profit.
It will be readily seen that both transaction and translation exposures affect the bottom line of a company. The effect could be positive
as well if the movement is favourable – i.e., in the cited examples, in case the USD would have appreciated and the USD would have
depreciated against the rupee.
An important observation is that the translation exposure, of course, becomes a transaction exposure at some stage: the dollar loan
has to be repaid by undertaking the transaction of purchasing dollars.
2nd example,
An Indian corporate has taken a loan from a bank in the US to import plant and machinery worth US $10 million.
When the import materialized, the exchange rate was 62. The imported plant and machinery in the books of the
corporate would be shown as 62 × $10 million = 62 crore and loan at 62 crore.
Assuming no change in the exchange rate, the corporate at the time of preparation of final accounts will provide
depreciation (25 per cent) of 15.50 crore on the book value of 62 crore. If the dollar exchange rate
appreciates to 63, the book value of plant and machinery will change to 63 crore. Depreciation will increase
to 15.75.
crore ( 63 crore × 0.25), and the loan amount will also be revised upwards to 63 crore. Thus, there is a
translation loss of 1 crore due to increased value of loan.
Besides, the higher book value of the plant and machinery causes higher depreciation, reducing the net profit.
Managing Translation Exposure

Since subsidiaries operate in foreign countries, their assets and liabilities are denominated in foreign
currencies and these assets and liabilities are to be translated into domestic currency for consolidation into
parent’s balance sheet for the purpose of annual report.

The procedure to consolidate the balance sheet is regulated by Accounting Standard Boards, but there are four
methods of translation of balance sheet.

 Monetary and non-monetary methods

 Temporal methods
 Current and non-current methods
 Current rate method
(i) Monetary and non-monetary methods: This method helps in differentiating between monetary assets and
liabilities, for example, receivables and payables and non-monetary assets and liabilities, for example, physical
assets and liabilities. Monetary items such as cash, accounts payables, accounts receivables are translated at
the current exchange rate and the non-monetary items like inventory, fixed assets, long-term investments are
translated at historical rates. Income statement items are translated at an average exchange rate during the
period except current receivables and payables related to non-monetary asset liabilities, i.e. depreciation
expenses and cost of goods sold are translated at the same rate as the corresponding balance sheet items. The
advantage of this method is that foreign non-monetary assets are carried at their original cost in parent’s
consolidated statement. This approach is consistent with the practice of original cost treatment of domestic
assets of the parent firm.
(ii) Temporal method: In this method, inventory is translated at the historical exchange rate just like monetary and
non-monetary methods, but it is also translated at the current rate if these are shown in the balance sheet at
market value.
(iii) Current and non-current methods: In this method, all current assets and liabilities are translated into domestic
currency at the current exchange rate. Each noncurrent item is translated at the historical exchange rate. Thus,
in this method, the cash and working capital of a subsidiary after appreciation of the parent’s currency will
result in translation losses and its appreciation will provide translation profits.
(iv) Current rate method: In this method, all balance-sheet and income statement items are translated at the current
rate except equity. If a firm’s foreign currency denominated assets are more than its liabilities, a devaluation
must result in a loss and a revaluation in a gain.
Currency Derivatives - Forfeiting

Forfaiting is a means of financing that enables exporters to receive immediate cash by selling their medium and long-
term receivables—the amount an importer owes the exporter—at a discount through an intermediary. The exporter
eliminates risk by making the sale without recourse. It has no liability regarding the importer's possible default on the
receivables.
The forfaiter is the individual or entity that purchases the receivables. The importer then pays the amount of the
receivables to the forfaiter. A forfaiter is typically a bank or a financial firm that specializes in export financing.
This is how forfaiting works:
1.Communicate with prospective importer - An exporter discusses a potential sale with an importer in need of extended
credit terms.
2. Contact a forfaiter - An exporter should then approach a forfaiter early in the process before pricing negotiations with
the importer. That way, the exporter can build the forfaiting cost into the sale price.
3.Present transaction details to forfaiter - The exporter presents details of the proposed sale and financing to the forfaiter.
Typical details include name of buyer, type of goods being sold, date, duration, and currency of the contract, credit period,
payment schedule, and evidence of debt.
4.Sign commitment letter with forfaiter - Within days, the forfaiter evaluates the transaction and feasibility of the deal and
determines a discounted price at which to purchase the accounts receivable. If the discounted price is accepted, the exporter
signs a commitment letter issued by the forfaiter.
Since this payment is without recourse, the exporter has no further interest in the financial aspects of the transaction, and it
is the forfaiter who must collect the future payments due from the importer
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