It covers payment methods and information on, banking systems, foreign exchange controls, and U.S. and correspondent banking.
Methods of Payment
U.S. firms most frequently provide the Italian buyer with a price quote that includes packing costs, insurance, and freight (CIF or CIP price). The average Italian business representative can then usually determine the charges for customs, taxes, and local transportation to arrive at the importer’s final landed cost. The customary terms of sale in Italy are either cash or net. Sales made on cash terms call for payment before delivery, on delivery, or shortly after delivery — usually within 10 days. A two- to five-% discount is made for payment of the full amount of the transaction at the end of the specified period from one to four months from the date of the invoice. The length of the period depends on the commodity involved, the credit standing of the buyer, and the motivation of the seller. A period of up to two years is often allowed for payment of capital goods, store equipment, trucks, and similar heavy equipment.
Some U.S. suppliers have lost business because Italian firms believe their payment terms are too rigid. Exporters should regard financing as another competitive factor, on par with the product itself, the delivery date, or after-sales service. U.S. manufacturers will be more competitive by allowing accounts to be settled from 60 to 120 days following receipt of the order.
Although originally an Italian creation, the use of irrevocable letters of credit has declined appreciably in Italy in recent years. Because of the growing reluctance of Italian firms to pay high fees associated with letters of credit, U.S. exporters should explore other mechanisms to ensure payment from Italian customers of uncertain credit worthiness, or risk losing the sale. Alternatives include export credit insurance and guarantee programs available through the Foreign Credit Insurance Association (FCIA).
Just as sales offer terms should be clear and detailed, shipment terms should conform to contract specifications and should be consistent with any samples that were sent to the Italian importer. Agreed delivery schedules should be met, as prompt delivery may be a decisive consideration of the importer in placing additional orders. When shipping on letters of credit, all terms specified in the letter of credit must be strictly observed. If all the terms are not followed, the bank may not honor the letter of credit.
For more information about the methods of payment or other trade finance options, please read the Trade Finance Guide available at www.Export.gov/TradeFinanceGuide.
Italy has a well-developed banking and credit system with numerous correspondent U.S. banks. Italian banks are subject to close government supervision, and the Bank of Italy (BOI, Italy’s central bank) must authorize the establishment of any new bank. In November 2014, the European Central Bank (ECB) assumed primary supervisory responsibility for “significant banks” and may exercise supervision over less significant national banks. As of July 2021, there are 11 banking groups in Italy deemed “significant” and therefore subject to ECB supervision.
U.S. firms seeking to finance major portions of their capital investment outside the United States may find capital available in Italy. As of December 2020, there were 474 banks in Italy, 14 fewer than in December 2019. Of these, 82 banks are branches of foreign banks. Currently, the country’s largest private banks, by assets are: Intesa Sanpaolo and UniCredit Group. These two banks combined accounted for over half of total bank assets in Italy and are a principal source of credit information. U.S. bank branches in Italy can also assist in financing capital investment.
Italy’s banking sector has undergone significant consolidation since the mid-nineties, decreasing from approximately 1,000 banks through mergers, takeovers or asset transfers, liquidations or, the conversion of a bank into a financial company, which involved 60 % of total Italian banking assets. The government is taking steps to encourage the consolidation process to continue over the next several years to boost the international competitiveness of the Italian banking sector.
Banks in Italy that have the authority to participate in foreign exchange usually have a U.S. correspondent. Foreign currency transfers and foreign exchange transactions must be channeled via authorized intermediaries (the Bank of Italy). Larger Italian banks usually have branches in one or more U.S. cities.
The Bank of Italy follows euro notes issues, performs credit, financial and market supervision, and regulates bank mergers. The Bank of Italy Governor’s term is for six years in line with European Central Bank (ECB) standards, and the Governor is limited to two terms in office. Banking competition oversight responsibilities are divided between the Bank of Italy and Italy’s anti-trust authority. CONSOB, Italy’s security markets and company accounting regulator, holds authority to raid firms suspected of securities violations and to impound evidence.
A prohibition on non-bank companies (either Italian or foreign) acquiring more than 15 % of a bank’s capital was abolished by the legislature in late 2008, with the aim of implementing a new European directive. Firms have used complex cross-shareholding arrangements to fight off takeover attempts in the financial sector. Still, the presence of foreign intermediaries in the Italian market increased in the last several years.
Foreign Exchange Controls
In accordance with EU directives, Italy has no foreign exchange controls. There are no restrictions on currency transfers; there are only reporting requirements. Banks are required to report any transaction over €1,000 due to money laundering and terrorism financing concerns. Profits, payments, and currency transfers may be freely repatriated. Residents and non-residents may hold foreign exchange accounts. On July 1, 2020, the GOI lowered the limit on cash payments for goods or services to €1,999 (down from €3,000), and the limit is set to fall to €1,999 on January 1, 2022 at the time of publication . Payments above this amount must be made electronically. Enforcement remains uneven. The rule exempts e-money services, banks and other financial institutions, but not payment services companies. Cash deposits of €10,000 and above in banks and other financial institutions may be signaled to the tax authorities who may decide to audit.
Italy is a member of the European Monetary Union (EMU), with the euro as its official currency. Exchange rates are floating.
U.S. Banks & Local Correspondent Banks
Several U.S. banks perform services in Italy through branches, subsidiaries, or representatives. Many U.S. banks provide their commercial customers with services such as bank reports on overseas buyers, assistance for letters of credit, and foreign exchange. Citi (Citigroup), JP Morgan Chase, and Bank of America, as well as numerous smaller, regional banks maintain offices in Italy.