New Import Rule controlling the quality of goods entering Egypt

There's a new rule issued by the Central bank of Egypt that aims to control the quality of the goods entering the country, and it allows banks to be an intermediary in foreign transactions.?

The Central Bank of Egypt (CBE) decided to work with Documentary Credits for import operations instead of the Documentary Collection procedure at the beginning of March 2022. Therefore, importers must use letters of credit for their foreign transactions, and no other payment methods are allowed.

The government considers that the new rule controlling the quality of the imported goods is essential to protect the local industry and citizens' health. Moreover, it aims to govern the import procedures, complement the pre-registration system of shipments, and eliminate the importers' excessive profit margins.

Economic analysts believe that this decision is to control the exit of foreign currency as the government fears a decrease in its foreign currency reserves.?

Documentary credit will give banks a more prominent role in importing goods as they will be grantors and intermediaries in foreign transactions. The new decision will deprive importers of using payment methods offered by suppliers to pay their debts in installments or postpone payments which will lead to better financial health.? In addition, it is expected that the documentary credit process will cause delays in the completion of transactions.

What is the impact of the new rule on foreign suppliers?

Transactions that occur after the 1st of March 2022 will fall under the new rule, and documentary credit will be applicable. The new rule gives suppliers more guarantees to be paid in one lump sum of the total debt amount. The transactions will be delayed as the law enters into force without prior notice. Banks are not fully ready to apply this new rule on the importation scale.??

Exceptions

Branches of foreign companies and their subsidiaries are excluded from the new rule. The CBE has clarified that these are Egyptian companies affiliated with foreign companies, but the foreign shareholder should own more than 50% of the company's shares.[

These companies were excluded from the new rule within the scope of import operations from the mother company and its subsidiaries.

Goods excluded from the rule: shipments received by express mail, transactions up to USD 5,000.00, or their equivalent in foreign currencies. Goods excluded from the law are drugs, serums, chemicals, tea, meat, poultry, fish, wheat, oil, powdered milk, baby milk, lentils, butter, and corn.

Written by Elhassan Ibrahim

*This article is informative and is not to be used as legal, economic, or commercial advice.

Sources: BCC, Central Bank of Egypt