Meeting with Mr. Gamal Negm, Deputy Governor of the Central Bank of Egypt for Banking Stability regarding the import operations and its financing mechanism
Instructions issued during the meeting:
Locally assembled electronic goods
It consists of a local manufacturing part in addition to the imported foreign component. That foreign component is excluded from the Central Bank's instructions issued No. 49 dated February 13, 2022. Hence, shipping documents are accepted in light of the fact that they are production requirements.
Ministry of Trade and Industry Decision:
Following up on the limit set for private use according to the decision of the Minister of Trade and Industry No. 126 of 2022, imports are released for private use up to 25 thousand US dollars once every 6 months, while more than 25 thousand US dollars are released using Form 4, taking into account compliance with the instructions of the Central Bank issued No. 49 of February 13, 2022 and subsequent amendments
Cash deposits generated from export operations
Accepting the proceeds of cash deposits of companies in foreign currencies resulting from export operations with neighboring countries (Libya - Syria - Sudan - Palestine - Iraq - Yemen) and using them in the implementation of import operations, taking into account the proportion of the value of deposits with the size and nature of the customer's usual activity and the value of documents indicating the export process and the completion of the source of 1) true copy of the customs declaration approved by each of the competent customs 2) General Organization for Export and Import Control Branch 3) Foreign Trade Sector in the Ministry of Trade and Industry, according to the two periodical books issued by the Central Bank on May 13, 2015 & 20/October/2015
The Central Bank is to be referred to in the case of exporting and depositing cash with any country other than the mentioned countries.
Transfers from abroad
Import operations can be carried out by accepting transfers from the accounts of partners or shareholders abroad resulting from dividend distributions abroad for one of the partners/shareholders or increasing the capital of the company in Egypt from the parent company, partners or shareholders abroad or from any other known external source at the discretion of each Bank.
Loans from the mother company abroad
There is no objection to the parent company or the sister company abroad to provide a foreign currency loan to the subsidiary company in Egypt for periods of time from one to five years and use the loan to implement an import operation, provided that:
- the financing period is not less than one year
- that it is evidenced in the financial statements of the two parties
- that the sources of currency with the transferring company are ascertained, and without any responsibility on the bank in managing the maturity, especially if the foreign currency resources are not available with the Egyptian company, through activity on the maturity date.
Goods that have been paid in full to the exporter
- Import operations can be carried out nothing that the value of the receivable is fully paid by the importers until the end of the working day 19 September 2022 provided that the following documents are obtained:
- With regard to the collection documents received by banks through the issuer’s bank, the issuer’s bank sends a SWIFT Message stating the details of the import process to the local bank and confirming that the amount due has been paid in full until the mentioned date 19/September/2022 and all messages are via SWIFT.
- For the collection documents received by customers directly from the supplier, an invoice is obtained from the exporter stating that the due amount has been paid in full until the mentioned date 19/September/2022 through the Cargo X system available to banks through the ACI pre-charge system.
- Documents indicating the arrival of goods at the customs port in Egypt
Outstanding foreign currency balances available in local banks
Import operations can be carried out using the outstanding balances of foreign currencies in local banks )even if it is not resulting from the main activity or operation of the company (or partners, shareholders, parent company, subsidiary or sister companies in the implementation of import operations requests - and without referring to the Central Bank - in accordance with the following determinants:
In case foreign currency balances are available in the importing company's account (at the bank that holds the transaction), the import process can be implemented directly. This is valid for balances available in company’s account till the end of work day on September 19/2022 only.
In case foreign currency balances are available in the account of any of the partners, shareholders, parent company, sister or affiliated companies existing in local banks (at the bank that holds the transaction) until the end of workday on September 19, 2022, import operations can be carried out using these balances, provided that they are sold to the bank first and the bank resells them without a margin of sale or purchase.
In the event of existing balances in other local bank accounts for each of the company/client, partners, shareholders, parent company, sister or subsidiary companies the amounts are transferred to the bank that maintains the suspended import operation, with the confirmation through the transferring banks through SWIFT that the transferred amount was deposited before or no later than on 09/19/2022.
In the coming period, it is not possible to carry out import operations using company account balances in foreign currencies or from the accounts of partners, shareholders, parent company, sister or subsidiaries existing in local banks.
It came to the knowledge of the Central Bank that some banks accept cash deposits in foreign currencies from natural persons for the account of Egyptian companies, however, this is no longer acceptable from the CBE and any bank that proceeds with such transaction will be penalized.
Frequently asked Questions (FAQs):
- What is meant by branches of foreign companies and their subsidiaries?
Subsidiaries are Egyptian companies affiliated with foreign companies abroad, in which the percentage of the foreign partner’s contribution is more than 50%, whether direct or indirect.
- Regarding the exemption for foreign companies branches and their subsidiaries, what is the scope of implementation in case that the parent company is a foreign company, and the subsidiary company is an Egyptian joint stock company, and what is the classification of those foreign companies?
The exception is limited to the scope of import operations from the parent company and its groups only and the dealings of branches of foreign companies as well as subsidiaries of foreign companies.
- In the case that the foreign group owns less than 51% however they have management control over the Egyptian company would the exemption applies to them?
No, they would have to use letter of credit only.
- What about the companies established particularly to import from the parent group on behalf of foreign companies operating in the local market, noting that these companies are subject to actual control by foreign companies?
If the ownership is more than 50%, they are exempted from the decision.
- Are the authorized/ accredited agents of companies such as “car dealerships” considered among the exempted companies?
No, they would have to use letter of credit only.
- Are foreign companies that import through customs clearance companies or intermediaries exempted, where the documents are in the name of the foreign company, but the broker uses the import card to issue a form (4)?
Since the documents are in the name of the foreign company and that the import is within the scope of import operations from the parent company and its groups only, then the import process falls within the framework of the exception granted to foreign companies and their subsidiaries and can be done through cash against documents.
- In case the sister company/parent company imports from several countries and transfers documents to its subsidiaries in several countries, will it be required to open letter of credit for the sister/parent company?
The exception is for subsidiaries, namely Egyptian subsidiaries for foreign companies abroad, in which the foreign partner has more than 50% whether direct or indirect, and the import scope is from the parent company and its groups only.
- If free zone companies import in their favour (import from outside Egypt), do these instructions apply in such a case?
As for the companies that work under the free zone system and their import processes undertaken through direct remittances without having to issue Form 4, will such transactions be carried out as usual, or do they entail also documentary letters of credit?
Any import or purchase for the local market from free zones in EGP or foreign currencies will be through documentary letters of credit. - As for the external free zone transactions, they will follow the regular measures already established prior to issuing the decision.
- In the case of the presence of a sister company to a free zone company- that is not of freezone nature- and imports from it does it need letter of credit?
Transaction will be through only documentary letters of credit.
- Is it permissible to continue accepting cash against documents from companies of a private nature or that do not issue Form 4 (for example: petroleum companies / free zone companies / special economic zones)?
Transaction will be through only documentary letters of credit with an exception for border trade.
- In case a client requests transferring advance payments while undertaking to open credits later, will this be in compliance with the instructions issued or not?
Import processes will be implemented through documentary letters of credit and transfer of advance payments will be in accordance with the clients previous business methods already established prior to the issuance of the decision.
- There are goods stacked delayed in the ports (especially China) and shipping is carried out successively due to the lack of containers and their documents will be received after the date of the decision, will Form (4) be issued to them?
The Central Bank of Egypt needs to be provided with the details of each case individually.
- What happens if customer made an advance payment through cash against documents in part or in full before the issuance of the decision –but the goods have not been shipped, or will be shipped after the date of the decision?
If the advance payment is 100 % before the issuance of the decision, the import process can be completed through cash against documents according to the customer’s request (actual implementation as of 22.02.2022). If the advance payment is partial payment and before the issuance of the decision, the import process is completed by opening a letter of credit with the remaining amount and the documents are in full value. (Example: 20% down payment paid, Letter of credit is opened with 80% and the shipping documents must be received in full value of the import process)
- Does the decision apply to companies that import through the Draw Back system?
Exempted and shipping documents are accepted.
- Are the avalized collection documents from the bank treated as letters of credit specially that collection documents have the same nature as the general obligation?
Avalized collection documents aren’t treated as letters of credit and LCs should be opened.
- Are government entities excluded from the decision of February 13, 2022?
No, they also need letters of credit.
- What is the status of what has been shipped / will be shipped after the issuance of the decisions and the goods in the ports?
If the shipment is made before February 22, 2022, the documents are accepted and the import process is carried out through collection documents, but if the shipment is made as of February 22, 2022, the central bank will need to be provided with the details of each case separately.
- Electronic goods assembled in the ARE are composed of a local production part + an imported foreign production part, most often transaction is through documents of collection upon the principle of good faith between the two parties؟
Transaction will be through only documentary letters of credit.
- Some customers have been informed about the import operations registered on the CargoX system. Don’t need letters of credit?
The CBE should be notified of the details of each case individually
- Is it permissible to exclude companies owned by legal entities established abroad by Egyptians?
No, it’s not, only letters of credit are accepted.
- What is the status of non-commercial transfers such as shipping expenses, insurance, software for example?
It is carried out by direct transfers, as they cannot be implemented as a letter of credit according to their nature.
- Is air freight considered within the definition of courier/ express mail?
Air freight is not necessarily express mail
- Is an Egyptian limited liability company established for the purpose of importing veterinary vaccines for a foreign company established in Egypt entitled to work with cash against documents instead of letters of credit as the investment law does not allow companies owned by more of 51% contribution for non-Egyptians to have an import card.?
Vaccines and serums are excluded.
- What is the status of importing companies (commercial/industrial) with a legal structure (Egyptian joint stock company) and owning exclusive distribution contracts or franchise agreement for foreign companies? Is it possible to continue using documentary collection?
Only letters of credit are accepted.
- With regard to the proposed facilities to support companies in switching to use letters of credit within established limits and credit facilities from the banks, please explain whether is it possible to approve the provision of such facilities depending on the study of customer behaviour with their suppliers during the transactions with the bank and before completing some of the special requirements of credit grants, (including field inquiry, Associated parties form , the original of a recent commercial register..... Etc.). And the extent to which this is consistent or inconsistent with the credit granting regulatory instructions for the purpose of opening letters of credit without cash cover and/ or partial cash cover.
A risk guarantee programme will be used with Credit Guarantee Company in accordance with the letter of Mr. Deputy Governor No. 55 of 20 February 2022 in case the client does not enjoy credit facilities on the level of the banking sector
- What is required in import operations for government agencies funded from abroad (IFC / EBRD / AFREXM) in return for a risk guarantee? Or in the case of our bank as a local agent?
There is no relationship between financing and the payment mechanism
- In the case of import for private use (Form 6) is the import continued through the collection of a document or should a letter of credit be opened?
Excluded and documents of shipment will be accepted.
- In case a certified agent in Egypt of a foreign company requests cargo substitution in the context of the guarantee on the cargo imported from such foreign company, will the decision apply?
Excluded and documents of shipment will be accepted.