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Thursday, 17 February 2022

We have more details on the CBE’s new import rules

Details on CBE’s new import rules outline exemptions for some goods + small shipments: Imports of goods worth up to USD 5k (or the equivalent in any other foreign currency) will be exempt from the Central Bank of Egypt’s (CBE) decision requiring importers to get letters of credit (L/Cs) for their purchases, according to a Federation of Egyptian Banks (FEB) statement carried by Masrawy and several other local outlets. The decision also exempts shipments delivered via express post, according to the statement.

The CBE is also exempting from the decision the import of meds, vaccines, and the active ingredients required to manufacture them locally. Imports of tea, meat and poultry products, fish, wheat, oil, milk powder, baby formula, fava beans, lentils, butter, and corn are also not subject to the new requirement.

The new rules will come into effect next Tuesday, 22 February, according to the FEB. The CBE had previously indicated that the decision would be implemented from the beginning of March.

Importers should be able to switch to L/Cs without extra bank fees: Banks must lower the fees for issuing L/Cs to match those for the existing process of documentary collection, according to the FEB statement. Banks are also required to raise credit limits for existing customers and set new limits for new customers, depending on their import volumes. The FEB is also instructing banks to provide L/Cs to all customers who request them as quickly as possible.

Refresher: The CBE issued over the weekend new regulations that require banks to begin only accepting letters of credit to facilitate the purchase of imports, and to no longer accept documentary collection from exporters. L/Cs ensure exporters that the bank will pay them if the importer defaults for whatever reason, offering exporters more protection. Trade and industry organizations had objected to the move, suggesting that it would drive up the price of goods in the local market and hurt the competitiveness of Egyptian exports. Among the challenges presented by the decision: Complexity for SMEs unexperienced with navigating the bureaucracy needed to obtain an L/C — and a cashflow hit for importers of all sizes, given banks typically freeze funds in importers’ accounts equivalent to the full value of the L/C until the L/C is wound down.

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