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Sunday, 6 March 2022

CBE issues updates to its L/Cs FAQ sheet

CBE issues updates clarifying new import rules: The central bank on Thursday issued updates (pdf) to its responses to importers’ questions about new rules requiring them to get letters of credit (L/Cs) for their purchases.

What new rules? As of the beginning of March, banks have stopped documentary collection as part of the import cycle after the CBE instructed banks to only accept letters of credit. The central bank has in recent weeks announced moves to ease the transition after pushback from trade and industry organizations who said it would drive up the price of goods in the local market and hurt the competitiveness of Egyptian exports.

The updates include clarification on downpayments to foreign sellers: The CBE will continue to allow importers to send downpayments on shipments to foreign suppliers through banks, if that was their previous arrangement. However, importers will also need to open an L/C for the remaining amount owed to foreign sellers.

And on the status of freezone companies: Any trade between the local market and freezones — whether in EGP or foreign currency — need to be done using L/Cs but transactions between freezones and overseas companies do not.

L/Cs aren’t necessary for some types of cross-border trade: Cross-border trade conducted by companies who are already exempt from filing certain CBE import paperwork — like firms in special economic zones and oil companies — is exempt from the new rules, according to the CBE. All other forms of trade by these companies will require L/Cs.

BACKGROUND- The CBE had previously announced exemptions for temporary imports and imports for re-export, imports by foreign companies, those made via express shipment, imports of goods worth up to USD 5k, and a raft of commodity and pharma imports.

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