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Wednesday, 31 August 2022

Light at the end of the tunnel?

Goods that have been piling up at Egypt’s ports are expected to be released in the “coming days” as the government rolls out a basket of measures to clear shipments that have been held up at customs, the Finance Ministry statement. The measures promise a measure of much-anticipated relief for importers — including manufacturers and retailers — who have been struggling to get their hands on raw materials and finished products as the nation struggles with a shortage of foreign currency.

Fast-tracked customs clearance + fine exemptions are coming: Importers who have finalized all their customs procedures, except for processing the Form 4 customs document, will be able to receive their shipments from customs, Finance Minister Mohamed Maait said. Importers and investors facing delays in finalizing their customs procedures because of paperwork will also be exempt from custom fines, Maait said. He didn’t specify how long this exemption will remain in place, saying only in the statement that the measure is meant to alleviate cost burdens on importers that they would pass on in the final ticket price of their products.

Form 4? Once they pay all their customs fees and get a waybill, importers are required to file Form 4 with a bank to receive either a letter of credit (L/C) or to finalize the process of documentary collection. Form 4 includes data on the importer and imported goods, including its origin and time of importation. It should also include all expenses related to the shipment, including value in FX, customs value, and the financing source. Banks then issue an L/C based on Form 4.

Based on the new decision, importers will now be able to get a temporary statement from their bank that it is processing their Form 4 to clear their goods at customs. The Customs Authority will then coordinate with banks directly to receive the L/C at a later date.

What remains unclear: Where the FX to clear these goods from customs is going to come from. As we’ve noted before, resolving the FX crisis is top of the priority list of the new central bank governor, Hassan Abdalla, who has been meeting this week with senior figures in the banking industry and the cabinet as the state looks to ease the import crisis. But until Abdalla knows where a significant influx of greenbacks are coming from (a fresh IMF loan, a reversal of capital outflows, and / or new FDI commitments), unlikely will not be lifted entirely — expect the current measures to apply only to shipments presently stranded in customs.

As for other goods that are still being held up: Shipping agencies will now be allowed to store imported goods pending customs clearance at the country’s dry ports or warehouses outside customs ports. This would mean that importers avoid paying demurrage, which is charged by shipping agencies in USD for leaving containers at the port, Mohamed El Bahy, head of the Federation of Egyptian Industries (FEI)’s customs and tax committee, told Enterprise. The shipping agencies would only issue delivery orders upon guarantees provided by customs on their dues, according to the statement.

Importers are also getting more time to process their shipments before they’re deemed “abandoned”: Food shipments will now have four months and non-food products will have a six-month grace period before authorities deem them as “abandoned” goods. Since 2020, authorities have imposed a one-month time limit for food and non-food products to remain at customs before they are deemed abandoned. Abandoned goods are usually held by the state, and sold later at auctions.

When is all this happening? The Customs Authority will begin implementing most of the measures immediately, Maait said in a televised interview last night (watch, runtime: 1:13:34). The Central Bank of Egypt (CBE) has “promised” to start using “Form 4” to release shipments “within days,” he said.

Industry reax: A good first step. Industry players we spoke with believe these measures are a step in the right direction, though obviously not enough on their own to resolve the crisis. “This is a good step that means we’re back on track. Yet, this is still not enough. We want more from the CBE and finance, trade and industry ministries,” El Adly said. “Words need to be translated into action [on ground].” Likewise, Emad El Qenawy, head of the importers division at the Federation of Egyptian Chambers of Commerce (FEDCOC), told Masaa DMC (watch, runtime: 7:31) that the move will help to address shortages and stabilize prices, but that allowing documentary collection would be the best decision for the central bank to take.

In context: The new measures come amid a wave of speculation in the business community on how policymakers could streamline requirements to use L/Cs for some categories of imports. The restrictions have been in place since the spring as the nation has struggled with a shortage of foreign currency. The restrictions have made it more difficult to obtain raw materials, leading to a “paralysis” in manufacturing, Bahaa El Adly, the head of the FEI’s electrical appliances division, told Enterprise. Some factories have suspended operations altogether, others are seeing a near halt in production, while others have slashed production capacity.

Have you gotten your car yet? There are no more than 2.5k cars currently stuck in ports, FEDCOC member Ahmed Shiha told Ala Mas’ouleety (watch, runtime: 3:31). Automotive players had said last week that nearly all the cars marooned in ports were released — though this was said to be just enough for the deliveries to the people that have already ordered their vehicles. Some 29k cars were said to have been stuck in ports as of May.

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