Domestic Correspondent Report: Egypt's New Importation Process

Domestic Correspondent Report

Within the framework prescribed by Egypt’s Council of Ministers on governance of the importation process and activation of a pre-registration system for shipments which became mandatory on 1 March 2022, the Central Bank of Egypt (CBE) has stopped dealing with documentary collections backing import operations and instead mandate use of documentary credits only as of this date. Exceptions exist for branches of foreign companies and their subsidiaries and banks are permitted to accept documentary collections related to goods already shipped prior to this decision.

To mitigate adverse effects of its decision, CBE launched an initiative in mid-February to guarantee the import operations of banks to cover risks associated with documentary credits issued by Egyptian banks as of 22 February 2022 and going forward. The initiative was directed at bank customers with previous dealings for imports through documentary collections only and from an existing bank relationship.

The credit risk guarantee company guarantees a bank’s portfolio under the initiative for 100% of the unsecured portion of those documentary credits and banks are exempt from paying the guarantee risk commission for six months from the date of activation of the initiative. The credit risk guarantee company will keep banks informed of the specifics and framework of the initiative.

On the other hand, CBE stressed the importance of a bank’s commitment to provide the credit risk assurance company with the necessary data on its portfolio on a weekly basis and requirements to be shared by the company. Moreover, CBE made some exceptions to its decision by exempting certain items from application of its importation decision. Exceptions include:

• Shipments received by courier;
• Shipments valued at less than USD 5,000 (or equivalent in other currencies);
• Medicines/serums, and their related chemicals;
• specified foods including tea, meat, poultry, fish, wheat, oil, powdered milk, baby milk, beans, lentils, butter, corn.

In addition, other procedures in place to support the importation of goods via documentary credits aim to:

• Increase existing credit limits for customers and open credit limits to new customers in proportion to the import volume of each customer; and
• Reduce all documentary credit commissions by all banks to be the same as documentary collections commissions.