Letter of Credit Requirement for Egyptian Importers
Importers and exporters must be in compliance with Customs Law no. 207/2020 as of March 2022. Importers must also be aware that the Central Bank of Egypt (CBE) issued a Decree no. 49/2022 replacing the use of the “cash against documents system” with letters of credit. The only exceptions to the new rule are subsidiaries and branches of foreign companies importing goods from their parent company and its affiliates and cargo that has been loaded before the issuance of the decree. Decree no. 49/2022 entered into force on March 1st.
A letter of credit is defined in Article 341 of Commercial Law no. 17/1999 as “The bank undertakes by virtue of a contract to open a line of credit upon the request of one of its clients (named the requestor/buyer) to the benefit of another person (named the beneficiary/seller) to guarantee the documents which represents the cargo shipped or that will be shipped”. Thus, the parties are the buyer/requestor, the seller/beneficiary, the issuing bank, and the receiving bank. Letters of credit are always irrevocable unless agreed otherwise; in such a case, the issuing bank is always committed before the beneficiary.
Letters of cred require loan facilities for which some traders won’t be eligible. The CBE issued Decree no. 55/2022 establishing the Credit Risk Guarantee Company (“CRG”) targeting ineligible bank clients covering 100% of the risks that might arise from such process. Contact Hegazy and Partners to learn how corporate restructuring may help your import/export business gain an exception to the new CBE Decree no. 49/2022.
On 8 March 2022, the Notary Public Authority issued Technical Leaflet no. 8/2022, based on Resolution no. 1127/2021 as decreed by its internal committee.
The instructions clarify the status of documents signed by foreigners officially residing in Egypt and authenticated by embassies and consulates.
In order for such documents to be subject to the new regulations, the foreigner’s Egyptian residency must be indicated in the documents.
The Notary Public Authority distinguishes official documents from powers of attorney (POAs).
- Official Documents
Any official documents authenticated by foreign consular authorities in Egypt for their citizens in accordance with the applicable foreign law and include a provision permitting the document’s execution abroad shall be considered as foreign documents. Such documents can be used as evidence but do not have executory power until they are executed in accordance with Civil and Commercial Procedures Law no. 13/1968.
- Powers of Attorney
Power of attorney issued before the consular authorities in Egypt between the holders of the nationality to which the consuls belong takes the ruling of the power of attorney issued before the foreign authorities and can be used in Egypt once authenticated by the Egyptian Ministry of Foreign Affairs, and the concerned persons may deposit them in the notary public offices and branches and extract copies of them whenever they wish to do so.
The Ministry of Supply and Internal Trade issued Ministerial Decree no. 49/2022 regulating the sale and government purchase of wheat in Egypt to promote the country’s self-reliance in light of the ongoing conflict between Russia and Ukraine, Egypt’s two largest wheat suppliers. Government buyers include the Egyptian Holding Company for Silos and Storage, General Company for Silos and Storage, milling companies affiliated to the Holding Company for Food Industries, and the Egyptian Agricultural Bank. The decree entered into force on March 17th.
The decree sets a new wheat purity requirement at 23.5 for wheat sold to government buyers. Additionally, all the owners of the wheat crops from the 2022 harvest season sell a mandatory 12 ardebs for each acre of registered agricultural wheat fields. Government buyers are now obligated to pay the farmers who supply the specified quantities within a maximum of 48 hours from the date of the quantities’ receipt.
Moreover, the owners are no longer able to sell the rest of the wheat without a license issued by the Ministry of Supply and Internal Trade, and such license should include the quantities, the purpose of purchasing, and the approved storage places.
Finally, those who sell at least 90% of their total 2022 wheat harvest to government buyers and who hold of more than 25 acres of wheat crops, will obtain subsidized fertilizers for the summer planting season. Individual and corporate wheat farmers may contact Hegazy and Partners for more information concerning the procedures to obtain a wheat sales license or for legal assistance concerning any payment disputes arising from the sale of wheat to government buyers.