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.