At present, Egypt's trade deficit is nearly 40 billion US dollars, and its government has begun to constantly ponder some ways to reduce imports and increase exports.
In response to capital outflows, the Central Bank of Egypt suddenly allowed commercial banks to set their own foreign exchange rates, allowing the Egyptian pound to depreciate against the US dollar. Its statement said that the central bank attaches great importance to exchange rate flexibility and its role as a shock absorber, hoping to keep Egypt's economy competitive.
This decision superimposed the decision of the Central Bank of Egypt to raise interest rates, which caused the Egyptian pound to plummet. On March 21, the exchange rate of the Egyptian pound against the US dollar fell sharply, from 15.7 to 1 the previous day to 18.2 to 1 at the close of the day, a drop of more than 16%, a record high. A record drop in more than 5 years.
This is not the first time Egypt has staged such an operation. Old foreign trade in the Egyptian market may remember 2016. On November 3 of this year, the Central Bank of Egypt announced that it would allow the exchange rate of the Egyptian pound to float freely in order to get rid of the domestic economic difficulties and better Fulfill loan commitments with the IMF. On the same day, the exchange rate of the Egyptian pound against the US dollar fell from 8.8 to 1 to 13 to 1, a decrease of 48%.
For importers, the plunge in the local currency against the US dollar means that import costs have risen sharply, which will reduce their willingness to purchase, not to mention the "new obstacles" that Egypt has recently introduced frequently on imports.
ACID Mandatory New Regulations
On October 1, 2021, its important new import regulation "Advanced Cargo Information (ACI) declaration", the forecast cargo information regulations, came into effect:
It is required that for all imported goods in Egypt, the consignee must first forecast the goods information in the local system to obtain the ACID number and provide it to the consignor;
Chinese exporters need to complete the registration on the CargoX website and cooperate with customers to upload the necessary information.
In order to continue to export to Egypt smoothly, how many Chinese companies have repeatedly operated on certification.
The latest development is that the Egyptian government is planning to expand the application of this system to air customs clearance!
Full demand for payment by letter of credit
On February 14, the Central Bank of Egypt announced that from March, Egyptian importers can only use letters of credit to import goods, and instructed banks to stop processing exporters' collection documents.
Now the payment methods of our well-known Egyptian customers are mainly D/P and L/C.
In 2016, Egypt promulgated a regulation that "Bills of lading, invoices, certificates of origin and other documents must be delivered to the bank of the destination country through the exporter's bank. If the owner sends it directly to the Egyptian buyer or the buyer's bank will be rejected", That is to say, it is mandatory for our export enterprises to complete the trade through bank presentation. The complexity of the process and the cost are much higher than the previous wire transfer.
The new regulations now restrict that Egyptian importers can only pay by letter of credit, which is to facilitate the Egyptian government to strengthen import supervision and reduce dependence on foreign exchange supply. Currently, the Egyptian Commercial International Bank (CIB) three-month basic import letter of credit costs 1.75%, while the import documentary collection system fee is 0.3-1.75%.
Also, not all Egyptian importers have the ability to issue letters of credit.
After the announcement of the decision, the Federation of Egyptian Chambers of Commerce, the Federation of Industry and Importers filed complaints one after another, believing that this move would lead to supply problems, raise production costs and local prices, and would have a serious impact on small and medium-sized enterprises that are difficult to obtain letters of credit. Call on the government to consider carefully and withdraw the decision. But it was rejected by the governor of Egypt's central bank.
In the end, they eased only some of the restrictions, excluding essentials such as wheat, corn, beans, poultry, milk powder, chemicals and medicines from the list of imported goods to which the new payment rules apply.
So far, foreign trade people who were used to exporting D/P foreign exchange to Egypt must now immediately understand the precautions for foreign exchange collection by letter of credit. For countries like Egypt, they should pay special attention to the "pit":
There are many twists and turns in the letter of credit, and money will be deducted for discrepancies. In the end, it is better to deduct more than to earn more.
The "junk" issuing bank may have various unimaginable illegal operations, and there is a risk of collection.
Adjustment of import tariffs on some products
In recent years, in order to encourage national industries and enhance the competitiveness of Egyptian products in the global market, the Egyptian government has been adjusting tariffs.
In January 2016, the Egyptian government temporarily raised import tariffs on non-essential and luxury consumer goods to 20%-40%;
In December 2016, Egypt issued a presidential decree, announcing to increase the tariff rate of 320 kinds of imported goods;
In September 2018, Egypt again adjusted tariffs on a large scale, and the list involved 5,791 items;
In November 2021, Egyptian Finance Minister Mohamed Maait confirmed that Egypt has recently made adjustments to its customs tariff policy. The Ministry of Finance introduced in a statement that after the House of Representatives approves Resolution No. 558 of 2021, customs tariffs for some categories of products will appear. Variety. Among them, a 5% tariff will be levied on photovoltaic cells imported as final products and a 10% tariff on imported mobile phones to stimulate the local information technology industry. Computers and their accessories and "tablets" are still exempt from taxation.
At present, the tax rate on imported goods from Egypt remains between 5% and 40%, and the tariff levied on imported goods from China is mostly around 30%, causing certain pressure on Chinese importers.
Mandatory promotion of electronic VAT declaration
In addition to the above measures, the Egyptian government is also forcing the electronic declaration of VAT: domestic businesses must declare and fill in electronic VAT documents online.
This measure started in the first quarter of this year, and it is a large fee for merchants. The reason why the government has taken these measures one after another is that there are needs for taxation, foreign exchange control and online data management. The ultimate goal The import substitution policy should still be implemented.
