Circular 15/2022: Regulations Governing the Procedures for Opening Letters of Credit

Central Bank of Libya P.O. Box 11103 Telegram Address: Misratiya - Tripoli - Libya

Explanatory: I.M.M/N 804 Circular ARM N No. (2022 / 15) Date: 25 Jumaada Al-Awwal 1444 AH Corresponding: 19 December 2022

To: General Managers of Banks

Greetings...

Subject: Regulations Governing the Procedures for Opening Letters of Credit

Based on the provisions of Law No. (1) of 2005 concerning Banks and its amendments, and the supervisory and regulatory role exercised by the Central Bank of Libya over banks in accordance with the law's provisions,

We hereby inform you of the instructions of the Central Bank of Libya regarding the regulations governing the procedures for opening letters of credit, as follows:

1. Banks are granted the authority to adjudicate applications for opening letters of credit for all goods and services legally permitted for import, provided that a valid banking code (CBL) is available.

2. Banks must exercise due diligence to verify the accuracy of the data related to the party requesting the opening of the credit, and ensure there are no reasons preventing continued business with them before proceeding with the letter of credit opening procedures.

3. A letter of credit shall not be issued until foreign currency is purchased to cover the letter of credit.

4. The upper limit for the value of a single letter of credit for the supply of service goods is USD 3 (three) million or its equivalent in other currencies, for commercial goods is USD 5 (five) million or its equivalent in other currencies, and for industrial goods is USD 10 (ten) million or its equivalent in other currencies. In no case shall a letter of credit for the supply of industrial goods exceeding the mentioned amount be split.

5. In the event that the value of a single letter of credit exceeds the upper limit mentioned above, the matter requires submission to the Banking and Currency Supervision Department for prior approval.

6. The initial invoice must be approved and issued by the exporting or manufacturing company or one of its authorized agents in the registers of the exporting country. At a minimum, it must include all data related to the type, description, weight, quantity, and price of the supplied goods or services, and the country of origin. The beneficiary's account must be in the same country from which the initial invoice was issued, and payment may be made to the parent company's account.

7. The value of the credit must be fully covered by the available balance in the account at the time of requesting the opening of the credit. Banks may provide the necessary financing to cover letters of credit for supplying needs, as per the attached disclosure, in the form of a participation financing structure between the bank and its customer, not exceeding 50%, with the bank bearing legal responsibility regarding the guarantees it deems appropriate to recover its rights.

www.cbl.gov.ly , swift code:CBLJLYLX , +218 21 444 1488 : Fax , +218 21 333 3591 : Phone

Central Bank of Libya P.O. Box 11103 Telegram Address (2): Misratiya – Tripoli – Libya

8. Banks are prohibited from having the authority to open back-to-back letters of credit.

9. No bill of lading presented with a letter of credit shall be accepted if its issuance date precedes the issuance date of the letter of credit, except for bulk commodity letters of credit (BULK). Bills of lading issued up to 10 days before the issuance of the letter of credit may be accepted, provided this condition is included in the letter of credit opening message (MT 700) sent to your correspondents.

10. Obtain prior import permission from the Food and Drug Control Center for importing medicines, medical supplies, and laboratory consumables, to be in the name of the manufacturing company or regional agents in accordance with the provisions of Law No. (23) of 2010.

11. Allow banks to receive land shipping documents for letters of credit for goods of Tunisian origin and enriched wheat, and potatoes supplied via the Ras Ajdir port, according to the controls provided by the Ministry of Economy and Trade in the letter with reference number 5/1/1194, dated 03/07/2021. Also, allow the supply of camels and livestock via land transport from neighboring countries (Niger, Chad, Sudan), and goods of Egyptian origin via the Marsa Al-Salom land border crossing, according to the controls provided in the letter from the Minister of Economy, reference number (1589.1.5), dated 03/04/2022.

12. The party requesting the opening of the letter of credit must provide a document insuring the supplied goods to the issuing bank, based on the initial invoice, issued by one of the insurance companies.

13. Provide an inspection and examination certificate issued by one of the inspection companies. It is required that the inspection company holds a valid banking code (CBL-Key). It is also required that the inspection company provides a statement confirming it has obtained international standard requirements (ISO/IEC17020:2012) and international quality management system standards (ISO9001:2015), and is accredited by the Libyan Accreditation Center. The inspection certificate must be accompanied by photos and analysis certificates issued by accredited international laboratories.

14. The party requesting the opening of the letter of credit must provide the tax payment certificate and the statutory security dues. It is required that they be original and recent, covering the year preceding the opening of the credit.

15. Banks are committed to exercising due diligence regarding the conformity of the data in the invoice with the inspection certificate, health certificate, Libyan standard specifications, etc., and that the prices are consistent with the specifications of the supplied goods and their standard prices. Any party violating this bears legal responsibility.

16. Applications for opening letters of credit must be rejected in accordance with decisions issued by competent authorities regarding the determination of goods prohibited from import or export.

www.cbl.gov.ly , swift code:CBLJLYLX , +218 21 444 1488 : Fax , +218 21 333 3591 : Phone

Central Bank of Libya P.O. Box 1103 Telegram Address: Misratiya – Tripoli – Libya

General Controls:

1. Adhere to and comply with the anti-money laundering and counter-terrorism financing controls stipulated in Law No. (1013/2017).

2. Suppliers are committed to providing original customs declarations indicating that the supplied goods entered official ports in Libya. These declarations must be submitted to banks within three months from the date of receiving the documents. All banks must inform the Banking and Currency Supervision Department of cases where the required customs declarations are not submitted in due time.

3. Banks are committed to exercising due diligence to verify the accuracy of international shipping documents via the International Maritime Bureau's trade information network to reduce risks arising from some parties submitting incorrect documents for letters of credit exceeding one million dollars.

4. Banks are committed to completing the opening of letters of credit for goods and services specified in the license, commercial register, and statutes of the party requesting the opening of the letter of credit.

5. The party requesting the opening of the letter of credit must provide a decision consenting to the Central Bank of Libya publishing the details of the letter of credit they will receive and their commercial register data.

6. Work to mitigate risks associated with opening letters of credit, whether through full or partial coverage, through approval by the bank's supervisory management (Risk - Compliance - Internal Audit - Credit Audit), while activating financing and investment policies in practical application and inquiring about the customer at the Libyan Credit Information Center and the market in which they operate, to achieve sufficient preventive control over various granted financings and accepted guarantees.

7. Banks are committed to including certain data in the bill of lading, such as the ship's number (IMO) and the name of the ship containing bulk goods.

8. Do not approve the value of documents presented for a letter of credit covered by the Central Bank of Libya until the documents are circulated with the bill of lading attached among local documents via the coverage system when uploading the SWIFT message for opening the letter of credit and the claim letter from the covering bank for the payment requested to be covered.

All circulars and periodic messages conflicting with this directive are repealed as of its date.

You are requested to take the necessary measures to implement the controls mentioned above.

Peace be upon you……… Naji Mohammed Issa Director of the Banking and Currency Supervision Department

// To The Governor The Deputy Minister of Economy The Director of the Office of the Head of the Administrative Control Authority The Director of the Office of the Head of the Libyan Court of Audit The Director General of Customs Authority The Director General of Customs Department The Director of Audit Department – Central Bank of Libya The Director of Legal Affairs Department – Central Bank of Libya The Director of Customs Operations Department – Central Bank of Libya The Director of Information Department – Central Bank of Libya Issued to / Branch Managers of the Central Bank of Libya (Benghazi – Sabha – Sirte) The Director of the Libyan Financial Intelligence Unit – Central Bank of Libya The Director of Compliance Department – Central Bank of Libya The Director General of Muamalat Financial Services Company The Deputy Director of the Banking and Currency Supervision Department for Large Supervision and Compliance Follow-up The Deputy Director of the Banking and Currency Supervision Department for Inspection The Deputy Director of the Banking and Currency Supervision Department for Islamic Bureaucracy For Information / Heads of Compliance Units in Banks (For Implementation) For the Dedicated Section in the Inspection and Compliance Department

www.cbl.gov.ly , swift code:CBLJLYLX , +218 21 444 1488 : Phone , +218 21 333 3591 : Phone

Central Bank of Libya P.O. Box 1103 Telegram Address: Misratiya - Tripoli - Libya

Disclosure of Needs of Targeted Sectors for Opening Letters of Credit with Partial Coverage

Industry Sector:

1. Machines and equipment for factory preparation.
2. Raw materials for factories.
3. Cement and asphalt industry mixers.
4. Stone crushers.
5. High-voltage electrical generators 0.5 MW and above.
6. Cold storage coolers.

Agriculture Sector:

1. Agricultural machines and equipment.
2. Poultry and cattle breeding pens.
3. Agricultural seeds and seedlings.
4. Breeding cattle.

Health Sector:

1. Specialized medical equipment and devices.
2. Medicines.

Transport Sector:

1. Aircraft and their spare parts.
2. Public transport buses with a passenger capacity of (15) or more.
3. Cargo transport vehicles with a load of (3) tons or more and graders.
4. Machines, equipment, and spare parts used in road preparation.

Economy Sector:

1. Basic goods (Sugar – Oil – Tomatoes – Ready Flour – Rice).
2. Livestock and meats.

Oil Sector:

1. Machines, equipment, and spare parts used in oil operations.

• This list is updated whenever necessary. Reference / Circular

www.cbl.gov.ly , swift code:CBLJLYLX , +218 21 444 1488 : Fax , +218 21 333 3591 : Phone