Circular dated January 27, 2016 amending the instructions for import operations

Cairo on: 27 January 2016

Dear Sir,

Chairman of the Board of Directors

Greetings,

Further to my letter dated December 21, 2015, regarding the controls for import operations, and with reference to the meeting held at the Central Bank of Egypt headquarters to discuss banks' inquiries regarding those instructions, I would like to inform you of the following:

First: Regarding the first item concerning the execution of import operations based on documentary collections received directly by banks through banks abroad, with no acceptance of documentary collections received directly by customers. In this regard, the following import operations are excluded:

1. Branches or subsidiaries of foreign companies.

2. Live birds and animals.

3. Raw materials, production supplies, and spare parts for factories via air freight.

Second: Regarding the second item concerning banks' obligation to obtain a 100% cash cover instead of 50%, it is worth noting the following:

1. Banks are permitted to obtain the mentioned cash cover in Egyptian pounds, while maintaining appropriate values to face currency fluctuations in the price of goods or in foreign currencies, without violating the maximum foreign currency deposit limit 1.

1 Referenced in the circular letter dated April 23, 2015.

2. The following is added to what is stated in the second item:

a- Import operations carried out through backed deferred shipping documents.

b- The 100% cash cover does not apply to shipments received for import operations for trade purposes carried out on the strength of standby letters of credit (C/L Standby).

3. Exempting import operations for each of the following from the 100% cash cover:

(a) Medical devices, equipment, and supplies.

(b) Spare parts for machines and equipment.

(c) Software, applications, and computer devices and their supplies.

4. Not using the approved credit limits for customers in the local currency granted to customers for trade purposes in providing the foreign currency for import operations in advance, whether those available through Central Bank tenders or from the bank's own sources of foreign currencies.

Third: Regarding the third item concerning the refinancing of import operations, the following must be adhered to:

1. The bank is permitted to refinance import operations for trade purposes that were shipped by a maximum date of December 31, 2015.

2. The permission to refinance the import operations mentioned in item two (3) above.

3. Accepting import operation refinancing operations for commercial goods and production supplies for the purpose of sale to industrial companies (provided there is a contractual relationship with the manufacturer and applying the provisions of the first item), and this is after referring to the supervision and guidance sector for approval for each case individually.

We attach herewith the clarifications mentioned above after adding the decision of the Board of Directors of the Central Bank of Egypt

Issued at its meeting held on December 16, 2015 for your reference.

Please be kind enough to alert regarding taking the necessary action to implement the aforementioned decision.

Yours faithfully,
Tarek Amer

Clarifications of the decision of the Board of Directors of the Central Bank of Egypt issued at its meeting held on December 16, 2015

Regarding import operations, some clarifications were added to the circular letter dated December 21, 2015 within the scope of the decision of the Board of Directors of the Central Bank of Egypt issued at its meeting held on December 16, 2015

for your reference, as follows:

First: Regarding import operations carried out on the strength of documentary collections, the execution of those operations is limited to documentary collections received directly by banks through banks abroad, with no acceptance of documentary collections received directly by customers, and a grace period of one month is granted from the date of application of that. Taking into consideration that the following import operations are excluded:

1. Branches or subsidiaries of foreign companies.

2. Live birds and animals.

3. Raw materials, production supplies, and spare parts for factories via air freight.

Second: Banks' obligation to obtain a 100% cash cover instead of 50% as stated in circular letter No. 86 dated June 28, 2010, and subsequent circulars, as follows:

1. Documentary credits used to finance the import of goods for the account of commercial companies or for the account of government entities, as well as in the case of enhancing a bill of exchange advanced on the strength of supplier facilities for import

The goods are accepted for the account of those entities, or import operations carried out through non-backed deferred shipping documents, or to meet any obligations on the bank, including issuing letters of guarantee regarding import operations for the account of merchants and government entities.

2. Banks are permitted to obtain the mentioned cash cover in Egyptian pounds, while maintaining appropriate values to face currency fluctuations in the price of goods or in foreign currencies, without violating the maximum foreign currency deposit limit 1.

1 Referenced in the circular letter dated April 23, 2015.

3. The 100% cash cover applies to shipments received for import operations for trade purposes carried out on the strength of standby letters of credit (C/L Standby).

4. The exemption from the mentioned cash cover - mentioned in circular letter No. 124 dated September 30, 2010, and its subsequent circulars, the last of which was on May 13, 2015 - is limited to the following import operations:

Drugs, vaccines, and chemical materials for [medical use].

Infant milk.

Medical devices, equipment, and supplies.

Spare parts for machines and equipment.

Software, applications, and computer devices and their supplies.

5. Not using the approved credit limits for customers from banks to pay the mentioned cash cover, including credit facilities secured by commercial or financial papers. This is without using the local currency credit limits granted to customers for trade purposes in providing the foreign currency for import operations in advance, whether those available through Central Bank tenders or from the bank's own sources of foreign currencies.

6. Regarding import operations for importing goods for non-trade purposes, such as what factories import of capital goods or production supplies and raw materials, etc., they are not subject to any restrictions whatsoever except the usual banking rules.

7. The above applies to import operations starting from January 1, 2016.

Third: The permission to refinance import operations for trade purposes that are subject to a 100% cash cover, as stated in the previous item, is not granted through temporary foreign currency credit facilities according to the letter of Mr. Nabil Mahfouz, Governor of the Central Bank of Egypt, No. 9 issued on January 14, 2013. The permission to refinance the following import operations continues:

a- Operations for non-trade purposes.

b- Basic food and supply goods (excluding supply goods).

c- Goods and products mentioned in item two (4) above.

Taking into consideration the following:

1. Banks are permitted to refinance import operations for trade purposes that were shipped by a maximum date of December 31, 2015.

2. Accepting import operation refinancing operations for commercial goods and production supplies for the purpose of sale to industrial companies (provided there is a contractual relationship with the manufacturer and applying the provisions of the first item), and this is after referring to the supervision and guidance sector for approval for each case individually.

3