Last Sunday, the Central Bank of Egypt issued a decision to stop dealing with collection documents in the implementation of all import operations and to work with documentary credits only, as of next month.
The Central explained that the decision comes within the framework of the governance of the import process and the activation of the pre-registration system for shipments, which will be applied compulsorily as of the beginning of next March.
The Central Bank’s decision excluded branches of foreign companies and their subsidiaries, and allowed banks to accept collection documents received for goods that had already been shipped before the issuance of this decision.
Tarek Amer, Governor of the Central Bank of Egypt, said that the rules of import regulation that were announced are irreversible and no amendments will be made to them, stressing that Egyptian banks are ready to implement the new procedures efficiently.
In press statements, Amer called on businessmen to expedite the reconciliation of their situations and not waste time in controversy that has nothing to do with the stability of Egypt’s foreign trade and the soundness of its performance.
The difference between collection documents and documentary credits:
First, a documentary credit is a payment method that protects the seller (exporter) and buyer (importer) in a contract of sale. Cargo shipment completed.
An agreement is reached between the importer and the exporter, a contract is made to this effect and a pledge to pay through documentary credits.
The importer also opens a documentary credit in his own bank, in favor of the exporter.
Then the bank begins to study the client’s request and the terms of dealing between them, then the request is approved and the credit is sent to the bank (the country of origin).
The bank dealing with the exporter informs him that the documentary credit has been received from the importer’s bank, adding its reinforcement to that when necessary.
Then the exchange takes place between the exporter and the master of the ship where the exporter gives the master of the ship the shipment and takes the shipping documents.
As for documentary collection, the exporter sends the documents and shipping documents to the importer’s bank, which in turn verifies the conformity of the documents with the terms of the documentary credit, and then the price of the goods is sent to him.
The documents are sent to the importing bank in which the documentary credit was opened after completing the payment according to the agreement between them. The importer receives the goods after delivering the shipping documents to the shipping company’s agent at the port of destination.
The two banks will permanently liquidate the relationship and make hedging arrangements.