The Economic Committee at the Egyptian House of Representatives has preliminarily approved the draft amendments to the Importers Register Law no. 121/1982 suggested by the Ministry of Trade and Industry, in collaboration with the Federation of Egyptian Chambers of Commerce. The draft law aims at regulating the importation business in Egypt, establishing a competitive and transparent market, curbing importation of 'low quality' commodities, and encouraging prudent investors to pump in investments in such sector without restrictions related to their nationality. Riad & Riad has been invited by several commercial chambers and business associations to explore insights and comment thereon. We summarize below the main characters of the prospective law:
Remove the Foreign Nationality Prohibition
In a significant step towards liberalizing the Egyptian market, the prospective amendment removed the aged requirement that an importation company must be fully owned by Egyptian nationals. According to the draft law, an importation company, whether it is a limited liability or a joint stock company, can be fully owned by non-Egyptians. The only requirement is for the company to have an Egyptian manager who has successfully passed the training courses to be determined by the Ministry of Foreign Trade.
Increase the Minimum Capital Requirement
The draft law has increased the minimum capital threshold for importation companies. A limited liability company must have a paid up capital of 2 million Egyptian pound, while a joint stock company must have an issued capital of 5 million Egyptian pound. This is in addition to another requirement that a company must have a minimum previous experience in the Egyptian market for at least one year with a business turnover of at least 5 million Egyptian pounds for the last year.
Require Cash Insurance Deposit
An importation company shall be required to deposit a cash insurance amount to be refunded upon expiry or termination of the importation license. The insurance amount for companies is EGP 200,000.
Impose Severer Sanctions
The draft law imposed harsh penalties to be imposed on violating importers. A penalty of imprisonment for a period not exceeding one year and a fine not less than EGP 50,000 and not to exceed EGP 500,000 shall be imposed on importers who commit any of the following:
- Import goods without having an importation license.
- Provide in bad faith, misleading information to the authorities
- Use inaccurate information about the importation transactions in any correspondences, documents or communication.
- Refuse to provide the competent authorities the required information about the imported shipment, its warehouses and distribution, as well as the sale or distribution invoices; this is without prejudice to the commercial data protection rules. For importation companies, a senior executive may be punished by the same penalties if it is proven that such senior executive was aware of the violation and breached one of its duties in a way contributing to the occurrence of the violation. The senior executive in this case will be jointly liable with the company for the payment of the imposed fines. It is worth mentioning that the Economic Committee decided to return the draft law for the Cabinet to reconsider removing the imprisonment penalty and instead increase the fine bracket to be from fines from EGP 500,000 to EGP 5 million.