Documentary collections from exporters will no longer be accepted by banks to facilitate the import of goods into Egypt according to a decision by the Central Bank of Egypt. Importers were previously able to use documentary collections that alleviated the need for cash in advance and were an alternative option for Letters of Credit.
The new regulation now prohibits documentary collections and requires importers in Egypt to use letters of credit as the payment method.[*] From an exporter’s perspective, Letter of Credit (“LC”) offers more protection than documentary collection. An LC shifts the importer (buyer) payment risk to their bank, giving the exporter greater assurance of payment.
Add PNC Confirmation
Although buyer risk is mitigated by letters of credit, Egyptian country risk and bank risk are not. The beneficiary (exporter) may have concerns about the political or economic stability of the buyer’s country, or the strength and reputation of the issuing bank. PNC is equipped to assess ongoing country and bank risks that could emerge during the payment cycle. A U.S. exporter can mitigate these risks by having PNC’s confirmation added to their letter of credit.
Learn more about other Letter of Credit options such as confirmation in our article here.