Currency Limitations For Ukrainian Importers

Vasil Kisil & Partners, Kyiv, Ukraine, 
Wed, Feb 25, 2015

1. Restriction on Foreign Currency Purchase with Borrowed Funds

Currency payments under importcontracts may now be made only at the expense of own but not borrowed funds.Particularly, for the purposes of servicing such contracts authorized bankswill not be able to purchase foreign currency upon the instructions of thosecustomers who are paying for it with the borrowed funds.  

2. Restriction on Advance Payments without NBU Approval

Authorized banks are now requiredto execute settlements under import contracts with the total amount exceeding USD 50,000.00 accordingto the following procedure:

1. To create a register of advance payments under such import contracts with the total amount exceeding the specified limit (the “Register”). There are currently no legislative requirements set with regard to the form, content and formation procedure for such Register, which may result in payment delays or even settlements suspension.  Moreover, two payment transactions under the same or different import contracts executed with the exact foreign counterparty can not be entered the same day into the same Register, created by a servicing bank.
2. To submit with the NBU the Register and the respective copies of currency purchase application and import contract which ensure an advance payment. The documents shall be submitted as scanned copies via e-mail.
3. To obtain the NBU confirmation on possibility of currency advance payment. There are currently no legislative requirements set with regard to the form, content and terms for such confirmation, which may also delay or terminate execution of import contracts, as well as to entail the related risks for importers, e.x. sanctions stipulated in the import contract itself.
4. To execute the confirmed advance payment, but no earlier than the 4 (fourth) banking day of the date of the Register submission to the NBU.

NOTICE:

5. No such restriction on advance payments without NBU approval is applicable to those import contracts which provide for settlements in the form of covered documentary letters of credit confirmed by an investment-grade bank, rated by Fitch IBCA, Standard & Poor’s, Moody’s (the “Covered LoC”). Such requirement appears quite a challenge due to the fact that even those Ukrainian banks addressed by the NBU as “systematically important”, are not currently investment-graded by the above-mentioned agencies.

3. Mandatory Letter-of-Credit Method of Payment

It is now required to executesettlements under import contracts with the total amount exceeding USD 500,000.00exclusively by the mean of Covered LoC.

NOTICE:

1. In case no amount is specified under the foreign contract, the given currency restrictions shall not be applied, considering the aggregate amount of payments in favor of the importer under such foreign contract made after February 24, 2015 does not reach the mentioned limits, i.e. USD 50,000.00 and USD 500,000.00 accordingly.
2. When foreign contract was executed before February 24, 2015 the given currency restrictions shall be applied only in case the outstanding payment amount exceeds the specified limits.

In case there are several import contractsexecuted with a foreign counterparty and the amount of each of such contractsdoes not exceed the above limits - the aggregate monthly amount of paymentsunder such foreign contract shall be considered.