In the context of international trade, importation involves the procurement of goods from foreign suppliers, giving rise to an outflow of funds, whilst exportation involves the sale of domestically produced goods to international markets, generating an inflow of foreign currency. Foreign exchange (FX) constitutes the financial mechanism by which currencies are converted and the financial risks inherent in such transactions are managed.
Core Concepts of Import and Export in Foreign Exchange
Import Payments: When an importer buys goods, they typically must convert domestic currency into the supplier's local currency which becomes a foreign currency to complete the payment.
Export Receipts: Upon receipt of payment by an exporter, the foreign currency received is converted into the exporter's home currency, a process commonly handled by correspondent banks or international currency transfer platforms.
Exchange Rate Impact: A strong domestic currency reduces the cost of imports whilst rendering exports more expensive on international markets, whereas a weak domestic currency enhances the competitiveness of exports whilst increasing the cost of imported goods.
How to Managing Currency Risks in Foreign Exchange
Businesses engaged in cross-border trade employ a range of financial instruments and strategies to protect their profitability from the adverse effects of exchange rate volatility:
Spot Contracts: A spot contract is an agreement to buy or sell an asset like currency, a commodity, or a security at the current market price for immediate payment and delivery.
Forward Contracts: These are agreements to lock in a specific exchange rate for a future date, protecting against adverse market movements.
Foreign Currency Accounts: The retention of foreign currency receipts in a dedicated account for the purpose of meeting future import payment obligations, thereby avoiding repeated currency conversion.
Key Transaction Methods
International trade relies upon specific payment mechanisms to ensure that the exporter receives the agreed funds and the importer receives the contracted goods in accordance with the terms of the transaction. They are as follows:
Letters of Credit (LC): A documentary instrument issued by a bank guaranteeing that an exporter will receive payment upon the presentation of the requisite shipping documents in accordance with the terms and conditions specified therein.
Documentary Collections: A process whereby the seller's bank collects payment through the buyer's bank in exchange for the release of the relevant shipping documents to the buyer.
Open Accounts: An open account transaction is one in which goods are shipped prior to the due date for payment, thereby exposing the exporter to the highest level of financial risk.
POSITION OF CAMEROON AND CEMAC
Export of Goods and Repatriation of Revenues
All transactions related to exports of goods are reported to the competent administrative authorities. Transactions related to exports of goods worth CFAF 5 million or more are domiciled with a CEMAC credit institution. Leasing operations involving the export of equipment or material shall be treated as deferred payment exports and shall be subject to the obligation of a bank direct debit provided for in the law.
Any export of goods gives rise to the submission of an export declaration to the customs administration or entity in lieu thereof and a firm exchange commitment obliging the exporter to repatriate and transfer the related revenues within the applicable regulatory time limits.
The exporter has a maximum period of 150 days from the effective date of export to collect and repatriate the export proceeds from firm sales.
The export earnings from the services are collected and repatriated by the exporter through his domiciliary bank through the Central Bank.
At the exporter's request, the receiving bank may settle commercial and financial discounts or returns of goods on exports, on presentation of supporting documents:
The credit institution may pay export commissions provided for in a representation, brokerage, service or factoring contract.
Any reduction in the amount of the export product to be repatriated following a withholding tax on bills of intermediation or any other costs related to the basic transaction is justified by economic agents at the time of repatriation of their revenues. To this end, economic agents shall provide the authorised intermediaries with the relevant supporting documents for the purpose of post clearance checks by the competent authorities.
The conditions and procedures for the domiciliation and payment of the export of goods and for the clearance of the relevant file shall be specified by instructions from the Central Bank.
Importation of Goods and Regulation
Imports of goods into CEMAC are free, with the exception of gold and other goods subject to specific regulations. In addition, States may impose restrictions on the import of certain goods on humanitarian, health, safety, security, security or environmental grounds.
All imports of goods are subject to an import declaration to the customs administration or to the customs administration in its place.
For goods subject to import restrictions, authorisation from the competent technical authorities is required in addition to the above-mentioned import declaration.
Imports of goods for an amount equal to or greater than 5 million CFA francs are domiciled with a credit institution in the country of final destination.
Import operations exempt from the direct debit requirement are specified by instructions from the Central Bank.
Transactions Relating to Gold and Precious Stones
Residents are free to hold, buy and sell gold and precious stones in any form within CEMAC, subject to compliance with applicable regulations.
The import and export of gold and precious stones are subject to prior authorization by the competent technical authorities.
Are exempt from prior authorization:
- Gold imports and exports carried out by the Treasury on its behalf, as well as those carried out by the Central Bank;
Imports and exports of manufactured articles containing a small quantity of gold or precious stones, including lined or plated articles.