On Foreign Trade

The Resolution №ПП-3351 of the President dated the 3^rd of November 2017 “On measures on further liberalization of external trade activities and support of entities of entrepreneurship” had significantly reviewed the legal regulation of external economic operations, in particular, the order of calculations on export.

Regarding the export

As of the 1^st of December 2017:

1.A single deadline shall be established, after which the accounts receivable on export contracts shall be considered overdue, these include 120 calendar days. The term shall be calculated in the following way:

- from the date of signing the act of completed work - for the export of services (works);
- from the date of registration of the customs cargo declaration - for the export of goods.

However, the goods exported by resident-founders of the Republic of Uzbekistan to organizations abroad (trade houses, trade missions, subsidiaries, branded stores, dealer networks and consignment warehouses), as well as goods exported by members of the Chamber of Commerce and Industry of the Republic of Uzbekistan to trade and investment houses of the Chamber shall make an exception: for them the effective terms shall remain unchanged.

We remind that relatively recently the Resolution No.477 of the Cabinet of Ministers of the Republic of Uzbekistan dated the 7^th of July 2017 introduced the following terms for receipt of foreign exchange earnings for the export of the own-production goods with the exception of fresh fruit and vegetables, grapes, melon crops, as well as raw materials specified in Annex No.2 to the Decree No.УП-1871 of the President of the Republic of Uzbekistan dated the 10^th of October 1997,

- 90 days from the date of actual export of the own-production goods for foreign currency without prepayment and opening of a letter-of-credit, without effecting the bank guarantee and without availability of an insurance policy for insuring an export contract against political and commercial risks, on contracts not exceeding the equivalent of US$100 thousand;

The remaining contracts were subject to the following deadlines:

- 180 days from the date of actual export of goods exported by the founders to the addresses of foreign enterprises (trade houses, trade representations, subsidiaries, company stores, dealer networks and consignment warehouses), as well as economic entities - members of the Chamber of Commerce and Industry of Uzbekistan to the addresses of trade-investment houses of the Chamber of Commerce and Industry;
- 180 days from the day of actual export of goods, works and services for small business entities and private entrepreneurs carrying out export of goods, works and services for foreign currency without prepayment, opening of a letter-of-credit or bank guarantee, in the presence of insurance policy for export contract issued within the established procedure;
- 60 days from the date of actual export of goods, works and services - for other exporters.

The following deadlines were in force for remaining contracts:

- 180 days from the day of actual export of goods, works and services for small business entities and private entrepreneurs carrying out the export of goods, works and services for foreign currency without prepayment, opening a letter-of-credit or bank guarantee, on condition of availability of insurance policy for the export contract issued within the established procedure;
- 60 days from the day of actual export of goods, works and services - for other exporters.

Thus, now the period of receivables inflow has been unified and increased from 60-90 days to 120 days from the date of shipment of products for export. At the same time, the current terms for receipt of payment within 180 days remain on shipment of the founders - residents of the Republic of Uzbekistan to organizations located abroad (trade houses, trade missions, subsidiaries, company stores, dealer networks and consignment stores), as well as members of the Chamber of Commerce and Industry of the Republic of Uzbekistan - to the addresses of trade and investment houses of the Chamber.

2.The subjects of entrepreneurship shall have the right to carry out the export of goods[i], works and services for foreign currency without prepayment, opening of a letter-of-credit, formalizing the bank guarantee and availability of an export contract and commercial risks’ insurance policy. The exception is made for export deliveries of fresh fruit and vegetable products, as well as goods specified in the Annex to this Resolution (the so called “raw goods”).
We remind that earlier the Decree УП-5057 of the President dated the 25^th of May 2017 had introduced the right to export goods and commodities without prepayment, opening a letter-of-credit, formalizing the bank policy and availability of the export contract insurance from political and commercial risks. However, this norm was operational under the observation of the following conditions:
- the talk was about the goods of one’s own production (except fresh fruit and vegetable products, melon crops, as well as raw commodities sepcified in the Annex No.2 to the Decree No.УП-1871of the President dated the 10^th of October 1997:
- the amoount of the contract should not exceed the equivivalent of US$100 thousand;
- mandatory receipt of foreign currency earnings should have been provided within 90 days from the date of actual export of goods.

Now all these conditions have been abolished.

The Decree also specifies that the export of goods, works and services shall be carried out in accordance with the indicated conditions (that is, without prepayment, opening of a letter-of-credit, issuing a bank guarantee and availability of an insurance policy for an export contract against political and commercial risks), only in the absence of overdue accounts receivable on previously performed export operations with the subject of entrepreneurship. However, even with overdue receivables, the very right to export shall not be lost on the whole; in this case, the export shall be carried out only on conditions of prepayment, opening of a letter-of-credit, as well as availability of the buyer's bank guarantee or issuance of export contracts’ insurance policies against political and commercial risks.

Responsibility for the emergence of overdue accounts receivable on foreign trade transactions shall be borne directly by the business entities;

3.The customs clearance for export, with the exception of raw commodities specified in the Annex to the Resolution, as well as goods exported on the basis of the invoice, shall be carried out without reference to settlements in the Unified Foreign Trade Operations Electronic Information System (hereinafter referred to as the “UFTOEIS”- EЭИСВО).
4.In case of emergence of force majeure acts, the period for receipt of proceeds in foreign currency shall be extended for a period of force majeure duration, confirmed by an authorized government agency where this event had taken place;
5.When the amount of insurance compensation (in national and/or foreign currency) under the export contract insurance policy has been received on the exporter's account, the amount of the receivable under this export contract for the purposes of applying financial sanctions shall be reduced by the amount of the insurance indemnity received. That is, a reduction in the amount of accounts receivable under the export contract for the amount of the insurance indemnity received shall be effected on account of the exporter of goods, works and services;
6.The requirement to issue a permit by the state customs authorities for re-export of goods under the “temporary import” customs mode has been canceled;
7.The right of business entities to export goods (excluding raw materials), works and services without conclusion of an export contract, on the basis of invoices, with entering information into the “UFTOEIS”- EЭИСВО after effecting 100% prepayment to the accounts of exporters in the banks of Uzbekistan has been introduced.

Regarding the Import

1.It has been established that importers shall be liable for emergence of overdue accounts receivable on import transactions applied to exporters who have committed overdue accounts receivable for export operations;

2.The requirement for compulsory submission of export cargo customs declaration by importers for confirmation of the customs value of goods imported into the customs territory of Uzbekistan with the application of benefits for customs payments has been abolished.

The Decree №УП-5215 of the President “On measures on streamlining the licensing of export and import of specific goods and commodities, as well as registration of export and examination of imported foods and commodities” dated the 3^rd of November 2017 had become another important document in the sphere of external economic activity, in compliance with which, effective the 10^th of November 2017, was changed the legal regulation of the issues indicated in the title of the Decree.

It should be noted that the issue of licensing itself is regulated by the relevant Provision adopted in pursuance of Resolution No.137 of the Cabinet of Ministers of the Republic of Uzbekistan “On additional measures for liberalization of foreign trade activity in the Republic of Uzbekistan” dated the 31^st of March, 1998. This Provision determines the procedure for licensing the export and import of only those goods and commodities, the list of which was specified in Appendix No.1 to the Decree of the President of the Republic of Uzbekistan No.УП-1871 dated the 10^th of October 1997. Export and import of all other products (works, services) is carried out without licensing.

Regarding licensing the export and import of specific goods and commodities

Firstly, jewelry, precious metal products, precious stones and products thereof are excluded from the list of licensed goods.

Secondly, the functions for licensing the export and import of the so-called “specific goods”, listed in the annex to the Decree, were transferred from the Ministry of External Trade to the Information-Analytical Department of the Cabinet of Ministers on the issues for development of foreign trade activity, export potential of branches of economy and territories of the Republic.

Regarding Import Operations

1.Examination of import contracts, concluded on the basis of direct negotiations, and with an amount exceeding the equivalent of US$100 thousand per contract financed on account of funds from:

The State Budget of the Republic of Uzbekistan, or
The Fund for Reconstruction and Development of the Republic of Uzbekistan, or
Credits (loans) attracted by the Republic of Uzbekistan (Government of the Republic of Uzbekistan) or under guarantee (except those refinanced by commercial banks), or
Economic entities, the share of the state in which Statutory capital makes up more than 50%, or
Legal entities, the share of economic entities in which Statutory funds makes up more than 50% with the share of state exceeding 50%, -- shall be carried out by the State Committee of the Republic of Uzbekistan on Investments.

2.Similarly, examination of a tender documentation or evaluation of tender bids within the framework of competitive tendering in an amount exceeding the equivalent of US$100 thousand per tender (bidding) financed on account of:

The State Budget of the Republic of Uzbekistan, or
The Fund for Reconstruction and Development of the Republic of Uzbekistan, or
Credits (loans) attracted by the Republic of Uzbekistan (Government of the Republic of Uzbekistan) or under guarantee (except those refinanced by commercial banks), or
Economic entities, the share of the state in which Statutory capital makes up more than 50%, or
Legal entities, the share of economic entities in which Statutory funds makes up more than 50% with the share of state exceeding 50%, -- shall be carried out by the State Committee of the Republic of Uzbekistan for Investments. Moreover, registration of import contracts, concluded on the basis of the results of tender (competitive) bidding, shall be carried out without any additional expert examination.

Thus, for the purpose of excluding duplicate procedures, the Decree provides for simplification and introduction of changes into the current procedure for examination of import contracts at the State Committee of the Republic of Uzbekistan for Investments. In particular, the procedure for examination of concluded import contracts amounting to less than US$100 thousand was canceled.

Regarding Export Operations

The Ministry for Foreign Trade is authorized to register export contracts (other than stock exchange contracts):

• concluded on the basis of Government decisions and inter-Governmental agreements;
• for export of goods (works, services) included in Appendix No.2 to the Decree.

Accordingly, new provisions should be expected within feasible future in connection with this Decree, which would regulate:

- issuing licenses for the export and import of specific goods and commodities;
- examination of import contracts and tender (bidding) documentation, as well as evaluation of tender (competitive) bids;
- registration of export contracts.

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[1] See an article (publication) “On the export of fruit and vegetables” as of the 9^th of November 2017.