On November 16 2012, the National Bank of Ukraine (NBU) adopted the Resolution On Amendments to the Terms for Settlements under Export/Import Operations and Establishment of an Obligation to Sell Foreign Currency Proceeds (Resolution). This provided for two important changes to the Ukrainian exchange control regime.
To begin with, pursuant to this NBU Resolution, the time period for settlements under export and import operations, as provided by Article 1 and Article 2 of the law On the Procedure for Settlements in Foreign Currency, No 185/94 dated September 23 1994, was reduced from 180 days to 90 days. Therefore, presently, there is a requirement for Ukrainian companies to receive within 90 days: the proceeds from the export of their goods and services; and, goods and services after any prepayment for such goods and services.
Second, this NBU Resolution created a new mandatory requirement for Ukrainian exporters to convert a percentage, to be specified, of their foreign currency proceeds (including those of the first group of the NBUs classification of currencies, which group includes US dollar, Euro, Swiss francs and UK pounds, and Russian rubles) into Ukrainian Hryvnia (UAH). Therefore, starting from November 19 2012, the NBU received the right, at any time until May 19 2013, in its discretion to establish the level of foreign currency proceeds to be converted by Ukrainian exporters into UAH.
On November 19 2012, this percentage was specified as being 50% of foreign currency proceeds received from the export of goods. It should also be mentioned that, following the wording of the NBU Resolution, this requirement applies only to foreign currency proceeds from exports of goods and not to exports of services.
In addition, there is a prohibition on the purchase of the foreign currency for making cross-border payment under a surety agreement. A surety can only pay from its own currency proceeds. Therefore, in case of a default by the borrower secured by a surety, the surety can only make a payment in foreign currency from the 50% of its earnings which it does not have to convert into UAH.
This restriction requiring the conversion of foreign currency proceeds existed in Ukraine before, but was cancelled in 2005. The new 90-day rule also existed until the beginning of 2010, when the time period was extended to 180 days. Both changes reflect the reaction by the NBU to pressure on the national currency, which has declined recently in currency markets against the US dollar and other foreign currencies.
Svitlana Stepaniuk and BC Toms
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