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Changes in currency legislation

As part of their response to the continuing financial crisis, Russian authorities have tightened certain key currency rules. The changes are set forth in Federal Law No. 192-FZ, dated December 29 1998, On Priority Measures in the Area of Budget and Tax Policy, which was published and became effective on December 31 1998.

75% conversion requirement for export proceeds
Article 18 of the Law increases the proportion of a Russian company's export revenues in hard currency that must be converted to roubles, from 50% to 75%. The conversion must be made within 7 days of receipt of the funds (previously, this period was 14 days). However, existing exemptions (full or partial) from the conversion requirement have been left in place, until changed by subsequent Presidential Decree or Federal Law.

Period for export-import payments
Article 20 of the Law introduces several changes to the Law on Currency Regulation and Currency Control (Currency Law). The key change shortens the period for settlement of foreign trade transactions. Imports and exports of goods (which are defined as including "work, services and results of intellectual activities) must now be paid for within 90 days, rather than the previous term of 180 days. If payment is scheduled beyond 90 days, the transaction will qualify as a movement of capital and require a license from the Central Bank.

This change only applies to import-export transactions. There has been no change in Article 1.9(b) of the Currency Law, which still categorizes financial credits with terms up to 180 days as unregulated current transactions.

The Law has shifted regulatory authority over the currency aspects of foreign trade transactions. Formerly the central bank had sole authority in such matters. At present, the Russian government must approve the regulations governing and implementing the 90-day limit for import-export transactions, with the agreement of the central bank. This calls into question the legal status of existing central bank regulations granting certain exemptions. An example of such an exemption appeared in central bank Order No. 02-94, dated April 24 1996, which approved detailed Regulation No. 39. Under Article 3 of that Regulation, a Russian resident could pay for imported goods or services with unlimited delay after import, without a license. It is unclear if this exemption still applies.

The Russian government and the central bank are supposed to adopt new regulations on export-import transactions by April 1 1999. In the meantime, caution should be exercised with respect to current transactions, and the application of previous central bank regulations (in force prior to December 31) to new transactions.

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