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Regulations of Exports: Domestic Qu

Regulations of Exports: Domestic Quotas and Export Fees
The Minister of Industry, Trade and Small and Medium Enterprises has recently issued two decisions regulating the export of milled rice and nitrogenous fertilizers. While there are differences between both decisions, the common thread between them is that they share the same motivation, namely guaranteeing sufficient supply to the domestic market. Interestingly, the two decisions diverge on how to achieve this goal. While the Ministry forces rice producers to supply a specific quota to the government, it offers incentives (through exemption of export fees) to fertilizer producers who provide specific quantities of their product to the domestic market. These rules are suggestive of regulatory attempts to balance free trade with domestic market needs.
Fertilizers
The Minister’s decision[1] relating to the export of fertilizers extends the application of a prior decision of the Minister, Decision No. 285 of 2013, until 22 October 2015 ("Decision 285"). Decision 285 regulates the export of “nitrogenous fertilizer” and imposes a tariff of EGP 400 per tonne on nitrogenous fertilizer (of all kinds) intended for export. However, exporters are exempt from this tariff if they deliver a specific amount of fertilizers to the Ministry of Agriculture and Land Reclamation in line with relevant conditions. This is intended to be an incentive to producers in order to ensure that Egypt does not export fertilizer abroad while failing to meet its own domestic needs. Any company wishing to export nitrogenous fertilizer must present the following documents at customs: (i) a license from the Chairman of the Board of Directors of the company, or the company’s managing director, declaring the quantity and type of fertilizer produced monthly by the company (certified by an auditor); and (ii) a license from the Ministry of Agriculture and Land Reclamation stating that the company has satisfied its monthly domestic supply due. The Ministry’s decision is of extreme importance especially at this point in time. The Egyptian government recently announced its intention to significantly increase the final sale price of subsidized fertilizers by a reported 34%. The export regulations may be intended to assist the government in satisfying domestic market needs of a good which has traditionally been traded on the black market in large quantities. The export regulations, however, will not solve structural problems with the supply and distribution chain which have greatly contributed to the increased trading on the black market and to the effective increase in fertilizer price on the final consumer, the farmer.
Rice
In a similar fashion, the Minister of Industry, Trade and Small and Medium Enterprises also issued Decision No. 776 of 2014[2] regulating the exportation of milled rice ("Decision 776"). Decision 776 on rice exports is significant since this comes as a departure from the government policy which had completely banned the export of rice due to domestic market needs. Decision 776 effectively made obtaining an export license conditional on the following:
  • That the amount of rice to be exported is the same as the amount deposited at the Ministry of Supply and Internal Commerce, and that the exporter provides a certificate from the Minister of Supply and Internal Trade ascertaining the amount of rice delivered to the Ministry. The type of rice to be delivered to the Ministry will be short-grain rice, and the price the Government will pay will be EGP 2000 per ton.
  • Payment to the Customs Authority of a fee of USD 280 per ton of rice, or the equivalent in EGP based on the exchange rates set by the Central Bank of Egypt on the day of the payment of the fee.
  • That the export license is valid for a period of three months and that it is not assigned to/by another party.
The term of Decision 776 is from the date of issuance, 19 October 2014, until 31 October 2015. Decision 776 is also symptomatic of long-term concerns regarding the production and exportation of rice in Egypt. Planting rice requires significant water usage, and its cultivation is often seen as not cost-efficient in a country with such great reliance on the Nile River. Furthermore, a shortage of rice in the past has resulted in bans on the export of rice. Exporting rice was prohibited from 2008 to 2012, when the ban was lifted. However, the ban was reinstated as the Government faced difficulties meeting the demands placed by its subsidy cards. The removal of the ban once again suggests that a long-term policy regarding rice exportation is needed, with the Government currently operating on a year to year basis.
Conclusion
The above decisions are significant because they show two different approaches to attempting to satisfy domestic market demand. While one approach – for fertilizers – tries to offer incentives in the form of exemptions for export fees conditioned on the supply to domestic market, to encourage producers to supply the domestic market with the relevant good, the second approach – for rice – is more heavy-handed and attempts to force producers to provide at least as much of the relevant good to the domestic market as they do for the international market.   [1] Minister of Industry, Trade and Small and Medium Enterprises' Decision No. 767/2014 extends the application of Decision No. 285/2013 which imposes tariffs on the exports of “nitrogenous fertilizers”, Egyptian Gazette, Issue No. 235 (cont.), 19 October 2014. [2] Minister of Industry, Trade and Small and Medium Enterprises' Decision No. 776/2014 regulating the exportation of milled rice, Egyptian Gazette, Issue No. 235 (bis) (a), 19 October 2014.
The Minister of Industry, Trade and Small and Medium Enterprises has recently issued two decisions regulating the export of milled rice and nitrogenous fertilizers. While there are differences between both decisions, the common thread between them is that they share the same motivation, namely guaranteeing sufficient supply to the domestic market. Interestingly, the two decisions diverge on how to achieve this goal. While the Ministry forces rice producers to supply a specific quota to the government, it offers incentives (through exemption of export fees) to fertilizer producers who provide specific quantities of their product to the domestic market. These rules are suggestive of regulatory attempts to balance free trade with domestic market needs.
Fertilizers
The Minister’s decision[1] relating to the export of fertilizers extends the application of a prior decision of the Minister, Decision No. 285 of 2013, until 22 October 2015 ("Decision 285"). Decision 285 regulates the export of “nitrogenous fertilizer” and imposes a tariff of EGP 400 per tonne on nitrogenous fertilizer (of all kinds) intended for export. However, exporters are exempt from this tariff if they deliver a specific amount of fertilizers to the Ministry of Agriculture and Land Reclamation in line with relevant conditions. This is intended to be an incentive to producers in order to ensure that Egypt does not export fertilizer abroad while failing to meet its own domestic needs. Any company wishing to export nitrogenous fertilizer must present the following documents at customs: (i) a license from the Chairman of the Board of Directors of the company, or the company’s managing director, declaring the quantity and type of fertilizer produced monthly by the company (certified by an auditor); and (ii) a license from the Ministry of Agriculture and Land Reclamation stating that the company has satisfied its monthly domestic supply due. The Ministry’s decision is of extreme importance especially at this point in time. The Egyptian government recently announced its intention to significantly increase the final sale price of subsidized fertilizers by a reported 34%. The export regulations may be intended to assist the government in satisfying domestic market needs of a good which has traditionally been traded on the black market in large quantities. The export regulations, however, will not solve structural problems with the supply and distribution chain which have greatly contributed to the increased trading on the black market and to the effective increase in fertilizer price on the final consumer, the farmer.
Rice
In a similar fashion, the Minister of Industry, Trade and Small and Medium Enterprises also issued Decision No. 776 of 2014[2] regulating the exportation of milled rice ("Decision 776"). Decision 776 on rice exports is significant since this comes as a departure from the government policy which had completely banned the export of rice due to domestic market needs. Decision 776 effectively made obtaining an export license conditional on the following:
  • That the amount of rice to be exported is the same as the amount deposited at the Ministry of Supply and Internal Commerce, and that the exporter provides a certificate from the Minister of Supply and Internal Trade ascertaining the amount of rice delivered to the Ministry. The type of rice to be delivered to the Ministry will be short-grain rice, and the price the Government will pay will be EGP 2000 per ton.
  • Payment to the Customs Authority of a fee of USD 280 per ton of rice, or the equivalent in EGP based on the exchange rates set by the Central Bank of Egypt on the day of the payment of the fee.
  • That the export license is valid for a period of three months and that it is not assigned to/by another party.
The term of Decision 776 is from the date of issuance, 19 October 2014, until 31 October 2015. Decision 776 is also symptomatic of long-term concerns regarding the production and exportation of rice in Egypt. Planting rice requires significant water usage, and its cultivation is often seen as not cost-efficient in a country with such great reliance on the Nile River. Furthermore, a shortage of rice in the past has resulted in bans on the export of rice. Exporting rice was prohibited from 2008 to 2012, when the ban was lifted. However, the ban was reinstated as the Government faced difficulties meeting the demands placed by its subsidy cards. The removal of the ban once again suggests that a long-term policy regarding rice exportation is needed, with the Government currently operating on a year to year basis.
Conclusion
The above decisions are significant because they show two different approaches to attempting to satisfy domestic market demand. While one approach – for fertilizers – tries to offer incentives in the form of exemptions for export fees conditioned on the supply to domestic market, to encourage producers to supply the domestic market with the relevant good, the second approach – for rice – is more heavy-handed and attempts to force producers to provide at least as much of the relevant good to the domestic market as they do for the international market.   [1] Minister of Industry, Trade and Small and Medium Enterprises' Decision No. 767/2014 extends the application of Decision No. 285/2013 which imposes tariffs on the exports of “nitrogenous fertilizers”, Egyptian Gazette, Issue No. 235 (cont.), 19 October 2014. [2] Minister of Industry, Trade and Small and Medium Enterprises' Decision No. 776/2014 regulating the exportation of milled rice, Egyptian Gazette, Issue No. 235 (bis) (a), 19 October 2014.