In a move to promote the use of internationally accepted trade finance instruments by Ukrainian exporters, the National Bank of Ukraine has updated its foreign exchange regulations concerning export transactions.
In more detail
Starting from 29 August 2020, Ukrainian banks are permitted to discontinue currency control of export transactions (i.e., control over Ukrainian exporters' compliance with the mandatory 365-day settlement period) upon receipt by a local exporter of funds from a Ukrainian or foreign bank under a documentary letter of credit issued by such bank for the benefit of the exporter.
Before these changes were introduced, Ukrainian banks were permitted to discontinue such currency control only upon receipt by the exporter of funds from its non-resident counterparty (the purchaser of goods).
Background
Currently, most of the export and import transactions of Ukrainian businesses are subject to the mandatory 365-day settlement rule. Under this rule, Ukrainian residents are required to complete all settlements under their export or import transactions (i.e., in the case of exports, all outstanding amounts must be credited to the exporter's bank account and, in the case of imports, all goods must be received by the importer) no later than 365 calendar days from the date when the goods (services) are dispatched (rendered) by the Ukrainian exporter or an advance payment for the delivery of goods (services) is made by the Ukrainian importer (as applicable).
In addition, foreign currency transactions of Ukrainian residents remain subject to a number of other restrictions, which include:
- the cumulative annual limit for making investments abroad by Ukrainian residents – EUR 2 million per year for Ukrainian businesses and EUR 100,000 per year for individuals
- no foreign currency purchases by businesses for amounts exceeding the equivalent of UAH 400,000 if such purchases are not justified by the purchaser's contractual obligations
- no UAH-denominated loans from Ukrainian lenders to non-resident borrowers
To learn more about the previously introduced foreign exchange restrictions, which currently remain in effect, please refer to our publication "Ukraine's FX Market: Review of 2019 and Outlook for 2020".
