The Odyssey of Importing

Due to the shortage of foreign currency, importing is an odyssey in Argentina. The sad part of the case will be noted when we talk about importing capital goods (machinery) for the installation of an industry that will provide local jobs and add value within our borders.

Planning a business in Argentina is an act of courage, courage and even love. In the act of planning we will use different accounting, financial, fiscal, legal techniques, among others, for the purposes of decide how the business will be run and what events will be considered. However, it is fair to say that the context in which business is conducted is changing and subject to significant restrictions.

Today's column focuses on the management of One of the most well-known restrictions by everyone today (difficulty of access to foreign currency to import) but, additionally, that demonstrate the greatest harm in the installation of a local industry since it will surely require inputs from abroad (imports).

Importing final consumer goods is not the same as importing capital goods. Capital goods are the “hardware” needed for an industrial activity to function, i.e. the machines. Without machines there is no industry and without industry there is no added value or local work.

It is in this context that the National State, when it should promote, encourage, assist and even facilitate the promotion of this type of projects (installation of local industries), motivated by general exchange and budgetary restrictions (with fiscal impact) generates regulations, always changing, with the particularity of being subject to operational restrictions, conditions and special authorizations, among other issues.

In the Argentine Republic we are immersed in terribly harmful customs for business context:

• the legislator or regulator establishes a regulatory framework in which a certain action is enabled for the administered party (in this case the investor who wishes to install an industrial project). This action, when it involves a facility or benefitIs subject to conditions that require a special order to the regulatory authority;
• along with the conditioning We can visualize two questions: the first will be given by exceptional situations so that if you find yourself in an exceptional situation, you do not have to request anything from the supervisory authority. If you are not in an exceptional situation You should request special treatmentspecial;
• The “general treatment” (according to the norm) becomes, in reality, a request for a “special and beneficial treatment” subject to bureaucratic procedures (now digital), tedious follow-ups and always with the important benefit of the National State that its silence does not mean approval of the request of the administered (Law 19.459).

In this context, private actors, overwhelmed by constant regulatory changes, have assumed that “normality” is the situation that, in the legal text, is “the exception”, that is: there are no benefits and it is better not to ask for anything because a request demands costly and bureaucratic procedures before the relevant authority.

This is a reality and one must work with it but always with the truth.

Now, when we face this reality independent professionals, as well as private sector agents aimed at advising investors, They can take two paths: (a) say that “it cannot be done” and act as if the only rule to be used was the “exceptional” situation (no benefit) or (b) know the rules, be up to date, tell the truth to the taxpayer, It should be noted that there is a general rule, that this general rule implies a benefit, that the benefit considers a special procedure, that the procedure is tedious and that, if this procedure is not desired, there is an “exceptional” situation that in reality, in the market, is understood as “the new normal”.

There is a gap between the two speeches. But this gap becomes even bigger when the ill-informed “advisor”, with determination or with the supposed arrogance of someone who is speaking to someone who does not know the specific regulations for an activity, limits himself to saying “you can't…” without further explanation or reference standards.

Sooner or later I was going to find the reference standard. Sooner or later I was going to expose the intelligence of the standard in a document. Sooner or later they were going to tell me that “I was right.” I am not a magician. I only know how to interpret a normative text and, diligently, I devote myself to studying it.

The case experienced is linked to the requirement of a Local company, importer of capital goods, which would need to make an advance payment to the foreign supplier (manufacturer) so that, once the advance payment has been received, the manufacturer may begin manufacturing the equipment and then, once finished, send it to the Argentine Republic and collect the balance of the price. The bank was asked to authorize the transfer of a commercial advance of more than USD 1.000.000,00 to the accounts of the foreign supplier. The bank's response was: "It is not possible...".

I share the summary of the analysis of the standard. If you are thinking of importing, NEVER accept the answer “from the bank”. It is better to read the regulations because on the other side there is an agent with an economic interest and an advisor about whom, as has been proven, you cannot be sure that he operates with the diligence required by a local investor.

A local company that wants to access the market Changes must be referred to the Ordered Text of the Rules on “Foreign and Exchanges” in force on the date of the operationIn this document (and unless there are severe alterations to it in future issues) we warn Section 10 is linked to access to exchange for the import of goods from abroad, and we must differentiate between situations in which we are dealing with capital goods or with other types of goods.. The categorization of The quality of capital goods will matter, as far as it concerns us (advance of imports), the time that the local importer can wait between the payment of the advance and the actual import (270 days). I would like to point out some issues that I believe need to be considered:

• Importation will only exist when there is the corresponding customs entry of the imported goods;

• Payment for imports can occur for two specific reasons:
  • Payment for imports with confirmed customs entry;
  • Payment for imports with pending customs entry (import advance). In this case, it will be important to consider the time period for entry of the goods (according to the type of goods), which will be as follows:
    • Capital goods: up to 270 days
    • Goods not included in this categorization: up to 90 days

The deadlines are extendable if justified;

• Since we are analyzing a hypothesis of advance payment for imports, only the rules that are relevant to this case will be considered. As for the forms, the individualized form “B12” should be used;

• Any person residing in a foreign jurisdiction who has issued an invoice (or proforma invoice) in the name of the local person (importer) is considered a foreign supplier. The concept of “residence” used in this paragraph must be understood in terms of “residence” for exchange regulations followed by the BCRA;

• In the case of advance payments for imports, the local subject (importer) has a maximum period to formalize the acquired good. In the case of capital goods, there is a 270-day period for this act (extendable). In the case of requests for access to changes for subsequent officializations, the incoming merchandise will be monitored through the system called SEAIMPO. This system will create a current account validating payments issued against accredited imports;

• To provide access to the exchange market, the participating entity must comply with the provisions of point 10.4.2 of the reference regulatory framework:

1. Documentation that allows proof of purchase of goods as well as their tariff position. These documents may be: sales receipt, pro forma invoice, purchase order, contract, etc.
   1. Estimated shipping date (provided by the supplier)
   1. Agreed purchase condition
   1. INCOTERM and description of merchandise
   1. Proof of the beneficiary of payment (data) as well as that it is a foreign subject;

In order to obtain the release to the exchange market for access to foreign currency, it must be verified that the requester (importer) does not have payments for unofficial advances that are overdue (more than 270 days). The categorization as capital goods will be informed by the provisions of DR 690-2002.

• Note to banking entity that allows to visualize the reasonableness of the operations as well as the business plan.

At this point it is important to consider the provisions of the "general rule" regarding access to exchange rates for the advance payment of imports, which is COM A BCRA 7030 in its updated version by COM A BCRA 7193. Its point 2.1 states the following:

• Monitoring of enabled balances through the SEAIMPO system (current account) to verify whether access to the exchange market is being requested with pending officializations or negative current accounts;

• The amount of USD 1.000.000,00 (COM A BCRA 7030 to COM A BCRA 7193) is linked to the need to have prior authorization from the BCRA to obtain access to changes in the event of exceeding said amount. This is stipulated in point 2 of COM A BCRA 7193 when it builds its logic on the basis of indicating that Special authorization from the BCRA will ALWAYS be required unless an exceptional situation is proven, as listed below, and then it can be seen that in point 2.1.- of said communication, the hypothesis of the requirement of an advance on imports in amounts less than USD 1.000.000,00 is specifically worked on.

In summary: Saying “it is not possible” is not the same as saying “it is allowed but there are restrictions”. In the case of advances for imports to be made in the near future, the general regulatory framework regarding exchange rates and the specific regulations indicated here must be observed. The advance made will be recorded in the SEAIMPO system and as long as we are dealing with capital goods, the time to definitively import the goods is 270 days (extendable). In the case of requiring authorization from the BCRA (Point 2.- COM A BCRA 7193) elements of judgment linked to the effective existence of the operation as well as the supplier and estimated dates must be demonstrated. The known limit of USD 1.000.000,00 is an exception to "lighten" the process and not the general rule.

Sergio Carbone is a Certified Public Accountant from the National University of Buenos Aires