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Tuesday June 28 2022

Risks related to non-return of foreign currency funds

18 May 2022 09:30 (UTC+04:00)
Risks related to non-return of foreign currency funds

In export operations, business people should consider the circumstances in which they fail to receive foreign currency funds in consideration of the goods (works, services) exported from Azerbaijan. In the cases as described below, export operations may create regulatory compliance risks, including, administrative and criminal liability.

Regulatory framework

In accordance with the Rules on “the regulation of import-export operations in the Republic of Azerbaijan” approved by Presidential Decree dated 24 June 1997, No. 609, legal entities and individuals must ensure transfer of foreign currency funds in consideration of exported goods (works, services) by consignment to its authorized bank account in the Republic of Azerbaijan within 180 days upon declaration of export operation.

The Central Bank of the Republic of Azerbaijan informs the State Customs Committee within 2 days to take respective measures, if it reveals that foreign currency funds were not transferred into the authorized bank account in consideration of exported goods.

Furthermore, under Article 483 of the Code on Administrative Offences, for non-return of the foreign currency funds from abroad in small amount received as a result of foreign economic activity, administrative penalty was set out in the amount starting from 30% up to 50 % of the foreign currency funds being subject-matter of the administrative offence. For the purposes of Article 483, small amount means amount up to 20.000 (twenty thousand) AZN.

If the said amount exceeds twenty thousand, then it is subject to the criminal liability.

Practical issues and judicial interpretation

The text of Article 483 of the Code on Administrative Offences is interpreted by the regulatory authorities that if an Azerbaijani businessperson exports the goods from Azerbaijan to foreign country and does not receive funds in return of the exported goods (up to 20000 AZN), then such businessperson may be subject to administrative liability.

However, the Constitutional Court interpreted (which interpretation is binding in nature) Article 483 of the Code on Administrative Offences in its Decision dated 17 May 2021 and stated that transfer of foreign currency may be subject to delay or failure for the reasons out of control of a person, such as, breach of payment obligations by the buyer. Therefore, the courts should take into consideration all circumstances of the case that may exclude the liability of a person.

Conclusion and our recommendations

As seen, export of the goods without any guarantee is very risky. It creates not only contractual, but also it may lead to administrative or criminal liability depending on the amount of non-returned foreign currency funds. To avoid this risk, it is strongly recommended to export the goods only based on a bank guarantee in an equal amount to the exported goods. We also recommend engaging a professional lawyer in case the regulatory authority commences any regulatory proceeding.

About the author: Imamverdi Novruzlu is a lawyer with over 2 years of experience in the area of law. He specializes in dispute resolution, corporate, contracts, intellectual property and especially customs law. Currently, he is a lawyer at Legalize Law Firm. For more information about the author please see the following link: https://legalize.az/en/team/imamverdi-novruzlu

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