Egypt: Selling

Distance Selling

Most Popular Forms of Direct Marketing

Mail orders, television and recently internet.

Type of Products

Flowers are a traditionally mail order product.  Recently, home appliances and other everyday use products are starting to be sold remotely.

Evolution of the Sector

Direct marketing is clearly progressing, especially mail order and internet sales. This is mainly due to the rapid development of the use of foreign bank credit cards and checking accounts and that the reduction of shopkeepers' taxes, a fact which facilitates direct sales. The Egyptian government encourages internet trade (law dating from 2004).

Distribution Network

Commercial Intermediaries

Trading Companies

 

• Type of Organization

There are different types of intermediaries.  Companies with modern management are very few.  The more widespread are "general sales" companies.  Some of them are specialized (construction products, frozen products...), others are generalized and sell everything.  At last, there are small companies specialized in only some products or foreign suppliers. It is possible for foreigners to sell on the Egyptian market if they are registered to make direct sales.  However, most use intermediaries to make it easier.

Wholesalers

 

• Main Actors

Wholesalers are very dispersed.  There aren't many large distributors.  They can be contacted directly, however, their specialization, which is often very precise, makes it useful to go through an intermediary.  Mansour Manufacturing & Distribution (MMD), Majed Al Futtaim Group, Raya Holding & Co. and Oriental Weavers & Co are amongst Egypt's major distributors.

Using a Commercial Agent

The Advantages

It is a good way to start trading activity in Egypt.

Where to Be Vigilant

The agent will have to be chosen according to his motivation, his interest in the product, his references and the range of products that he deals with.

Elements of Motivation

The amount of commission is an important motivating element.

The Average Amount of Commission

The commission rates vary according to the type of product or service, sales volume (the higher it is, the lower the commission) and the services provided by the agent.  For everyday goods like rice, wheat, sugar and cotton, the commission is between 1 to 3%. For chemical and food products, it is between 3 to 5%.  For medical, construction or office equipment, it is around 10%.  For scientific and laboratory equipment, 15%.  For big projects like civil engineering, it is between 1 to 3%. The commission rates have to be recorded in the signed documents.

Breach of Contract

The contract is free insofar as the law is neutral regarding its content. There is no obligation of exclusivity; there is no obligation of compensation in case of cancellation.  The commission rates have to be recorded in the contract. It is the agent, and not the foreign company, who has to register the contract with the Ministry of Trade and Industry.

Finding a Commercial Agent

Alibaba
US Commercial Service, Distributors, Sales Agents and Importers in Egypt

Setting Up a Commercial Unit

The Advantages

It is free to establish a company or an office in Egypt. One simply has to register at the Commercial Registry, a procedure that has to be renewed every 5 years.  The rent, the rate of taxation and the cost of employement being relatively inexpensive, this procedure is advantageous. For more information, refer to the American Chamber of Commerce in Egypt website.

Where to Be Vigilant

Set up a commercial unit only if the foreign company has long-term business interests in the country.

Different Possible Forms of Settlement

 

• A Representative Office

A representation office can make it possible to get information on the market and give the necessary support (promotional and for service).  It is not subject to any tax and does not need any specific authorization.  It is not possible to trade, to make profits or to place orders through a representation office.

• A Branch Office

A branch can take and place orders as well as lead a marketing campaign  It has to pay taxes.  Opening a branch is considered as a direct investment and has to be registered at the Ministry of Finance.

• A Company

To get an independent company up and running requires time and investment, but this could offer a way of guaranteeing better protection for the owner, get loans and enter into markets that are subject to improt barriers.

Franchising

Evolution of the Sector

Franchising has developed considerably in a very short space of time.  Mostly in the fast food area.  Currently, there are approximately 40 franchises in Egypt, of which 25 are fast food chains. The EFDA (Egyptian Franchise Development Association) promotes this practice in the country.

Some Big Franchises

Mo'men Restaurant, Egyptian chain of sandwich restaurant which has franchises in the country (15 units)
Cook Door, Another big national restaurant chain which has franchises (16 units)
House of Donuts, Big American chain franchise

For Further Information

EFDA, Egyptian Franchise Development Association

Customs Procedures

Import Procedures

There are significant documentary restrictions; the original sales invoice and two copies of it, the original certificate of origin and two copies of it are required. These two documents must be certified and authenticated by the Egyptian consulate in the country of origin. For the certificate of origin, it is necessary to specify that the information given is exact and accurate. Further, the package list, the bill of lading with the name and address of the sender and the number of bills of lading sent are required. Since 1999, The Central Bank of Egypt informed national banks that all the letters of credit should be paid 100% in cash by the importer. A complete description of the product content is also required for products for which analyzes are compulsory.

Specific Import Procedures

There is no simplified customs declaration system.

Importing Samples

The Customs accept the entry of samples exempt from all duty for the purpose of sales promotion or exhibition. The value of these samples must not exceed 500 EGP or it should not be possible to sell them as such. These conditions must be repeated specifically in the accompanying documents. If they do not meet these conditions, a deposit must be made to the Customs with a file which will ensure a re-export of the product. The deposit will be returned on proving the re-export of the goods. For medical samples, health conditions must be met.

Customs Duties and Taxes on Imports

Average Customs Duty (Excluding Agricultural Products)

The weighted average customs duty is 6.9%

Products Having a Higher Customs Tariff

Customs duties are highest on alcohol (almost 3,000%).

Preferential Rates

The average customs duty rate is 45%, however, there are much higher rates, which apply to goods whose importation was formerly forbidden (70% on poultry, from 600% to 3000% on alcohol and 54% on textile).

Since September 2004, a new Egyptian reform has lead to a sharp drop in customs duties (-35%) and to the adoption of the HS (Harmonized System) 2002 to 6 figures instead of 8.
Nevertheless, the Egyptian Customs Authorities frequently apply the "Egyptian Selling Price" to define the customs value.  Going from the principle that under-invoicing is widespread, the Customs Authorities base themselves on the price of the first importation to the country, in order to define a "fixed" price. If the value of the invoice is lower, the Customs Authorities use the "fixed" price. Thus there is an increase of between 10 and 30% of customs on the invoice values. This method of determining the customs value is very often left at the discretion of the customs officials which makes the estimation of the exact rate exceedingly difficult to calculate.

Within the framework of its membership to the League of Arab States, Egypt is in the process of discussion to create an Arabic Common market with the suppression of customs duties. Lastly, the European Union is negotiating a cooperation agreement with Egypt.  Its implementation will enable the reduction or cancellation of customs duties on most of the products.

Customs Classification

Egypt applies the Harmonized Customs System.

Method of Calculation of Duties

Egypt applies the Harmonised Customs System. The customs duties are calculated Ad valorem on the CIF value. 

Method of Payment of Customs Duties

Customs duties are payable in Egyptian pounds.

Import Taxes (Excluding Consumer Taxes)

Customs excess load: 2% of the customs cleared value if the applied duty is between 5% and 30%, and 3% if the customs duty exceeds 30%.

Labeling and Packaging Rules

Packaging

No packaging prohibited.

Languages Permitted on Packaging and Labeling

Arabic is compulsory in most cases.

Mark of Origin "Made In"

The indication of the country of origin is compulsory.

Labeling Requirements

On an imported product, the country of origin should be written in arabic, as well as the name of the producer and a description of the product.  For more information, refer to USDA's Website.