Assignment on Foreign Exchange Operation and Foreign Remittance of IBBL

Meaning of Foreign Exchange:

Foreign Exchange means currency & trade exchange say conversion of one to another. This is a part of economic & Science. This is a big deal divided into different currencies instrument such as Draft, Traveler Cheque, Bill of Exchange business including sell, purchasing of currency notes & TC etc.

Currency Exchange means the conversion of one Currency into another.

Foreign Exchange Market:

Foreign Exchange market means the places where foreign currency is bought & sold. In this more that supply, currency value.

Alternately following are the features of foreign exchange market:

1. Bank & client.
2. Different Banks in the same foreign exchange market.
3. Different Bank & Schedule Bank of the same country.
4. Different Control Bank.

Islami a Bank follows the following the two craters in respect & payment of foreign exchange:

1. Local currency market value &
2. Foreign currency market value.

Exchange is being controlled:

1. To stabilize the rate of exchange.
2. To protect domestic industries.
3. For proper implementation of plans.
4. To increase the bargaining strength
5. To check over invoicing & Under invoicing
6. To check the Blank marketing and smuggling
7. For regulating the international movements of goods

Authorized Dealer Branch:

Bangladesh Bank, in exercise of the power under section 3 of Foreign Exchange regulation Act. 1947 issues a license to schedule Bank where they have adequate trained Officer/Staff to deal in Foreign Exchange. The banks that are authorized to deal in foreign exchange are called authorized dealers.

Arbitrage of Foreign Exchange:

Arbitrage can be defined as simultaneous buying and selling of foreign currencies for the purposes of making profit Arbitrage is carried out mostly by banks, They keep constant watch over the latest development in the financial market of the world.

Foreign Exchange Regulation Items:

1. Bangladesh Bank Manual.
2. Foreign Exchange Circular.
3. Public Notice
4. Import & Export Policy Gazette
5. Ministry of Commerce Circular
6. BCD circular.
7. Guide lines for foreign exchange regulation.
8. Other authorization (i.e. NBC Dept)

 Methods of effecting payment of IBBL:

Islami Bank follows the following methods to make payments between countries.

1. Telegraphic Transfer (TT): This is an instruction for transfer of money by Telegram, Cable or telex from a bank in one country to another Bank in different center. This is an instruction form the Importers Bank to the exporters Bank. The TT charge is realized by us from the partly as per Bank circular.
2. Mail Transfer (M.T): This transfer is the order to pay cash to a 3^rd party. This Transfer is sent by mail & the charge must be realized as per Bank circular.
3. Drafts & Cheque: A draft is pay order issued by one Bank to another Bank or its branch.

 Some common terms used in Foreign Exchange:

Over Bought: This position known as long position.

Over Sold: This position known as short position.

LIBOR:London Inter Bank Offer Rate.

SWIFT: Society for World Wide Inter Bank Financial Telecommunication.

CHIPS: Clearing House Inter Bank Payment System.

NOSTRO A/C: Our A/C with you i.e. out A/C with American Express.

VOSTRO A/C:  Their A/C with us, Al- Raji A/C with IBBL.

LORO A/C: This A/C i.e. third Bank Relationship.

ACU: Asian Clearing Union.

Uniform Customs and Practices for Documentary Credits (UCPDC):

The ICC Uniform Customs and Practice for Documentary Credits (UCP), first published in 1933, are the universally recognized set of rules governing the use of the Documentary Credit in international commerce. Banking associations and individual Banks in more than 100 countries and territories adopted the previous revision of 1983.

This revision of the UCP, the first for ten years, takes into account a range of important consideration- including international judicial decisions, technical innovations in banking and other industries, case studies and day to day practice to offer a thoroughly revised and up to date series of rules.

Three years in preparation, the 49 Articles of the new UCP has come into effect on January 1,1994 that indispensable guides to Documentary Credit usage. They provide a comprehensive and practical working aid to bankers, lawyers, importers, exporters, transport executives and everyone involved in international trade.

Activities of Foreign Exchange:

There are three kinds of foreign exchange transaction.

1. Import
2. Export &
3. Remittance.

In the following these are discussed in brief.

5.7 Import:

Meaning of Import:

Import means lawfully carrying out of anything from one country to county for Buying. It will be occurred according to the Government law.

Important Policy Order:

Based on the needs of commodity and availability of finance, Government declares policy. For import of goods for a particular period having approval from the National Assembly is defined as Import policy order. Import policy is a guideline of a set of rules envisaged by Government Authority i.e. the Ministry of Trade and commerce for the registered importer for import of goods inside the country.

Duration :

Earlier import policy has been formulated for two years. But present import policy order has been formulated for 5 (five) years, Effect from the 14^th June 1999 to 30^th June 2003 and valid till announce of new import policy order. If require Government can revise the policy in each every years.

General Rules in connection with import:

Restriction of Import:

a)      Negative list of Merchandises.

b)      Restricted list.

c)      Footnote under Restricted List

d)     Freely importable items

ITC number is compulsory (H.S code 6 digit) to be mentioned in the L/C and LCAF to identification the item to be imported. H.S code of seven digits as mentioned by Bangladesh statistical Bureau to be used.

1. Requirement Right of Refusal (ROR) for public sector agency from Ministry of Industry or respective Ministry/department of both to Import item under Restricted List.
2. Import cannot be Israel, Serbia Montenegro
3. Pre-shipment inspection (PSI) for private sector normally PSI is not mandatory.
4. Shipment to be made through Bangladeshi ship some exemption

 a) Single importer maximum 20 MT grow importer highest 100 MT

                   b) General waiver from department of shipping otherwise certificate of

waive is to be obtained to ship through Foreign Cargo

                   c) Import of Raw materials export oriented Industries to be made on

competitive rate.

CFR & FOB Basis Import:

                   a) Normally import under CFR basis

                   b) FOB basis import can be made complying Bangladesh Bank relative

instruction

Country of origin: Mandatory should be clearly indicated at the body of packing / container / box / packet etc

Sources of Finance:

1. Cash

a) Foreign Currency

b) Wage earners FC balance

2. Foreign loan grant or commodity assistance

3. Barter and STA

 Classification of Importer:

a) Commercial import

b) Industrial import

c) Import under wage earners scheme

d) Actual user

1. No import permit / license required
2. LCAF required
3. Import can be made duly through irrevocable L/C

Working procedure of Banks in Case of LCAF:

1. LCAF receive by the nominated Bank
2. Importer has valid IRC & duly renewed
3. For importation of capital machinery & primary party’s no need IRC
4. IRC code number to be mentioned
5. ICAF registration where need
6. L/C copy to be sent to CCI & 15 days
7. Income tax declaration two copies (one for Bank for rest to be sent to NBR)

Import related fees:

Four categories of importer registration renewal fees are as under : 

Surcharges for different years are as under :

            1 year late TK 50/-

            2 year late TK 100/-

            3 year late TK 200/-

 Regulations of Import:

Import of goods under this policy shall be regulated as under:

1. Control list:

Unless otherwise specified items which have been indicated as banned in this list shall no be permissible for import. An items included in this list with specific conditions for import shall be importable only on fulfillment of the conditions specified.

1. Freely Importable Items:

Unless otherwise specified an items the name of which does not appear in the control list shall be freely importable.

3.  Notwithstanding anything mentioned else where, all imports into Bangladesh shall be subject to such general or specific conditions as many have been prescribed in this order.

4. In addition to the conditions mentioned in the control list the conditions. Restrictions and procedures for import of various items mentioned in the test portion of this order, shall as usual, apply in case of import of those items.

5.  If, while determining the import status of an items mentioned in the control list the description of goods does not conform to the H.S.C Code mentioned against item, or any discrepancy arises between the H.S Code and the description of goods, in that case the description of goods shall prevail, In other words, if the import of a particular item is shown as banned in the control list, or is shown as importable as subject to fulfillment of conditions in the list, the said ban or restriction as the case may be, shall equally apply to the import of that item , even if such ban or restriction is mentioned else where and not against the appropriate H.S Code,  if any importer, taking , advantage of such discrepancy, import any banned items or restricted items or restricted item without fulfilling the respective conditions, such import shall be treated to have been made as in contravention of the provisions of this order.

Regulations of Import:

L/C:  may be open under deferred payment basis.

Direct Payment in Abroad:

          Only for Bangladeshi National who live in abroad for service. Those who are entitled to purchases the importable goods for direct payment to the beneficiary from his own service without opening any L/C, The goods must be sent to the Bangladesh. Nationals who lived in Bangladesh. In that case no approval is required from CCI & E.

Time Limit Opening of L/C:

          Letter of Credit shall be opened by all importers within 120 days from the date of registration of LCAF with the Bangladesh Bank unless otherwise notified.

Validity of LCA for Shipment:

          Unless otherwise specified, shipment of goods shall take place within 17 month in the case of machinery and spare parts and 11 months in the case of all other items form the date of issuance of LCA from by Bank or registration of LCA form within Bangladesh Bank registration unit as the case may be.

Document required to be submitted along with LCA Form:

Importers in both public sector and private sector shall submit to their nominated banks the following documents along with the L/C authorization Form for opening letter of credit.

a)      L/C application form duly signed by the importer.

b)      Indent for goods issued by indenture or pro-forma invoice obtained from the foreign supplier, as the case may be and

c)      Insurance cover note.

Import L/C (Letter of Credit):

A letter of credit is a conditional Bank undertaking of payment. In other words letters of credit is a letter form the importer Bankers to the exporter that the bills if drawn as per terms & conditions complied with will be honored on presentation.

Definition of L/C:

A letter of Credit is a conditional bank undertaking of payment. In other words letters of credit is a letter form the importer bankers to the exporter that the bills if drawn as per terms and conditions are compiled with will be honored on presentation

As per UCPDC 500 a credit may be either:

            i)          Revocable.

            ii)         Irrevocable.

The Credit, therefore, should clearly indicate whether it is revocable or irrevocable. In the absence or such indication the credit shall be deemed to be irrevocable.

Classification of L/C:

 1.         Revocable L/C

            2.         Irrevocable L/C

            3.         Confirmed L/C

            4.         Transferable L/C

            5.         Divisible L/C

            6.         Revolving L/C

            7.         Restricted L/C

            8.         Red Clause L/C

            9.         Green Clause L/C

            10.       Back-to-Back L/C

            11.       with Recourse

            12.       without Recourse

            13.       Stated by letter of credit.

 Types of L/C:

Revocable Credit:

As per Article no. 8 (a) A revocable credit is a credit which can be amended or canceled by the issuing bank at any time without prior notification to the seller since to offers little security to the seller.

Irrevocable Credit:

As per Article no 9 an irrevocable credit constitutes a definite undertaking of the issuing Bank. A credit cannot be amended or cancelled without the agreement of all parties. It gives the seller grater assurance of payment. An irrevocable credit can be either confirms or unconfirmed dependant on the desire of the seller.

Classification of importer:

Importers are those who ate authorized by the import Trade authority i.e. & CCI & E for import of goods essential for consumption or for production purposes.

There are mainly three types of importers.

1.         Commercial Importer

2.         Industrial Importer

3.         Importers under Wage Earner Scheme

1. Commercial Importer:

It means an importer registered under the importers, exporters and indention registration order 1981 who import goods from sale, when issued to commercial importers, given the category held by him with ITC classification and public notice against which they are admitted into import trade.

          2. Industrial importers:

When issued to an industrial consumer, gives the items of import as raw materials and packing materials and spare parts, the value of entitlement and ITC classification.

3. Importers under WES:

It means registration importers who import only under the WES. In this scheme, the foreign exchange required for import of goods is met out of the remittance made. By Bangladesh national earning wage abroad. WES importers can be importing all permissible items a declared by the importer also can import under WES.

Registration of Importer:

As per import & Export control Act. 1950 no person can indent, import or export any goods into Bangladesh except kin case of exemption issued by the Government of the peoples Republic of Bangladesh. Violation of this order is punishable with fine under the provisions of Sea Customs Act 1878 as applied by sub section (3) of Section 3 of this Act.

Procedure for obtaining, IRC (Import Registration Certificate) :

Through public notice or import policy the chief controller of imports & Exports invites applications usually for registration of importers. The following papers/ documents are required for submission to CCI&E or area office of CCI & for import registration certificate:

 1. Application form.

            2. Nationality Certificate.

            3. Income Tax registration Certificate with GIR.

            4. Trade License from the municipal or local Authority.

            5. Membership Certificate.

            6. Partnership deed (for partnership firm)

7. Certificate of Registration with the register of joint Stock Co. & Articles and Memorandum of Association in case of Limited Co.

8. Bank Certificate.

9. Documentary evidence for business existence.

10. Original copy of Treasury Chalan being payment of registration fees.

11. Original copy Chaplin for passbook.

12. Other documents if any required by the CCI & E.

13. Ownership’s documents or Rent receipts of the place of Business.

14. Survey clearance from the relevant Authority.

The nominated bank of the application will examine the papers/documents s& verity the signature of the applicant and forward the same to the concerned office of the CCI & E with forwarding schedule in duplicate through bank’s representative. The duplicate copy of the same bearing the acknowledgement of CCI & E office of the receipt of the documents is back by the bank and is preserved.

          If the documents are found in order and the CCI & E is satisfied the IRC is issued to the applicant and sent direct to the nominated bank. The passbook is also issued by the CCI & E simultaneously to the importer and sent direct to the nominated bank.

Parties to a letter of credits:

As per terms and conditions of the L/C, the seller is required to be routed through some intermediary bank in other order to get his claim. So, we see hat there are a number of parties involved in a L/C involved parties to a L/C ar4e under

          1. Importer/Buyer.

            2. Exporter/Seller/Beneficiary

            3. Opening/issuing Bank

            4. Advising/ notifying Bank

            5. Confirming bank (for add confirming L/C)

            6. Exporter’s bank i.e. negotiating bank

            7. Reimbursing bank or paying bank.

Preparation of credit report:

Bank prepared credit report in prescribed forms Character, capacity and capital which are known as the three C’s of credit. Instead of the three C’s some mention the three R’s i.e. reliability, responsibility and resources. To these three C’s we may add two more C’s i.e. collateral and conditions.

How a banker should obtain the necessary information regarding these fundamental of credit, No. doubt, bankers have to make inquires from those of their customers and other peoples and inquired the report by the banker. Sometimes information are gathered by deputing marketing officer or credit officer.

Position of the A/C:

          Import Section will see whether there is sufficient fund available in account to cover the margin to be sanctioned, commission, postage, cable or Telex charge etc. If it is found O.K., L/C will be sanctioned.

In all cases the sanction must be informed to the importer for acceptance. On receiving confirmation from the client then the terms and conditions of the sanctioned are acceptable, the subsequent documentation/ charge document are taken up.

Papers/ documents submitted by the importer before opening of the L/C :

1. Trade License (Valid).
2. Import Registration certificate (Must be kept in the bank custody).
3. Passbook import.
4. Income Tax declaration.
5. Membership certificate.
6. Memorandum of Articles (In case of Ltd. Co.)
7. Registrar deed (In case of partnership firm)
8. Resolution.
9. Photo one copy.

Bank will supply the following papers/documents before opening of the L/C

 i.            L/C application form.

1.   LCAF Form.
2.    IMP Form
3.  Murabaha agreement.
4.  Charge documents paper.

The above paper must be completed duly filled and signed by the party and verified the signature.

Maintenance of register:      

The sanction must be recorded in the following registers:

Document execution register. All the charge documents must be recorded in this register.

    » Limit register.

    » Liability ledger.

L/C application & Procedure for Opening L/C :

For opening L/C the client is to submit to the bank an application in the printed format of the designated bank. This is called L/C application form which is also an agreement between the importer and the bank. The form is to be stamped under stamp Act. In force in Bangladesh. The importer must submit the LCA & IMP and indent or contract. Purchase order/pro-forma invoice (duly accepted by the importer) along with L/C application.

The L/C application must be completed/ filled in and signed by the authorize person of the importer giving the following particulars:

1. Full name and address of the supplier of beneficiary and importer.
2. Brief description of the goods.
3. L/C value for US$, etc. (CFR value) which must not exceed the LCA value.
4. The unit price, quantity quality of the goods.
5. Origin of the goods, port of loading and port of destination must be mentioned.
6. Model of shipment (Sea, Air, Truck or Rail etc.)
7. List date of shipment and negotiation time (must not be beyond 30 days from the shipment date).
8. Insurance cover note number and name or the company.
9. Tenor of draft (1.e, sight/ issuance/ deferred etc.
10. Mode of advising L/C (i.e. airmail/ full telex short cable etc.)
11. Opening of L/C under UCPDC publication No. 500/- ICC revision 1993.
12. Whether shipment/ transshipment is allowed.
13.  Instruction to add confirmation if required.
14. LCA Number.
15. Any other relevant information and instruction if any must be mentioned in the L/C application form.

Examination of L/C application:

On receipt of L/C application it must be checked by an officer of L/C section very carefully in the following manner:

1.         That the terms and conditions as stipulated in the L/C application area consistent with the exchange control and import trade regulation and UCPDC.

2.         That all the information mentioned in above column has been furnished.

3.         That the terms to be imported are eligible according to importers entitlement.

4.         The goods are not being imported or originated from South Africa or Israel.

5.         If the goods are imported from any member counters of ACU.

6.         That all the cutting/permit etc are endorsed.

7.         That the validity of the L/C must not exceed the validity of LCA.

8.         L/C is opened within the validity period permitted in the License.

Confidential Report of beneficiary of L/C:

According to exchange control regulations bankers are required to obtain confidential report of the beneficiary of L/C Before opening the same, if the amount of L/C exceeds Tk. 5.00 Lac Bank can open L/C below Tk. 500 Lac without obtaining C.R.

          Bankers can write to their foreign correspondents to supply the Credit Report. But from practical experience foreign correspondents of different country are not supply timely.

          On receipt of F.R from any source the bender can accumulate the same in one master file.

LCAF Registration & Procedure:

L/C authorization forms consisting of six copies. 1^st copy for exchange control purposes, 2^nd copy for the licensing authority 3^rd & 4^th copies for the CCI & E 5^th copy for the registration unit and 6^th copies is the office copy of the bank.

The procedure for registration of LCA form with the Bangladesh Bank is as under:

1. All LCA forms should be registered with Bangladesh Bank, Registration Unit, Exchange control department, Bangladesh Bank, Dhaka.
2. After filling up the relevant portions of the LCAF and duly signed by the importer there are forwarded to the area registration unit of the Bangladesh Bank by the authorized dealers duly authenticated. The LCAF are registered by the Bangladesh Bank registration unit subject to observation of usual drill. The officer kin-charge of the Bangladesh Bank Registration unit will give the restoration number on all the copies of LCA forms under his signature. Thereafter, the same will be opened unless a LCA forms which has been registered with the Bangladesh Bank.
3. After registrati8on the original and duplicate copies of the LC authorization forms will be delivered to the authorize representation of the banks from whom the same received by the registration unit of the Bangladesh Bank.
4. The authorized dealers will not issue blank L/C authorization forms to their clients; the importer should sign the L/C authorization for in presence of Banks officer. The A.D should sign the LCA form and verify the importer signature. Authorized dealer shall keep it carefully.
5. All Authorized dealers will remain to have with them specimen signature and photo and authenticating officers of the Bangladesh Bank registration Unit
6. The registration will remain valid for 11 months or 17 months As the Case may be depending on the commercial and Industrial machineries.
7. When letters of credit have been opened against the Exchange control copy of the copy under the stamp and signature of the authorized dealer.

 L/C advising:

L/C must be typed in the printed the format of a bank. After typing, L/C should again be checked up advised by short cable, short cable be sent \n corporation principal term of the L/C as under:-

1. Advice irrevocable L/C No………date…………favoring……. (beneficiary’s name and address)
2. Amount (foreign currency)
3. Merchandise to be imported.
4. Negotiation days
5. Name of the importer with address.
6. Test number.
7. Air mailing details.

The airmail L/C must state as under “This is a confirmation of our cable dated”……………..This is necessary to eliminate the possibility or issuing two advised of dispatching the same L/C to the beneficiary by the foreign correspondent.

Add confirmation:

Sometimes the beneficiary of the L/C may ask for add confirmation to all L/C by an internationally, reputed bank in the beneficiary’s country. The import is requesting his bank i.e. opening to do so in writing.

The opening bank advised the L/C through their correspondent with whose have prior arrangement of credit line. Instructions are issued in the following language. “Please adding your confirmation of the credit at beneficiary’s cost” Adding confirmation L/C is negotiation restrict to the bank who has added their confirmation the credit.

Such undertaking can neither be amender nor cancelled without the agreement of the issuing bank, the confirming bank and the beneficiary.

Disposal of L/C copies and fillings:

L/Cs is normal typed in respective banks printed format in manifolds (9 copies). The original L/C is sent to the advising bank for beneficiary and 2^nd copy sent to the above bank at the same time for their own purposes, 3^rd copy for importer, 4^th copy for reimbursing bank 5^th & 6^th copy office copy of the bank, 7^th copy for I.D. 8^th copy for CCI & E and 9^th copy for Bangladesh Bank.

One copy for importer be sent to them alone with the memo of changes incurred by the opening bank for the L/S stating their account has been so debited for the amount of Memo including that amount of margin.

Partial utilization of LCA:

When several L/Cs are opened against a single LCA endorsement must be given according to the L/C opened and aggregate of all the L/Cs must not exceed the value of LCA. Particulars of all the L/Cs should be noted on the back of LCA under “opened L/C no …………dtd ……………for F Currency ………….@…………… equiv. Tk…………..balances is Tk………………..

Accounting procedure for opening L/C :

The following accounting system is followed in documentary credits. The register shall be posted immediately on receipt of approval from the manager to open L/C. this register shall control the numbers of L/C. Following entries are to be passed:

Currency Voucher:

            Dr. Assets as per Contra (L/C WES) at notional rate

            Cr. Liability as per contra (L/C WES)                        ”

            Dr. F.C. Deposit (WES fund held A/C)                     ”

Cr. F.C. Deposit A/C (WES L/C cover)                     ”

Taka voucher:

            Dr. Party’s A/C (Current A/C)

            Cr. Sunday Deposit (Security dep. L/C WES A/C)

            Cr. Telex recovery A/C (at the L/C is transmit by telex or cable).

            Cr. Commission (As per Bangladesh Bank Circular).

            Cr. P & T A/C.

            Cr. Murabaha Import L/C @ B.C. selling rate.

            Cr. WES fund purchase A/C.

            Dr. Profit receivable A/C WES

            Dr. Profit receivable A/C (monthly creditable by daily product basis).

            Cr. Investment Income A/C.

L/C Amendment:

Amendment of irrevocable letter of credit is not permissible without the joint consent of all the parties involved in documentary credit operation.

Time Extension:

A written application from opener is verified a relevant license/ LCA/ permit of the loan/ Barter must remain valid up to that period the extension is sought. Increase of L/C amount may be done provided the LCA covers the increase in amount.

L/C amount can be decreased provided the relevant Indent is amending accordingly and with the consent of beneficiary.

Each of clauses of the L/C can be amended provided the parties involve the L/C consent to it. Procedure or preparation and dispatch:

Amendment is to be typed in the Banks printed format. The copies of the amendment must be dispatched to all concerned as done in dispatching the L/C. Amendment be kept in the L/C file chronologically date wise.

Bank charge:

Amendment commission is to be realized form the party as per instruction of Bangladesh Bank F. E. Circulars.

Accounting procedure.

Dr. Party’s A/C.

Cr. Commission A/C.

Cr. Postage & Telegraph A/C.

Liability:

If the amount of L/C increased the liability voucher is to be passed as under:

Dr. Liability as per contra (WES L/C).

Cr. Asset as per contra (WES L/C).

Dr. Asset as per contra (WES L/C).

Cr. Liability as per contra (WES L/C).

A fresh Liability is to be passed including amount of increase on the date of amendment.

     Back to Back L/C:

Meaning of Back to Back L/C :

Back to Back L/C is a type of import L/C either in inland or in abroad, which open against lien on valid expert L/C.

In our country in export garment this method of finance is widely used and very well known to the manufacturers of garments. Bangladesh exporter received an irrevocable L/C. for supply readymade shirts from an American Bank. For manufacture of the ordered shirts the exporter. Dose not has required raw materials and cloths. To execute the order he is to import materials and cloths from Korea.

Then the Bangladesh exporter does not have the required raw materials and clothes. To excite the order he is to import materials and cloths from Korea.

Then the Bangladeshi exporter will have to open an import L/C favoring Korean suppler for import of cloths and accessories. The L/C is opened by the Bangladeshi bank keeping the American Bank L/C in the ‘back’ (i.e. to fulfill the requirement) of the export L/C is called back to back L/C.

While opening such import L/C the Bangladeshi exporter is to pledge to manufacture the shirt by the Korean in imported cloths under boded ware house system.

Problems of Back to back L/C :

1.         Shipment time gap: Sometime time is shorted for exporting against import L/C, kit may be caused.

2.         Terms and rules violations: IBBL cannot violate the rules & term of Shariah council.

3.         Selling violation: Out of agreement IBBL cannot receive excess wanted.

4.         Payment of back to back L/C bill: No stock bills are supported against Shariah.

5.         Gaps of International rules & regulations.

Prospects of back to back L/C :

            1.         It is Garment oriented readily.

            2.         Backward lender (must have)

            3.         To continuous quality improvement.

            4.         To exchange customer facilities.

            5.         To be continuous of our authorized.

L/C Opening functions:

The following functions are maintained for opening L/C.

            1.         Opening the L/C.

            2.         L/C Lodgment.

            3.         L/C Retirement.

 Lodgment of L/C:

When the documents received from the foreign correspondent and checked with L/C file by two persons to ascertain the correctness it is found in order at that time make entry in the bill register and pass the necessary voucher (reverse the liability entry). The process is known as lodgment. Document must be lodged within 3 (three) days. In three ways the documents may be transferred to the parties.

            a) Cash Payment.

            b) MPI (Murabaha post imported).

            c) Murabaha WES bill.

 Retirement of L/C:

When the parties retire the documents by cash payment or by MPI/LIM arrangement is known as retirement.

Kinds of Bill:

1. At sight
2. Collection (30 cash/ Loan? Barter)
3. Issuance/Deferred.

Check up the document:

Before lodgment, documents must be checked with L/C file. Check up as under:

1. Invoice

2. Bill of Lading

3. Draft

4. Bank forwarding date.

1. INVOICE:

            a) The invoiced amount tallied with draft amount.

            b) The invoice is shown by the beneficiary ad s signed by him.

            c) Description of goods in the invoice and bill of Lading are identical.

2. Bill of Lading:

a) Full set of on board and freight prepaid incase of CFR value duly signed by the shipping company.

b) Correct description of goods is given as per invoice and bill of Lading.

c) Shipment date is given as per L/C.

d) Bill of Lading not closed or closed or dirty, if so, the acceptance of is required.

Endorsement of LC/ License:

LC form must be endorsed showing the utilization of shipment as under:

“Utilized         (F.C……….) equivalent Tk. . . . . . . . . . @ . . . . . . . . Under Bill No……… Against L/C No. Balance Tk…………………

Signature of the official noting on the L/C file:

As soon as documents are lodged the utilized amount is to be noted on the Back of the L/C copy or on the printed format of the L/C file.

Security Documents:

Documents must be kept under & Key of the Bank under the custody of a responsible officer.

Intimation to the Importer:

Importer is to be advised on the date of lodgment of documents with full particulars of shipment to retire the documents against payment or to dispose the import documents as per pre-arrangement, if any. Documents must not be handed over to the importer without payment of without making any arrangement for disposal.

Lodgment of deferred/ Issuance Bill:

After scrutiny of documents, if it is found in order, the documents are presented to the importer for acceptance. The draft is presented under a covering schedule as follows:

“We have received a original documents for US$………………Drawn on you which present for your acceptance on the 1^st of exchange duly signed by you under robber stamp. Please return us the draft within one day of your receipt”.

Dishonor of Documents:

If a documents if found discrepant by the Bank on checking a telex/cable message is to be sent to the negotiating Bank/ Collecting Bank on the date of receipt of documents in the following language.

Your Ref. No………. Under out L/C No……………..for US$…………Bears discrepancy (i.e.) 1………………2……………………3………….etc. Referred to draw shall revert on hearing. Meantime documents held at your risk and responsibility”

Regards:

In the meantime the discrepancies are also to be referred to the draw for their acceptance.

The reply of importer is to reach to the Bank within 72 hours in case of non-acceptance. The dishonor is to be communicated to the negotiating bank within reasonable time. Unusual delay in communication of dishonor is not acceptable to the negotiating Bank and the issuing Bank forfeits its right to claim refund.

Retirement Procedure for Deferred Payment of issuance Bills/ BB Bills :

When the draft is returned by the draw (importer) after duly accepted by him the following procedure to be maintained.

1.         The maturity date is to be worked out and noted in the bill Register and also in due date diary. The due date diary may be maintained by the dealing officer ad the Manager in-charge of foreign Exchange Determent.

2.         The Foreign Correspondent should be advised the due date maturity and be authorized to debit the NOSTRO account or to claim reimbursement on due date as per L/C terms.

3.         All the documents delivered to the importer except accepted bill of exchange/ draft.

For liability of issuance bill reversed the following vouchers are to the assed be the Bank.

Dr. Liability as per contra, When retired the documents, the as Cr. Assets as per contra. Voucher under:

                                                Dr. Party’s A/C.

                                                Cr. H.I., I.D A/C.

                                                Cr. R & T A/C.

                                                Cr. F.C.C. A/C.

                                                Cr. Commission A/C.

Checking & Advising of Export L/C Processing of Opening of BB L/C :

Books, Register and forms required:

            1. Export L/C advising register.

            2. Test key.

            3. Signature Book-lets of foreign correspondence.

            4. L/C advising and amendment advising letter forms.

            5. Inward received register.

International transfer of goods are made through the letter of which issued by the Foreign Bank at the request of Importers in favor of Exporter. Such export L/Cs. is enrolled through the Bangladesh Banks by the Foreign Banks who have correspondent relationship.

The foreign issuing banks may advice a credit in the following manner:

1. By short cable/telex followed by airmail.

2. By full telex (no airmail confirmation).

3. Airmail letter of credit.

4. Advising of L/C after adding confirmation.

a. When a telex L/C is received by the bank it should be recorded first in the Bank inward cable/telex received register. Then it would be passed on to test section for decoding and to verify the test number. When the rest verified then the full telex L/C message will be passed on the beneficiary in the printed format of the advising bank.

b. When a L/C is received by short cable authenticate the test number and advised it to the beneficiary. The item is to be diaries to follow up the airmail. Inward register and then the signature on the L/C is to be verified by authorized officer of a bank and finally is to be forwarded to the beneficiary under forwarding schedule, it found in order in all respects.

All the necessary particulars of the L/C both cable or airmail original export L/C are to be enter in the L/C advising register.

Adding confirmation to Export L/C:

Add confirmation in an undertaking to the Exporter by the advising bank on behalf of the L/C opening Bank regarding payment of documents value to be submitted against the L/C.

Add confirmation is to be given at the request of L/C opening Bank. Therefore, their must have an agency arrangement between both the bank i. e. L/C opening bank and advising bank, First it is to be checked whether the issuing bank is a corresponding bank, if so whether there is any credit limit has been fixed. In case of foreign Banks of good understanding adding confirmation to the export L/C is done without any limit. The sanction of appropriate authority (H.O) is required before confirming a L/C. No confirmation should be added in respect of V issued by unknown banks. Revocable L/C of L/C of banned countries must not be confirmed.

While adding confirmation commission must be realized as per instruction of the correspondent. While on L/C is confirmed its negotiation is done by the confirming bank usually.

Accounting Procedure for confirmation of L/C :

Dr. Customer Liability (Confirming L/C.)

Cr. Bankers liability (Confirming L/C.)

Amendments:

1.         On receipt of amendment, must be authenticate the test or verify the signature. If the test number is incorrect or signature differs, cable confirmation must be obtained from the L/C opening bank. Meanwhile, amendment may be advised as unauthenticated.

2.         Dispatch under register mail or by special messenger. Realize the advising commission Tk. 200/- per L/C and Tk. 200/- per amendment from the beneficiary as per rules of the bank.

Before advising any L/C the following steps must be ensured (Checking of export L/C.)

Before advising the export L/C to the beneficiary advising bank should check the terms and conditions of export to ensure the following points:

1.         That the exportable commodity is not banded by our export policy.

2.         That all the L/Cs are subject to uniform custom and practice for documentary credit ICC publication No. 500, 1993 revision.

Banks involved for opening L/C And Single Deal System of IBBL :

Five banks may be involved for opening L/C. These are given below:

            1. Negotiating Bank- On behalf of exporter.

            2. Issuing Bank- On behalf of importer.

            3. Advising Bank- Advice to the exporter.

            4. Confirming Bank- Who confirms the L/C on behalf of exporter.

            5. Reimbursement Bank- Exporters (specify)

 Documents forwarded to issuing

Single deal system:

Islami Bank certify the CRF (clear Report finding) and all agreements are made before opening L/C, as a result its goods are not sold again raising the products price or reducing the products price. It is the single deal system. Because IBBL deals with the business of selling any buying, not loaning.

Requirement for PSI (per-shipment inspection) :

Duties are imposed on item; the following papers are needed-

            1. L/C Copy.

            2. Performa invoice.

            3. Insurance photo copy (cover note).

            4. Tin (Tax identification Number).

            5. VAT certificate (Registration Number)

            6. Pre-shipment Inspection information form.

5.7.23 Charges for L/C opening:

1. L/C commission: L/C commission 50% within 90 days, first Quarter and Subsequently increase 30% and upon on 15% vat.

2. FCE- (Foreign correspondent charge): Below $25 up to $ 2500. if applicant want to bear the application charge them addition $ 75 will be charged.

3. Telex- per Telex 300 Tk. But if amendment is consider then per amendment 500 Tk. and of Courier Telex, then it will be 1500 Tk.

4. Handling charge- Tk 200 fixed.

5. Stamp change: –   Per L/C 360 Tk.

            Murabaha gain 150 Tk.

            L/C application 150 Tk.

                        Other        60 Tk.

                                       360 Tk.

L/C Margin- that mean cash security ordered by Bangladesh Bank. For industrial items it is liberal & for luxurious items it is highly cost.

How many parties are involved of L/C?

            1. Importer

            2. Exporter

            3. Opening/ Issuing bank

            4. Advising Bank

            5. Negotiating Bank

            6. Confirming bank

            7. Reimbursement bank.

Which documents are given to the parties for opening L/C, by the bank?

            1. IMP form.

            2. L/C EXP form.

3. Charge document (for, D.P. notes, disbursement, Murabaha agreement, Sanction advice, TR (Trust receipt), letter of authority

4. Letter of pledge

5. Letter of Hypothecation.

6. L/C application.

7. Letter of guarantee.

How many copies are needed of import form?

            According to import act 4 copies are needed:

            1. Original for Bangladesh Bank.

            2. Duplicate for authorized dealer.

            3. Triplicate for authorized record

            4. Quadruplicate for submission to the Bangladesh Bank.

L/C authorization form:

It is made for

            1. Commercial Sectors.

            2. Industrial Sectors.

It contains 6 pages.

            1. Original for exchanged Control purpose.

            2. Duplicate for custom purpose.

            3. Triplicate for listening authority.

            4. Quadruplicate for listening authority.

            5. Quadruplicate for the registration unit of Bangladesh Bank.

            6. Office copy for authorized Bank

What contains of L/C form:

            1. L/C Number

            2. Shipping period

            3. Importer name & address

            4. IRC (Import Registration Certificate)

            5. Years of renewal

            6. L/C value (It is mentioned transferring currency and Tk.)

            7. Source of financing.

            8. Description of goods

            9. HSC (Harmonious system code.)

Procedure for Transferable L/C:

The original beneficiary when request the banker in writing to effect transfer the L/C to the second beneficiary on the letter of request must be verified by his banker. The L/C can be transferred only on the terms and condition specified in the original credit.

A transferable credit can be transferred once only. Fractions of transferable credit can be transferred separately. The aggregate of transfers will be treated as only one transfer; the aggregate of such transfers must not exceed the original value of L/C.

When transfers are made in part it should be verified that the original L/C permit part shipment.

While transferring a credit bank may hold the original at their custody. Each and every transfer must be noted on the back of the original one. All the transfers are to be noted in the L/C register. Bang charges/ commission are to be realized from the 1^st beneficiary unless otherwise specified.

Each transferable L/C is subject to UCPDC, ICC publication No. 500, 2000 revision.

Processing and Opening of Back to Back L/C Procedure :

An exporter serious to have an import L/C limit under back to back arrangement, must have apply to the designated bank in prescribed forms for sanction for opening of Back L/C. In that case the followings information is to be furnished by the applicant:

            1. Full particulars of Bank account.

2. Types of business (Proprietorship, partnership, Ltd. Co.) In case of Ltd. Co. Balance Sheet of last 3 years and the name of directors.

3. Historical Back ground.

4. Amount of limit required/

5. Terms of payment.

6. Goods to be imported.

7. Security to be offered.

8. Repayment schedule and source of fund.

9. Other liabilities of the customer with the bank.

10. Statement of Assets and liabilities.

11. Trade License.

12. Valid bonded war house license.

13. Membership Certificate.

14. Income Tax declaration.

15. Memorandum of Articles.

16. Registered partnership deed (if partnership firm.)

17. Resolution.

On receipt of above particulars and papers, the back to back L/C opening section of the bank will prepare a credit report of the concerned importer/ exporter.

On receipt of above information, the designated branch must be obtained a sanction from Head Office for opening back to back L/C.

In all cases the sanction must be informed to the importer for acceptance. On security confirmation form the client that the terms and conditions of the sanctioned are acceptable, the subsequent documentation/charge document is taken up.

Confidential Report of Foreign Suppliers:

According to exchange control regulations bankers are required to obtaining confidential report of the beneficiary of L/C before opening the same, if the amount of L/C exceeds Tk. 5.00 lac. Bank cans L/C below Tk. 5.00 Lax without obtaining confidential report. Bankers can write to their Foreign correspondents to supply the confidential report. But from practical experience foreign correspondents of different countries are not supply timely.

To overcome the above situation bankers can consult reference books i.e. MUNN/DUNN/BRADSTREET/ Trade Directory of various chambers of commerce of different countries. On receipt of confidential report from any source the bender can accumulate the same in one master file.

 Negotiation of Export Documents of Back to Back L/C :

On receipt of documents it must be checked properly and then a proposal sheet would be prepared as per banks format indicating the full particulars of shipment and discrepancies under the signature of authorized person and should be placed to the manager/ appropriate authorized for disposal instruction or sanction.

L/C Terms:

Each and entry chaise in the L/C must be complied with meticulously and ensure the following:

            1. That the documents are not stale.

2. That the documents are negotiated within the L/C validity. If a credit expires on a recognized bank holiday its life is automatically become valid up to the next working day. This is to be stipulated in the documentary schedule quoting the relevant article of UCRDC.

            3. That the document value does not exceed the L/C value.

DRAFT:

Draft is too examined an under:

            1. Draft must be dated.

2. It must be made out in the name of the beneficiary’s bank or to be endorsed to the order of the bank.

3. It must be draw by the opening bank instead of beneficiary of the credit as Per UNPDC 500.

4. The signature of the drawer must be verified by the bank.

5. In case of issuance bill the bill the requisite foreign bill stamp has been affixed as per stamp act. in the country.

6. Amount must be dallied with the invoice amount.

7. It must be marked as drawn under L/C no……….dated………issued by ……….. Bank.

INVOICE:

 It is to be scrutinized to ensure the following:

            1. The invoice is addressed to the importer.

2. The full description of merchandise must be given in the invoice strictly as per L/C.

3. The price, quality, quantity etc. must be as per L/C.

4. The invoice must be Language in the language of L/C.

5. No other charges are permissible in the invoice beyond the stipulation on the L/C.

6. The amount of draft and invoice must be same and within the L/C value.

7. If L/C calls for consular invoice, then the beneficiary’s invoice in not sufficient.

8. Required number of invoice is submitted.

9. The shipping mark and number of packing list shown in the B/L. must be identical with those given in the invoice and documents.

10. The invoice value must not be less than the value declared in EXP form.

11. Invoice amount must be correct on the basis of price, quantity as per L/C.

12. Invoice amount must be correct on the basis of price, quantity as per L/C.

13. Consular invoice must be steamed by the local consulate/ embassy of the country to which the goods are imported.

Other Documents:

Certificate of origin, weight certificate, packing list, Inspection certificate, certificate of analysis, quality certificate of analysis, quality certificate etc. each of these certificates must conform to the goods invoiced and are relevant to L/C.

Recording in the Register:

After checking and disposal instruction/sanction of the competent authority the full details of the shipment and all the relevant documents are recorded in the prescribed FBP/FBN register. The following particulars are to be noted:

 Date end FBP number.

            Name of the shipper/exporter.

            Name of the Export goods.

            Name of the vessel.

            Name and address of the importer.

            Master L/C number and the name of issuing bank.

EXP No. date of report, disposal of EXP-Duplicate and Triplicate and disposal date of EPC (Export price committee) export of raw jute/DRF (Registration form for export of jute goods).

Discrepancy if any (reference of indemnity. reserve if any).

Amount in F.C. and taka, rate, exchange earned etc.

Date of reminder issued.

Date of realization and P.R.C (Proceeds realization certificate).

Whether issued or not.

Date of reporting of transaction to Bangladesh Bank (Vides- 1,2,3 etc.)

 EXPORT

Meaning of Export:

Export means lawful carrying out of anything from one country to another country for sale

 Definition of Exporter:

The importers and exports trade of the country is regulated by the Imports Exports Control Act 1950. No person /firm is allowed to export any thing from Bangladesh unless he is registered with CCI and E under the registration order (Importer and Exporter) 1952. To become an exporter an ERC (export Registration Certificate) must be obtained from the office of CCI & E.

Procedure for obtaining Export Registration Certificate (ERC) :

For obtaining Export Registration Certificate (ERC), intending Bangladesh Exporters are required to apply to the CCI & E authority in the prescribed from along with the following documents:

                    a) Nationality Certificate.

            b) Copy of valid Trade License.

            c) Income Tax Certificate.

            d) Bank Certificate.

            e) Copy of rent receipt of the business firm.

            f) Registered Partnership Deed in case of partnership concerns.

            g) Memorandum of Articles & Association and Incorporation certificate in

    Case of Limited Company.

On satisfaction of the CCI & E the potential exporter is advised to deposit export registration fee of Tk. 1,000/- through Treasury Chelan to Bangladesh Bank/ Sonali Bank for enabling them to issue ERC. The ERC may be renewed every year on payment of renewal fee of Tk. 1,000/- through Treasury Chelan as started.

Get the name of the Importer/ buyer:

The following authorities/ organizations will be able to furnish the names of foreign buyers

a) The export Promotion Bureau.

b) Trading Corporation of Bangladesh.

c) The Commercial Representatives locater in our Embassies/ High Commissions abroad.

d) Commercial Representatives of Foreign Governments located in our country.

e) Commercial Banks, chamber of commerce and Trade Association.

f) International Chamber of Commerce, Paris and other organizations through their Directories, Periodicals and Publications.

g) Direct Trade Deals of the Government.

h) World Directory of Industry and Trade Association.

i) Export Service Organizations i.e. shipping lines, airlines, marine insurance firms etc.

j) Trade Fairs.

k) Trade Directories of the world.

 Different types of Export:

a. Export under L/C:

Exporters are allowed to export the commodity under irrevocable letter of credit. Under this type of export, exporter will ship the goods as pr terms of the credit and will get payment as per arrangement of the credit.

b. Consignment basis export:

Exports are allowed against firm contract. As per contract, importer will ship the goods and the buyer will make payment after selling the consignment.

c. Export against advancement payment:

Sometimes exporter receives payment in advance. In that case Authorized Dealer should obtain a declaration from the exporter on the “Advance receipt voucher” certifying the purpose of the remittance. Then the exporter will export the goods against the advance payment.

General Rules for Export:

There are some rules, which are mandatory for export of any goods form Bangladesh. The rules are as under:

(1) No Person can export any goods from Bangladesh, unless he is duly registered as an exporter with the CCI & E.

(2) All export must be declared on the EXP form, which is consisting of 4 copies.

(3) Export mush is against any of the following:

                        a) Export L/C.

                        b) Firm Contract.

                        c) Advance Payment.

         (4) Transport documents related to land route or sea and any other Author8ized Dealer. The Airway Bill and any other documents of title to car4go may be drawn to the order of a Bank in the country of import. However in case of advance payment, transport document may be drawn to the order of Foreign Importer Bank endorsement of transport documents is prohibited. Directions under Sl. No. shall not apply in the following cases:

           a) Export of Trade sample.

            b) Personal Effects.

            c) Goods shipped under the order of Govt.

            d) Export of fresh fish, vegetable and fruits.

            e) Gift package for less than Tk. 50/-.

(5) ‘EXP’ must be submitted to the Bank by the exported and Bank will submit the Duplicate Copy to the Bangladesh Bank within 14 days from the date of shipment.

(6) Payment for goods exported should be received through an authorized dealer in freely convertible currency.

(7) Export proceeds must be received by the exporters within 4 months.

(8) Overdue export bills statement to Bangladesh Bank should be submitted by the 15^th of the month, following quarter to which it relates.

          (9) In case of short shipment, exporter should give a notice of short shipment of\n the prescribed from in duplicate, the prescribed from in duplicate, the customs, who will forward a Certified copy of the notice, to the Bangladesh Bank.

 Issuance of EXP Forms and Numbering:

Bank will certify EXP Form only after confirming the following:

            a) Arrangements have been made for realization of Export proceeds.

            b) Bona-fides of the importer/ consignees abroad.

c) Arrangements have been made for receipt by Authorized dealer of documents of title to goods.

d) The EXP has been signed by the exporter.

EXP number should be as under:  

Disposal of EXP Form:

I) The EXP Forms are quadruplicate. Exporter will complete and sign the EXP Forms.

II) After completing him EXP Forms, exporter should submit all copies to the AD for certification. After Bank’s certification it to be submitted along with the shipping bill to the custom authorities. Custom authorities affixing their seal & signature will return the duplicate, triplicate and quadruplicate copies to the exporter. The original copy to be forwarded to Bangladesh Bank by custom authority.

III) Exporter will submit the remaining copies EXP forms along with invoice to the AD through whom payment to be received.

IV) AD should submit the certified duplicate copy of EXP forms to the Bangladesh Bank within 14 days from the date of shipment.

V) Upon receipt of payment, the AD should also submit the triplicate copy of EXP form to Bangladesh Bank at the end of the month certifying on the reverse of the form, with monthly summary statement.

Stages & Mechanism of Export:

          1) Exporter will make the goods ready for shipment.

2) Arrangements have to be taken for inspection of the goods by the     competent authority as per credit terms.

3) Exporter will declare on EXP form against export L/C/Firm Contract/ Advance payment.

4) Exporter have to arrange approval for export from custom authority on EXP from by submitting Export L/C, Export permission from CCI & E, Quota clearance from EPB, U.D. in case of garments, invoice, packing list along with shipping bill prepared by C&F agent.

5) After completion of custom formalities, shipping company will receive the goods and will issue B.L.

6) Exporter will collect visa/ license and certificate of origin for final documentation.

7) Exporter will submit the full set of documents to the negotiating bank for negotiation.

8) Negotiation bank will dispatch the documents to the issuing bank for clearance of the goods from destination against payment as per credit terms.

 Export Documents Checking:

After submissions of export documents by the exporter, Bank must check, whether the entire required document submitted or not. Bank must examine all documents stipulated in the credit with reasonable care to ascertain whether or not they appear, on their face to be in compliance with the terms and conditions of the credit. The Banks will not examine documents not stipulated in the credit. To examine documents Bank must follow the L.C terms and international standard banking practice. Automated or computerized carbon copies to be treated as original documents if it is marked ‘original’ Copy documents need not be signed. Multiple documents means one original and remaining copies, Signature, Mark, Stamp or label is sufficient for authentication of document. Bank will accept a prohibited in the L/C.

Some common discrepancies in Export Documents:

1)       Late shipment.

2)       Late presentation.

3)       Part shipment effected.

4)       Consignee/Notify party differs.

5)       F.CR presented instead of B/L.

6)       House Airway Bill presented instead of AWB

7)       B/L shows “ freight collect” instead of “freight prepaid”

8)       Shopped on Board not marked on the B/L

9)       B/L is caused

10) Description of the goods differs

11) Unit price differs

     12) Amount overdrawn

13) Pre-shipment inspection certificate absent

14) Certificate does not cover credit terms

15) Certificate not signed by authorized person

16) Not showing inspection of the gods at named place.

17) Telex acknowledging receipt and giving acceptance on sample, not presented etc.

 Export Financing:

To meet up the cost of the goods to be exported, the exporter, the exporter may require Bank finance. Besides, he may require finance for go down rent, freight etc. Event after shipment of the goods, exporter may require Bank finance to meet-up his current expenditure up to repatriation of the export proceeds.

There are two types of export finance:

            (i) Pre-shipment finance.

            (ii) Post shipment finance.

Pre-shipment finance:

Pre-shipment investment is finance, allowed by a Bank to an exporter, to meet the cost up to the shipment of the goods t overseas buyer. The purpose of the investment is to purchase raw materials or finished goods or manufacturing processing, packing and transporting the goods.

Post shipm:

shipment finance:

There is a time gap between export of the goods and realization of the proceeds. So exporter may require finance in that period to continue his business. So Bank may finance against export documents ensuring the following:

                     1) Export documents comply the credit terms.

            2) Buyer is bona-fide.

            3) Party’s past performance is satisfactory.

            4) Any other security in case of export under contract.

Security of Pre-shipment Investment:

1) Bank will mark loin on the related export L/C.

2) Bank will finance against a L/C having sufficient time to procure the goods for export.

3) Finance to be done after arrival of the imported raw materials under back-to-back L/C.

4) Bank will supervise the production from time to time to ensure export of the goods in time.

5) If finance is applied for a particular purpose Bank will ensure the proper use of the money for the purpose only.

6) Change documents to be signed by the exporter before disbursement of the PSI.

7) In case of Quota finance, Quota allocation letters to be kept lien with the Bank.

8) Bank will adjust the liability proportionately from related export documents.

Types of Pre-shipment Finance:

1) Cash finance for purchase of raw materials/finish goods.

2) Cash finance for factory rent, wages & salaries and all other factory expenses.

3) Finance for payment of freight.

4) Purchase of Quota to export the goods to Quota countries.

Limit of Pre-shipment finance:

1. As. per existing rule Banks can extend pre-shipment facility up to 90% of Export L/C value (FOB value)
2. Bank will finance with in the Head Office sanction limit for the concerned client.
3. Other liabilities of the client with the Bank also to be considered for extending pre-shipment facility.

Issuance PRC:

Sometimes exporters are required to submit to the various Govt. Agency evidence of goods and realization of their proceeds. In such cases proceeds realization certificate (PRC) may be issued.

Negotiation/ Purchase of Bill without L/C:

In our country exports are also made on the basis of contract between the buyer and the seller with out the cover of L/C. In such case document are delivered to the buyer through the intermediary of foreign correspondent of the A.D against payment. Limit (post shipment finance) is usually sanctioned from Head Office to such exporters to boost up export of the Country.

Document sent on Collection Basis:

          When the bank refuses to negotiate the document due to major discrepancies, the bill is sent by bank on collection basis under written instruction from the beneficiary. To handle such transaction as per ICC Publication No. 322 named “Uniform Rules for Collection”

EXP Requirement:

All export from Bangladesh must be declared by the shipper on EXP form to the Bank enabling them to submit the duplicate within 14 days from the date of shipment.

The shipper is required to repatriate the export proceeds within 4 months from the date of shipment otherwise penalty is imposed upon them. A careful watch is to be dept to ensure that the sale proceeds are received on due date. A due date diary must be maintained to pursue the individual case.

Shipping & Customs Formalities:

International transfer of goods are made through the Letter of Credit which issued by the foreign bank at he request of Importers in favor of exporter. Such Export L/Cs is enrooted through the Bangladeshi Banks by the foreign banks who have correspondent relationship.

The foreign issuing banks may advise a credit in the following manner:

1. By short cable/ Telex followed by Airmail.
2. By full telex (No airmail confirmation).
3. Airmail L/C.
4. Advising of L/C after adding confirmation.

Keep the goods ready for dispatch (shipment):

On receipt of the order from the importer, the exporter is to take immediate steps to manufacture the goods if they are not already in stock according to the specifications desired and keep them ready for dispatch.

Inspection of Goods:

The goods should be kept ready for inspection of the competent authorities and issue a certificate of quality control required under regulation: for example:

            1. Export promotion Bureau.

            2. Custom Authorities who will inspect the goods under Sea Customs Act.

            3. Chamber of Commerce and Industry.

            4. Other agencies authorized to inspect the goods before shipment.

Get in touch with the customs and other competent Authorities:

          Getting shipping space:

In order to export the goods, the shipping companies or their agent must be approached by the exporter for booking space, to know the freight etc. So that shipment may be made conveniently. In this regard, the services of clearing and forwarding agents may be taken conveniently for actual shipment of goods; commission etc. is also to be paid to the agents for this works.

Get in touch with port Authorities:

Who will have to allow the goods to move into the port and make arrangements for loading and unloading and keeping the goods in godsons.

Shipment of Goods and other documents to C & F Agents:

To handle the goods for export in the port of shipment banks nominate clearing agents to handle the goods to pass on custom formalities. Clearing agents are appointer by the bank from amongst the C & F agents of custom authority. The clearing agent on behalf of the bank arrange shipping space in the overseas vessel as per shippers instructions and also pays all the relevant dudes payable to the custom authority shipping company as freight. Bank or the shipper is to reimburse these to the C & F agent to the debit of party account.

Which documents/ papers are requirement in regard to export of goods subject to L/C stipulation:

           1. Commercial Invoice.

            2. Certificate of origin.

            3. Negotiable bill of lading.

            4. Pre-shipment inspection certificate.

            5. Quantity & quality certificate.

            6. Fumigation certificate depending o the nature of cargo.

            7. Phytosanitary certificate depending on the nature of cargo.

           8. Gross revenue proceeds (GFP), export price check (EPC)/ Incase of jute shipment etc.

All the above documents prepared by the exporters are an essential Prerequisite for shipment of export to various countries. In completion of documentary formalities cargo is firmly booked by the shippers. The shipping documentary formalities cargo is firmly booked by the shippers. The shipping agents issue shipping order. The shippers/C&F agent then forward the shipping order along with shipping bill to customs authorities. Customs authorities check up the shipping bills/ in voices/ packing list/ shipment order. GRP/EPC Pre-shipment inspection certificate etc. When they are satisfied with export documents and find jetty and charges have been pad by the shippers, they pass the shipping bill and order for shipment. The export cargo is then weighed by the LMD and shipment is effected in the presence of preventive officer. Immediately when the cargo has been lifted on board on the basis of LMD. Mate receipts are issued by the master/chief officer of ship, and finally bills of lading are prepared on the basis of each mate receipt which is an acknowledgement of receipt by ship owners against shipment of cargo on board.

On completion of shipments when shipping documents are presented to bank for necessary settlement of bill of exchange, the bankers should a\carefully scrutinize/ check that the documents have been prepared as per the terms of L/C.

Some Bad Terms in Export L/C:

Generally the following bad terms are found in the export L/C:

1. Negotiation restricted                                 : It should be freely negotiable.

2. Expiry out-side Bangladesh                        : It should be in Bangladesh.

3. Document to be present for

Negotiation outside Bangladesh                     : It should be in Bangladesh.

4. Bill of lading to the order of opening

Bank or Buyer                                     : It should be to the order of negotiating Bank and endorsed favoring opening bank or named bank as per L/C terms.

5. Blank endorsement in B/L.             : In no circumstance blank endorsement is acceptable in exchange control Bangladesh.

6. Airway Bill to the order of applicant          : It should be to the order of a bank.

7. Payment will be made after of

proceed from a name bank or buyer.  : Payment terms should be clear & specific.

8. G.S.P from requires                                    : G.S.P form ‘A’ is to be issued by the authority. Only in case of the merchandise to be exported is made by using Bangladesh Raw materials.

Negotiation of Export Document:

If the export document complies the credit terms Bank may negotiate the Document. Negotiation means the giving of value for Draft and/or documents by the Bank authorized to negotiate. For negotiation, Bank will issue and office note taking decisions of purchase the documents and disbursement of fund. If it is decided to purchase the document then it to be recorded in the FBP register putting a serial number for the documents and the following voucher to be passed.

          Dr. FBN A/C @ OD sight Export Bill.

            Cr. F.C held against BB L/C (79% or as required).

            Cr. Marginal deposit A/C against FBN (2% or as required).

            Cr. Pre-shipment finance.

            Cr. Investment income A/C (PSI).

Cr. Bain WES Bill A/C (For regular 10% & for overdue A/c 20% of generated found or as required)

Cr. Hire Purchase A/C (For regular 10% & for overdue A/c 25% of generated found or as required)

Cr. P&T Recovery A/c

Cr. Local Agents Commission

Cr. FCAD Export A/c (Maximum 7.5% of FOB value as per retention Quota)

Cr. Party’s A/c

It is notable that the above accounting procedure is applicable only for

100% export oriented garments industries. Other wise funds to be credited to party’s current account and other liability accounts, if any. FBN accounts to be adjusted within 21 days by debiting IBG A/c, Ho, and IBW after realization of the export proceeds in NOSTRO A/c.

Repatriation of Export Proceeds:    

Negotiating Bank will maintain regular correspondence with the L/C issuing/ paying Bank for realization of the export proceeds in time. And will follow –up the correspondence related to the discrepancies, discount clear by the buyer to avoid distressed cargo/no realization. Payment must be repatriate within 4 months. Overdue statement to be submitted to Bangladesh Bank quarterly.

Sending Export Documents on Collection:

If the documents are discrepant exporter’s Bank will send the documents to the Issuing Bank on collection, at the request a risk of the exporter.

At the time of sending documents on collection the following voucher to be passed.

          Dr. out-ward foreign bill Lodged A/c

            Cr. out-ward foreign bill for Collection A/c

After realization of the proceeds, above entries to re

serve and the following voucher to be passed.

Dr. IBG A/c HO, IBW @ Mid rate (Bangladesh Bank’s buying rate +TT documentary ¸2)

Cr. Party’s Current Account

Cr. Party’s Investment Account

Cr. Investment Income A/c

Cr. Income A/c (Commission)

Cr. P&T A/c

Cr. Telex charge

Cr. F.C held against Back to Back L/C

Export claim & Discount claim settlement:

If the buyer becomes reluctant to accept discrepant documents without discount, banks may allow discount on the request of the exporter, if discount is less than 10% of the export values, subject to post facto approval from Bangladesh Bank. If the discount is more than 10%, prior approval is required. Foreign commission, brokerage or other trade charges related to export may be allowed up to 5% without Bangladesh Bank permission, but for more than 5%, permission is required. In case of export of books, journals and magazines, 33% discount is allowable. Export claim may be deducted from the bill vale or may be remitted against claim after full realization of the export proceeds.

Export Incentives:

To promote the export business, Government has declared some incentives for exporter. Following are the main incentives as per export policy 1997-2002 declared by the Ministry of Commerce:

Retention Quota:

Exports dared allowed to deep 40% of their export proceeds to their F.C A/c. It is 7.5% in case of export against switch import is higher, proportionately.

Investment period:

Normally export finance, as working capital is allowed for 180 days. Now it has been extended up to 270 days for frozen foods, tea and leather.

Credit Card:

Exporters are allowed to get credit cards for business tour.

Investment Facility:

Commercial Banks may finance for export, up to 90% of FOB value of the export L/C.

No compensation:

Commercial Banks will not impose compensation on overdue sight export bill under irrevocable export L/C.

Duty Draw Back:

Those exporters, who are not available Bonded Warehouse facility, are entitled to get duty draw back facility. They will pay the duty to the custom authority at the time of importing the raw materials and after realization of the export proceeds. They will apply for draw back duty paid earlier Authority will pay back the duty.

Bonded ware House Facility:

100% export oriented industries are allowed to import duty free goods for ultimate export. The goods to be stored at the Bonded Warehouse.

Duty Free Capital Machinery:

100% export oriented industries outside EPZ are also allowed to import capital machinery’s free of duty.

Cash Incentives:

Deemed exporters are allowed 25% Cash Incentive by Bangladesh Bank.

Stock Lot Disposal:

Rejected Garments & Leather may be sold to local market paying 20% duty on the imported raw materials.

Freight Rebate:

Bangladesh Biman charging freight at a reduced rate for fruit & vegetable export.

REMITTANCE:

Meaning of Remittance:

The word “Remittance” originates from the word “remit” which means to transmit money/ fund. In banking terminology, the work “remittance means transfer of fund one place to another. When money transferred from one country to another is called “Foreign Remittance”

 Types of Remittance:

Foreign remittance may be classified into.

• Inward Foreign Remittance.
• Outward Foreign Remittance.

Inward Foreign Remittance:

Inward Foreign Remittance means Remittance received from foreign countries from abroad. In other words remittance coming into our country from other countries by the remitter by way of permissible banking channel through freely convertible Foreign Currencies is called ‘Inward Foreign Remittance’ i.e. payless point of view it is inward foreign remittance. On the other hand remitter’s point of view it is called outward Foreign Remittance. During The year 1995-1996 Bangladesh received and amount of US$ 1217.062 Mil as Foreign remittance. The above process of Remittance may be presented diagrammatically as under:

Outward Remittance:

Outward remittance of funds be made by means of T.T. D.D. T.T. etc. the remitter has to deposit money along with the application contains name and address of the payee name of the currency etc. All outward remittances must cover the transactions approved by the Bangladesh Bank. Which are usually for importers travel & educational expenses.

 Direct/ Indirect Remitter:

Wage Earners:

Bangladeshi nationals working abroad both in private sector & in Govt. Sector.

Indenture:

Indenting commission & Agency commission received from suppliers from abroad. Bangladeshi Nationals working in Bangladesh Embassy abroad.

Foreign Govt./ Govt. organization (UNO & others) who have their own activities in Bangladesh say business, Embassy etc. can also remit to Bangladesh for meting their expenses, salary etc.,

Donors:

Foreign Donors can only remit to Bangladesh through the Govt. Register Organization & institution etc.

Exporters:

Export proceeds also remitted to Bangladesh against exporting of goods.

Activities (Task) of Remittance:

Only three activities are executed these are-

1. OFBC – Draft, cheque etc. are drawn outward / abroad:

2. IFBC:

3. FCC- FC clearing is a place where met to the agents place, from many banks, branches that is drawn on the Bangladesh Bank.

 Mechanism of Remittance:

FCAD- Foreign currency A/C Dollar.

FCAP- Foreign currency A/C Dollar.

MFCD- Mudaraba foreign currency deposits.

PFC- Private foreign currency.

FCAD- Exp.- Foreign currency A/C dollar export.

NRO- Non residence dollar.

NRT- No residence Taka.

PDAP- properly development A/C dollar.

PDAP- properly development A/C pound.

 Instruments of Foreign Remittances:

Cash for          : Dollar, Pound, France Fr. Riyal or any other currency.

T.C.                 : Travelers Cheque.

F.D.D              : Foreign Demand Draft.

T.T                   : Telegraphic Transfer, Cable transfer or swift transfer.

M.T                 : Mail Transfer.

I.M.O              : International Money Order.

Cheque            : By any person & institution..

P.O                  : Payment Order.

 Different types of F.C A/C:

Foreign Currency A/c. Under wage Earners Scheme FCAD, FCAP & other.

P.F.C A/c Private Foreign Currency A/c.

N.F.C.D : Non resident Foreign currency Deposit A/c.

Exporters Retention Quota A/c.

Education Foreign Currency A/c.

C.T A/c. Convertible Taka A/c. & Non- Convertible Taka A/c.

Procedure of Opening F.C. A/C’S:

Any Bangladeshi National or any person of Bangladesh Origin who are serving and working abroad (outside Bangladesh) and whose incomes are not derived from Bangladesh sources are called wage Earners. Following formalities to be obtained before opening a F.C A/c.

Opening Form fill up : Account opening form prescribed for Foreign Currency account should be properly filled in.

Signature verifies:

 The signature of the account holder on the account opening form and specimen signature card must be verified with the signature recorded in the passport.

Nominees’ signatures verify:

The Signature of the nominee, if the account holder desires to authorize to operate the account in absence of him, nominee’s signature must be varied by the account holder.

Photo:

Photograph of the nominee and account holder must be obtained.

Attestation of Nominee’s photo: The photograph of the nominee must be attested by the account holder.

Photo state copy of Passport:

First three page and the page where responsible person.

Required Documents for Different Types of Remittance :

1. Declaration form signed by the remitted for getting the WES benefit.

2. ‘C’ Form to be filled in regarding purpose of remittance is required by the remittance from the remitter (for remitting exceeding US$ 20,000/-)

3. for export-EXP Form duly signed by exporter & other ERC, Invoice, AWB/BL & other documents.

4. Indenting commission-Photo copy of valid RC turn over/VAT, Tax Registration certificate form mist is submitted. Copy of previous month (paid VAT/Tax) treasure challis also)

5. Donation-NGO Bureau’s permission & NGO registration Certificate to be obtained.

6. If the remittance in the Form of Cash/TC is more than US$ 5,000/- then the same to be declared in the Form of FMJ supplied by the custom Authority which is required to produce the bank at the time of encasement.

 Accounting Procedure on Foreign Exchange Transaction : (Inward Remittance)

1. For T.T. 1^st verify the test Number any entry in the T.T payment register.

Dr. IBG A/c. D.D.ID.

Cr. F.C. Deposit (W.F.H) A/c. (at National rate)

Dr. WES Fund purchase A/c. Tk. @ T.T. Clean

Cr. Party’s A/c.

Cr. Commission A/c.

Cr. Govt. Tax A/c.(If the remittance relates with indenting commission 5% & 15% Vat to be deducted).

2. If the party deposit draft to the bank for collection of the proceeds. In that case the following voucher should be passed:

            Dr. Outward foreign bills lodged A/C.

            Cr. Outward foreign bills for collecting.

After clearance the proceeds of the draft the voucher as under:

            Dr. Outward foreign bill for collecting.

            Cr. outward foreign bill lodged A/C.

            Dr. IBG A/C. H.O.ID (at notional Rate)>

            Cr. Commission A/C.

            Dr. W.F. purchase @ T.T. clean rate.

            Cr. P & T A/C.

            Cr. Pay’s A/C.

            Cr. Govt. Tax A/C. (for indenting commission).

3. When a Taka draft presented for payment those who are maintain NRD & Account with us.

            Dr. IB General A/c. L.O. (Mentioning related NRT A/c)

            Cr. Party’s A/c.

Accounting Procedure for outward Remittance for Issuance FDD/TT (Tested MSG to be given) :

Dr. F.C. Deposit (W.F. Held A/c.) @ 40

Cr. IB. General A/c. H.O.I.D,@40-

Dr. Party’s A/c/ Cash @ B.C. selling.

Cr. W.F. Purchase A/c.

Cr. Commission A/c.

Cr. P & T A/c.

When issued T.C.

            Dr. F.C. Deposit (W.F.H) A/c.

            Cr. IB General A/c. H.O. ID.

Dr. Parties A/c.

Cr. Commission.