Import Financing and Documentary Credit or Letter of Credit

MODES OF PAYMENT IN INTERNATIONAL TRADE: 

Cash in Advance

Open Account

Collection Method

Documentary Credit / Letter of Credit (L/C)

01.     Cash in Advance:

The buyer places the funds at the disposal of the seller prior to shipment of the goods or provisions services.

02.     Open Account:

An arrangement between the buyer and seller where the goods are manufactured and delivered before payment is required. Open account provides for payment at some stated specific future date and without the buyer issuing any negotiable instrument evidencing his legal commitment. The seller must have absolute trust that he will be paid at the agreed date.

03.     Collection Method:

An arrangement whereby the goods are shipped and relevant bill of exchange (draft) is drawn by the seller on the buyer, and/or documents is to the seller’s bank with clear instructions for collection through one of its correspondent bank located in the domicile of the buyer.

04.     Documentary Credit or Letter of Credit (L/C):

The Documentary Credit or letter of credit is an undertaking issued by a bank for the account of the buyer (the applicant) or for its own account, to pay the beneficiary the value of the draft and/or documents provided that the terms and conditions of the Documentary Credit are complied with.

DEFINITION OF LETTER OF CREDIT, AS PER UCP 600, ARTICLE2

Creditmeans any arrangement, however means or described, that is irrevocable and thereby constitutes a definite undertaking of the issuing bank to honor a complying presentation.

Honor means:

to pay at sight if the credit is available by at sight

to incur a deferred payment undertaking and pay at maturity if the credit is available by deferred payment.

to accept a bill of exchange (“draft”) drawn by the beneficiary and pay at maturity if the credit is available by acceptance.

Issuing bank means the bank that issues a credit at the request of an applicant or on its own behalf.

SPECIAL TYPES OF DOCUMENTARY CREDIT:

Revolving Credit:

The revolving credit is one, which provides for restoring the credit to the original amount after it has been utilized. How many times it will be taking place must be specifically mentioned in the credit.

Transferable Credit:

A transferable credit is one that can be transferred by the original beneficiary in full or part to one or more subsequent beneficiaries.

Back to Back Credit:

The back to back credit is a new credit opened on the basis of an original credit in favour of another beneficiary.

Red Clause Credit:

A Red Clause credit is a credit with a special condition incorporate into it that authorizes the confirming bank or any other nominated bank to make advances to the beneficiary before presentation of the documents.

Standby Credits:

The Standby Credit is a documentary credit or similar arrangement, however named or described, which represents an obligation to the beneficiary on the part of the issuing bank to:

(1)           repay money borrowed by the applicant or advanced to or from the account of the applicant

(2)           make payment on account of any indebt ness undertaken by the applicant or

(3)           make payment on account of any default by the applicant in the performance of an obligation.

Parties to a Letter of Credit:

The parties are:

The issuing bank

The confirming bank, if any , and

The beneficiary.

Other parties are:

The applicant

The advising bank

The nominated paying/ negotiating bank/ accepting bank and

The transferring bank, if any.

OPERATIONS OF DOCUMENTARY CREDIT:

The following five major steps are involved in the operation of a documentary letter of credit:

(1)      Issuing

(2)      Advising

(3)      Amendment, if necessary

(4)      Presentation and

(5)      Settlement

The documentary credit cycleLEGAL FRAME WORK

Foreign Exchange Regulation Act 1947 and GFET

Import Policy and Export Policy

Directives of NBR and other authorities

UCPDC-600

URR-525

URC-522

Sanctioned Terms and Conditions of the Bank

The foreign currency held by Authorized Dealers shall at all times be deemed to be held at the disposal of   Bangladesh Bank.

DOCUMENTARY REQUIREMENTS FOR OPENING L/C

 

Importer shall submit following documents for opening L/C:


a)   Valid Import Registration Certificate (commercial/industrial)

      The following persons/purposes are exempted from Registration:

Govt. Departments

Local Authorities & Statutory Bodies

Recognized Educational Institutions

Hospitals

Import of Capital Machinery for own use


(b)          Tax Identification Number Certificate


(c)          VAT Registration Certificate


(d)          Membership Certificate of a recognized Trade Association as per IPO


(e)          A declaration, in triplicate, that the importer has paid income-tax or submitted income tax return for the preceding year


(f)           Proforma Invoice or Indent duly accepted by the importer


(g)          Insurance Cover Note with Money Paid Receipt covering value of goods to be imported plus 10 (Ten) percent above


(h)          L/C application Form (MF-fx13) duly signed by the importer


(i)            Letter of Credit Authorization Form (L/CAF), commercial or industrial as the case may be, duly signed by the importer and incorporating New ITC number of at least 6(six) digits under the Harmonized System as given in the Import Trade Control Schedule 1988.


(j)           IMP Form duly signed by the importer


PRECAUTIONARY STEPS

 

The Branch must ensure that they deal only with known customers having a place of business in Bangladesh and can be traced easily, should any occasion arise for this purpose.

The Branch shall assess the financial standings & credibility of the customers with a view to ensure satisfactory arrangement for retirement of the documents.

The Branch should also obtain confidential report/CREDIT REPORT on the exporter in all cases where the amount of the L/C exceeds Tk.2,00,000.00 against P/Invoice and Tk.5,00,000.00 against indents.

The Branch shall verify prices so as to ascertain competitiveness of the commodities to be imported.

The Branch shall also see the marketability of the commodities to be imported.

The Branch shall verify signature of the Importer on L/C Application Forms, L/CAF & IMP Form.

The Branch will not open L/Cs for import of goods through the customs stations/routes like Sonamasjid, Hili, Burimary, Birol, etc. unless the importers pay 100% margin or prior Head Office approval is obtained.


SANCTIONING, DOCUMENTATION & LEGAL FORMALITIES

Approval of Head Office and/or Branch Manger (where L/Cs are to be opened under his delegation) is to be obtained before opening L/C(s).

Security documentation is to be completed as per sanction/approval terms prior to opening of L.C. Charge Forms such as Demand Promissory Note, Letter of Undertaking, Letter of Debit Authority & Letter of Guarantee (where applicable) to be obtained with due stamps as per prevailing Stamp Act rate.

OPENING L/C:

With the little understanding of L/Cs and after completing necessary formalities, the branch may now proceed for opening the credit on behalf of their own customers who maintain accounts with them, except government organizations. Necessary entries to be given in the L/C opening Register (MB/FX-03) by allocating an L/C number and following vouchers are to be passed for completion of opening transactions at BC Selling rate (Spot):

Time Limit for Opening of L/C

 L/Cs shall be opened within 150 days from the date of issuance of L/CAF or from the date of registration of L/CAF with Bangladesh Bank.

Terms of L/Cs

Full description of the goods along with quantity and unit price are to be incorporated in the L/C and shall take all precautions to quote the correct H.S. Codes of the goods. Prices to be quoted on CFR or FOB basis according to the P/Invoice or Indent. No import shall be made on CIF basis without prior approval from the Ministry of Commerce.

 All L/Cs should provide for payment to be made against full sets of ‘On Board’ (shipped) transport documents drawn or endorsed to the order of Mercantile Bank Limited showing dispatch of goods covered by the credit to a destination in Bangladesh.

 All L/Cs must specify submission of signed invoices, certificates of origin & pre-shipment Inspection Certificate. L/Cs shall also incorporate any other documents, which are mandatorily specified for that commodities in the IPO/Public Notices/Bangladesh Bank Circulars.

It is not permissible to open import L/Cs in favour of beneficiaries or to use shipping carriers of the countries from which import into Bangladesh are banned by the competent authority.

Shipment Validity & Expiry

All L/Cs must specify shipment validity as per terms of the P/Invoice or indent or L/C application. However, shipment validity under any circumstances shall not exceed 9(nine) months from the date of issuance of L/CAF or registration of L/CAF with Bangladesh Bank, except capital machinery and spare parts, shipment of which shall be made within 17 (seventeen) months. All L/Cs must stipulate an expiry date and a place for presentation of documents for payment/acceptance.

Additional Confirmation to the L/Cs

At the request of the importer, the branch may request a third correspondent bank (having prior arrangement of credit line) to add their confirmation to the L/Cs. The branch shall send a request letter to the International Division, Head Office for their record and necessary instructions to be advised to the concerned confirming bank for this purpose. Confirmation charges are to be recovered from the importer as per schedule of charges of the bank unless it is waived or directed otherwise as per agreement between the supplier and the importer.

Stipulation of Reimbursement terms and issuance of Reimbursement Authorization

The branch shall stipulate reimbursement term in the L/Cs mentioning name of the Reimbursing Bank and Nostro Account Number (preferably in the country of the currency denominated in the L/Cs so as to avoid possible loss due to conversion of differential currencies). The branch shall issue and send Reimbursement Authorisation[1] to the Reimbursing Bank immediately after opening of the L/Cs.

Amendments

The Branch may allow amendments to the L/Cs only upon requests of the L/C applicants that do not violate foreign exchange regulations and import control regulations. Necessary charges and/or margin (where L/C value is increased by subsequent amendments) are also to be realized/recovered from the customer before amending the L/Cs.

Cancellation of L/Cs

An Irrevocable L/C can not be cancelled without the agreement of the beneficiary and the confirming bank, if any.

The branch, at the request of the importer, may approach the L/C advising bank for cancellation of the L/C and such cancellation will only be effective upon consent of the beneficiary advised to the branch through the L/C advising bank. However, the branch may cancel the L/C without the consent of the beneficiary, advising bank and confirming bank, if any, if the L/C expires and the branch receives no shipping documents within 15 days[2] of expiry of the L/C.   The branch should send a message to the concerned bank advising such cancellation and closure of L/C file due to expiry of the same. The branch will then cancel the Reimbursement Authorisation which has been provided to the Reimbursing Bank while opening the L/C. The branch will reverse L/C contra liabilities, refund margin and recover charges from the L/C applicant as per schedule of charges.

COMMON IRREGULARITIES IN OPENING OF L/CS:

From regulatory point of view.

From sanctioning point of view.

From operational point of view under UCPDC and URR

01. From regulatory point of view.

The required documents not submitted duly e.g. IRC, TIN, VAT, Membership certificate etc.

Supplier’s Credit Report

Pre Shipment Inspection

In case of Indent, Bangladesh Bank approval for the respective principals.

Validity and import entitlement of IRC

Validity of L/CAF

Verification of price of the importable items

 

All L/Cs must specify shipment validity as per terms of the P/Invoice or indent or L/C application. However, shipment validity under any circumstances shall not exceed 9(nine) months from the date of issuance of L/CAF or registration of L/CAF with Bangladesh Bank, except capital machinery and spare parts, shipment of which shall be made within 17 (seventeen) months.

 

 Last date for opening L/C: After issuance of L/CAF within 150 days L/C to be opened.


Last date of shipment: After issuance/registration of L/CA form capital machinery to be opened within 17  month and for other item 9 months.


Terms of Shipment:

CFR, CPT, FOB & CIF

Import under FOB requires compliance of directive of Bangladesh Bank.

CIF requires permission of Ministry of Commerce.

Country of Origin:

Country of origin is to be mentioned in the body of packing/ containers etc. Certificate of origin is required for release of goods by the customs authority.

For 100% export oriented industry, country of origin is not mandatory for import of raw materials.

Requirement of IRC for capital machinery: In order to establish new industry IRC is not required for import of capital machinery. No waiver from CCI & E is also required.

02. From sanctioning point of view.

·         Within the limit and validity

Stipulation of Margin

Schedule of Charges

Particulars of approved items

Tenor

Retirement Arrangement

03. From operational point of view under UCPDC 600

·         Availability of the Credit/ Payment Terms

Confirmation Arrangement

Reimbursement arrangement

Required documents (Nature of items)

Sales Term

Shipment and expiry date

H S CODE

Classification of commodity has been introduced in early nineteenth century in Europe. Internationally accepted coding system was first introduced in 1931 as Brussels Nomenclature and in 1937 as League of Nations Nomenclature. Present nomenclature has been introduced by Customs Co-operative Council (CCC) as CCC N (nomenclature) in the year 1959.

The term “HS Code” refers to the “Harmonized Commodity Description and Coding System”. The HS code is used by Customs agencies worldwide to assess duties, collect trade statistics, and generally to control imports and exports. The system begins by assigning goods to categories of crude and natural products, and from there proceeds to categories with increasing complexity. The codes with the broadest coverage are the first four digits, and are referred to as the heading. The HTS therefore sets forth all the international nomenclature through the 6-digit level and, where needed, contains added subdivisions assigned 2 more digits, for a total of 8 at the tariff-rate line (legal) level. Two final (non-legal) digits are assigned as statistical reporting numbers if warranted, for a total of 10 digits to be listed on entries. To ensure harmonization, the contracting parties must employ all 4-digit and 6-digit provisions and the international rules and notes without deviation, but are free to adopt additional subcategories and notes.

SCRUTINY / EXAMINATION OF DOCUMENTS

Upon receipt of the documents the branch shall examine the documents with the L/Cs and determine whether to take up or refuse the documents and to inform the negotiating bank from which it received the documents within five banking days following the day of receipt of the documents.

If the documents appear on their face not to be in compliance with the terms and conditions of the credit, branch must refuse the documents by sending Notice to that effect by telecommunication or by other expeditious means to the negotiating bank without delay but not later than the close of the five banking days following the day of receipt of the documents.


Such notice must state all discrepancies in respect of which the bank refuses the documents and must also state whether it is holding the documents at the disposal of or is returning them to the presenter.

 

Notice Format:

  •  

From: Mercantile Bank Limited

Ref: Your Bill No……………….. dated…………. for US$ ………… our L/C NO………. dated ………..

We have received your subject documents with the following discrepancies:

As per Article-14 of UCPDC (1993 REV.) ICC PUB-600 we have to refuse the documents at this stage. However, we have referred the discrepancies to the applicant for their approval and shall revert soon. In the event discrepancies are subsequently accepted we will deliver the documents to the applicant against payment/acceptance unless we hear contrary to it from yourselves prior to their acceptance. Meantime, documents are held at your risk & responsibility.

The branch may then approach the L/C applicant for a waiver of the discrepancy (ies).

IMPORT BILL SCRUTINY CHECKLIST

Following points should be carefully checked in respect of the relevant documents:

a)  Forwarding schedule of the negotiating bank

whether there is any discrepancy mentioned in it

whether there is any special instruction that cannot be complied with

whether there is any commission/charge payable/realized beyond L/C terms

b)  General

Late shipment

Late Presentation

Early shipment i.e. shipment made before issuance of D.C or before time   stipulated in Documentary Credit

L/C expired

L/C over-drawn

Partial shipment or transshipment beyond L/C terms


c)  Bill of Exchange

Amount of B/E differ with Invoice

Not drawn on L/C issuing Bank

Not signed

Tenor of B/E not identical with L/C

Full set not submitted


(d)  Invoice

Not issued by the beneficiary

Not signed by the beneficiary

Not made out in the name of the applicant

Description, price, quantity, sale terms of the goods not correspond to the credit

Not marked one fold as original

Shipping marks differ with B/L & Packing List

 

(e)  Packing List


Gross wt., Net wt. & Measurement, Number of Cartons/Packages differ with B/L

Not marked one fold as Original

Not signed by the Beneficiary

Shipping marks differ with B/L

 

(f)            Bill of Lading/Airway Bill, etc.

 

Full set of B/L not  submitted.

B/L is not drawn or endorsed to the order of Mercantile Bank Limited.

“Shipped on Board”, “Freight Prepaid”, etc. notations are not marked on the B/L.

Name and address of the Notify Parties are not mentioned or differ with L/C.

B/L does not indicate the name and the capacity of the party i.e. carrier or master on whose behalf the agent is signing the B/L.

‘Shipped on Board’ notation not showing name of pre-carriage vessel/intended vessel.

‘Shipped on Board’ notation not showing port of loading and vessel name (in case B/L indicates a place of receipt or taking in charge different from the port of loading).

Short Form B/L.

Charter party B/L

Description of goods in B/L not agree with that of Invoice, B/E & P/L

Alternations in B/L not authenticated

 Loaded on Deck

B/L bearing clauses or notations expressly declaring defective condition of the goods and/or the packages

Stale B/L

 

(g)           Others


N.N documents not forwarded to buyers or forwarded beyond L/C terms.

Inadequate number of Invoice, Packing List, B/L and others submitted.

Certificate of origin differs with L/C terms.

Shipment advice with Insurance Cover Note number not issued to the Insurance Company and/or to the applicant.

Shipping Company Certificate regarding ownership of vessel not issued

L/CA Form, IRC, HS Code and Export L/C Number are not mentioned in all the documents

(h)           PSI Certificate

 

CRF absent

CRF dated later than B/L, AWB, TR date

Original CRF presented instead of duplicate

CIF value not shown

CRF not issued by authorized office of the inspecting company in the country of supply

CRF not signed by the authorized officer of the inspecting company under dry embossed seal/hologram

Container number and inspecting company’s seal number not mentioned in the CRF in case of container shipment

Description, quantity, quality, H.S. Code and price of goods differ with L/C and Invoice

CRF number & date not mentioned in the invoice and packing list with due endorsement of the inspecting company

DISPOSAL OF DISCREPANT DOCUMENTS

If the importer refuses to accept the documents because of discrepancies advised to him, the branch should immediately advise the same to the negotiating bank by telex/cable[i] and dishonoured documents will then be handled according to the instruction of the negotiating bank. If no reply is received regarding disposal of the documents, the bank will return the full sets of documents to the presenter by courier service/Registered Postal Mail.

* To:

  • From: Mercantile Bank Limited

Ref: Your bill no……… dated ………. for US$ ……… our L/C No………… dated ………..

Be informed that the L/C applicant refused the documents because of discrepancies advised to you vide our

telex/Cable dated ………  Please advise us your disposal instruction, if any, within 3 days of this message   failing

which we shall return the documents.


 The branch should cancel the Reimbursement Authorization provided to the Reimbursing Bank while opening the L/C and/or claim refund of reimbursement with interest from the remitting bank, of any reimbursement which has been made to the negotiating bank. The branch shall reverse the contra liability which has been passed at the time of opening and recover/realize postal and other charges incurred by the bank in this behalf.

LODGMENT OF DOCUMENTS

If the documents are found in order or the discrepancies in the document, if any, are subsequently accepted by the applicant, the branch will record the particulars of the documents in the PAD Register (MB fx-05) and the following vouchers are to be passed for completion of lodgment transactions:


(a)                 Reversal of L/C liability to the extent of documents

Dr. Bankers liability on L/C Cash

Cr. Customers liability on L/C Cash


(b)                 PAD Vouchers

Dr. PAD A/c for Bill value including interest[3]@ B.C selling rate prevailing on the date of lodgment less Margin amount.

Dr. Sundry Deposit A/c: Margin on L/C Cash

Cr. MBL General A/c: CAD ID on respective Nostro A/c. for bill value at Ready Selling Rate in case of USD

      & ACU Dollar or TT OD rate for all other currencies.

Cr. Income A/c: Interest on PAD

Cr. Income A/c: Exchange Gain on F.C.

RETIREMENT OF DOCUMENTS

Importer is to be advised (MFfx-04) on the date of lodgement 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. Subsequent reminders (MFfx-05) are also to be issued every week till retirement of the bill. Such bills will be considered and be reported as overdue if the importer fails to retire the documents within 21 days of arrival of the relative import consignments at the port of destination.


When the importer intends to retire the documents, the branch will prepare following retirement vouchers for adjustment of PAD liabilities there against:

Dr. PAD A/c for the interest amount accrued from the date of lodgment to the date of retirement

Cr. Income A/c: Interest on PAD

Dr. Party’s A/c. for PAD amount with accrued interest

Cr. PAD A/c.

Thereafter the documents may be handed over to the importer against proper acknowledgement after certification and endorsement.

 

1.

On the Invoice

Certified that the invoice has been drawn under L/C No……………..

For USD…………..

Mercantile Bank Limited

Authorized Signature

2.

On the Bill of Exchange

Received Payment

Mercantile Bank Limited

Authorized Signature

3.

On the Transport Document

Please Deliver to the order of

M/s…………………….

Mercantile Bank Limited

Authorized Signature                            Authorized Signature

  •  

Sometimes importer may not come forward to retire the documents, and for safe-guarding bank’s interest the branch should arrange clearance of the consignment under forced circumstances with prior approval of Head Office since consignment are liable to be auctioned by the custom authority within 45 days from the date of arrival of the vessel. However, in case of perishable goods or seasonal items, Branch must take immediate action for retirement of documents or clearance of goods to safeguard Bank’s interest.


Documents must not be handed over to the importer without payment or without making any arrangement for disposal.

ENDORSEMENT OF NON-NEGOTIABLE COPY DOCUMENTS

 

For clearance of cargo – In the event of non-receipt of import documents relating to goods, which have already reached the port, the customer may ask the bank to provide a Shipping Guarantee/NOC to enable them to clear the goods from the customs. The Shipping Guarantee may be given on the basis of a written undertaking from the client.  The S/G should state, inter alia, that he will in due course accept the original documents in spite of discrepancies, if any, and bear the exchange loss on account of fluctuation of exchange rates between the date of guarantee to actual date of lodgment of original documents, when received.

To check the non-negotiable copy documents with the L/C terms and make entries of particulars of the documents in the Shipping Guarantee Issue Register (MBfx-06)

To recover Taka equivalent of F.C value of N/N copy documents and charges from the customer.

To ensure return back of the shipping indemnity/guarantee from the shipping company by delivering original shipping documents to the importer after receipt of original document from the payee bank.

To mark cancellation on the shipping indemnity/guarantee returned by the shipping company through the importer and file it in the respective L/C file.

VOUCHING PROCEDURE

Dr. Customers A/c for F.C amount of N/N Documents at prevailing B.C Selling (Spot) less proportionate margin

Cr. Sundry Deposit A/c: Margin on L/C cash

Dr. Customers A/c for Bank’s charges as per schedule

Cr. Income A/c: Miscellaneous Earnings

N.B. The branch should not endorse N/N copy documents and issue shipping guarantee/indemnity/NOC for clearance

of cargo after receipt of original shipping documents from the Negotiating/collecting bank.

For Custom Assessment Purpose – at the request of the importer branch may endorse Non-negotiable copy documents for custom assessment purpose. The branch will certify the value of F.C on the copy invoice and also certify[4] the copy transport documents under single authorized signature. Endorsement charge is to be realized as per schedule of charges of the bank. 

L/C ON DEFERRED PAYMENT BASIS

L/Cs may be opened on deferred payment (DA) basis in the following cases subject to approval of Head Office:

(i)   Capital machinery imports on up to 360 days usance basis,

(ii)   Industrial raw material imports for own use of industrial importers on up to 180 days usance basis,

(iii)  Import of coastal vessels including oil tankers and ocean going vessels including those procured for scrapping on up to 360 days usance basis,

(iv)  Import of agricultural implements and chemical fertilizer on up to 180 days basis,

(v)  Import of life saving drugs on up to 90 days usance basis.

For such deferred payment imports, the prices must be internationally competitive and usance interest, if any, should not be at rate higher than the LIBOR for the relative period or the equivalent rate prevailing in the currency of the country of the supplier.

ACCEPTANCE & LODGMENT OF DEFERRED BILL

On receipt of import documents against the L/C, the documents should be subjected to usual scrutiny. If found in order, the customer should be asked to accept the usance bill of exchange. When the bill of exchange is returned by the drawee (i.e. importer) after duly accepted by him, the maturity date of the bill is to be worked out and noted in the IFDBC register and also in the Due Date Diary (MBFx-16). The date of maturity of the Bill of Exchange is communicated to the negotiating or collecting bank by SWIFT/ fax. Simultaneously the documents are lodged under ABP (Accepted Bills for Payment).

 

AS PER IMPORT POLICY ORDER 2009- 2012 THE FOLLOWING GOODS SHALL NOT BE IMPORTABLE:

Maps, charts and geographical globes which do not indicate the territory of Bangladesh in accordance with the maps published by the Department of Survey, Government of the People’s Republic of Bangladesh.

Horror comics, obscene and subversive literature including such pamphlets, posters, newspapers, periodicals, photographs, films, gramophone records and audio and video cassette tapes etc.

Books, newspapers, periodicals, documents and other papers, posters photographs, films, gramophone records, audio and video cassettes, tapes etc. containing matters likely to outrange the religious feelings and beliefs of any class of the citizens of Bangladesh.

Unless otherwise specified in this order, old, second-hand and reconditioned goods, factory rejects and goods of job-lot/stock-lot or secondary/sub-standard quality.

Reconditioned office equipment, photocopier, type-writer machine, telex, phone, fax;

Unless or otherwise specified in this order, all kinds of waste;

Goods (including their containers) bearing any words or inscriptions of a religious connotation the use or disposal of which may injure the religious feelings and beliefs of any class of the citizens of Bangladesh;

Goods (including their containers) bearing any obscene picture, writing inscription or visible representation.

Import of live Swine and any item prepared from swine is banned; 

BANGLADESH CUSTOMS REGULATIONS FOR IMPORT SHIPMENTS

A. Diplomatic shipments:

Diplomatic personnel are allowed duty free clearance against Exemption Certificate, which is issued by the Ministry of Foreign Affairs, Government of the People’s Republic of Bangladesh

B. Privileged personnel shipments:

Expatriates working with the UN agencies, World Bank and Foreign aided projects, are allowed duty free clearance against customs passbook, which is issued by the customs authorities after the arrival of the expatriate. All import shipments should arrive Bangladesh within 6 months of the expatriate’s arrival.


C. Non-privileged personnel shipments:


Shipments that do not apply to category A & B are not subject to duty free clearance.


D. Vehicles:

Returning residents/ non-privileged personnel are subject to payment of duties.

Diplomats and Privileged personnel are allowed duty free clearance.

Vehicles more than 6 years old are not permissible for import into Bangladesh.


E. Pets:

 

Permission from the Department of Livestock, Govt. of Bangladesh and a valid vaccination certificate is required.

To bring pets into Bangladesh a value of US$.100.00 is applicable (per pet),


F. Restricted items:


Drugs, obscene and subversive literatures, firearms, ammunitions and antiques are not allowed to be imported along-with the HHGDS (House Hold Goods) Shipment. This is only subject to obtaining special permission from the concern Government Authorities.


G. Useful information

 

Air and sea shipments undergo customs examinations except for diplomatic Shipments. The owner of the shipment must be present in the country for the clearance of the shipment.


Shipments should be consigned to the “OWNER” and HOMEBOUND as the” NOTIFY PARTY”.

Import Finance plays a vital role in a country’s foreign trade business. Import of goods and services are needed not only for export production but also to supply domestic industry with the necessary inputs which are not locally available or available at uneconomic cost, and are needed for expansion and development.

Loan Against Imported Merchandise (LIM) is a facility provided by the bank to the importers who are in shortage of fund to retire the import bills and thus to clear the goods from the port authority. In other words it may be referred as an advance made to the importers for clearance the imported merchandise. In some other banks it is known as Advance Against Merchandise.

LIM Accounts may be created in the following two cases        :

(a)           LIM Account on importer’s request

(b)           Forced LIM Account

(a)           LIM ACCOUNT ON IMPORTER’S REQUEST       :

After lodgment of documents, the importer concerned to be intimated for early retirement of the documents by paying outstanding bill amount including other charges. If the importer is not in a position to retire the bill out of his own sources at that moment, may request the bank to clear the goods by creating LIM Account. On receipt of the importer’s request the official of the import bills section will prepare an office note by calculating the total landed cost of the consignment. To ascertain the landed cost the following points to be considered   :


i)              Bill amount i.e. invoice amount                                :               Tk. ……………………………..

ii)             Customs duty %                                                      :               Tk……………………………….

iii)             VAT %                                                                     :               Tk……………………………….

iv)            Development surcharge %                                      :               Tk……………………………….

v)             C & F Agent’s bill (approx)                                      :               Tk……………………………….

vi)            Miscellaneous (approx)                                           :               Tk……………………………….

Total landed cost of the goods                                                :               Tk………………………………

Less margin retained at the time of opening L/C (-)                :               Tk………………………………

Less further margin to be realised from the                            :               Tk……………………………….

importer (-)

Bank’s Liability will be                                                               :               Tk………………………………..

Efforts should be taken so that at least 20% to 30% margin of the landed cost may realise from the importer. Realisation of margin will depend on the banker customer relationship and also on the marketability of the goods.

The following charge documents have to be executed by the importer.

i)              DP Note

ii)             Letter of Arrangement

iii)             Letter of Disbursement

iv)            Letter of Pledge

v)             Any other document if necessary

The branch Managers are not empowered to sanction the LIM A/cs in favour of the importers for clearance the goods without obtaining the approval from Head Office.

On getting approval from Head Office on the Office Note the branch Manager will send the documents to the port city branch by endorsing the bill of lading in favour of them with certification of invoice for clearance the goods through importer’s nominated as well as Bank’s approved C&F agent under intimation to Head Office and concerned zonal office. In the forwarding letter clear instruction’s to be given for despatching the goods either by train or by truck duly insured. Branch Managers will have to take prior approval from International Division, Head Office to create LIM Account in favour of importers. Before sending the documents to the port city branch and undertaking on prescribed form with special Adhesive stamp regarding the stipulated period sanctioned to the importer to be obtained.

The following accounting entries and vouchers are generally to be passed in the set of  “Retirement Voucher” on the same day at the branch.

Dr            :               Customer A/c

Dr            :               LIM A/c Customer

Cr            :               IBTA/ Pay Order

Cr                            PAD

The particulars of LIM A/c must be entered and voucher to be posted in the LIM Register.

After clearance, the goods should be stored either in Bank’s godown or in importer’s godown under bank’s lock and key and the particulars of goods to be entered in the space provided in the LIM Register. At the same time insurance of goods covering fire and other risks to be made. Godown Staff salary, godown rent (if the goods stored at the Bank’s godown) and other miscellaneous charges in connection with the LIM A/c will be paid by debit to party’s LIM A/c under advice to the importer.

b) FORCED LIM ACCOUNT:

Immediately after lodgment of documents, the branch incumbent and concerned dealing official shall vigorously peruse importers for retirement of bills. PAD should not remain outstanding for more than 30 days from the date of lodgement.

If the party fails to retire the documents within 30 days or within the date of arrival of ship which ever is earlier the branch should send the documents for clearance the goods.

Other formalities in connection with the forced LIM A/c will be the same as in the case of LIM A/c created on importer’s request. No further L/Cs of the party for whom the bank was forced to clear the consignment and the party failed to take delivery of  the goods within the time specified below under the head disposal of LIM stocks should be opened without prior approval from Head Office even if the same is within the discretionary power of branch Manager.

DISPOSAL OF LIM STOCKS 

a)             The LIM liability should be adjusted within a maximum period of 45 days from the date of storage for commercial importer and 60 days for industrial importers.  

 b)             Part delivery against payment may also be allowed if so desired by the party to clear the LIM liability within the aforesaid time, after recovering 30% margin over the landed cost if possible, but such payment should be proportionate with outstanding LIM liability taking into account the interest, godown rent and other charges upto eventual date of final delivery. This should be so arranged that with the last delivery the entire LIM liability is fully adjusted. Special care should however be taken to protect bank’s interest in case where all the packets/bumbles are not of equal size quality and price.

c)             Additional 30 days may be allowed to both commercial and industrial importers, if so approached by them for final adjustment. In the event of importer’s failure to lift the       goods on payment of bank’s dues in full even within the extended period of 30 days, the following steps shall be taken by the branch incumbent :

i)              Final notice shall be issued on importer’s giving 15 days time for payment.

ii)             In case no response is received from importer, legal notice shall be served on the partarty giving another 15 days time for payment.

iii)             In case the concerned borrowers do not liquidate the liability within the stipulated time limit, but come forward with prayer for further time, in such cases, branch incumbents may allow further 30 days time only provided he is satisfied that importer will be in a   position to repay the outstanding dues within the extended period under advice to Zonal / Head Office.

iv)            In case the party fails to liquidate their liability within the extended time granted as mentioned in the proceeding paras the goods should be disposed off in public auction.

v)             For disposal of the import consignment, a Disposal Committee shall be constituted by Head/Zonal Office on receipt of a report from Branch incumbent that the consignment need to be disposed off by public auction as per Head Office standing instruction . The Disposal Committee shall be constituted with the Head of Zonal Offices as Chairman, Manager of main Branch and Manager of concerned branch and the officer next to Head of Zonal Office as members of the Committee.

vi)                   A notice for public auction of the goods should be published by the Disposal Committee at least in two National Dailies (one Bengali and one English). In all cases of public auction required earnest money shall be 5% of the quoted amount in the form of Demand Draft/ payment Order. This condition must invariable be mentioned in the public notice inviting quotations for sale of import consignments.

The Disposal Committee should open the tenders and select the highest bidder.

vii)            The Committee may also reject the highest offer if the price quoted is less than the normal market price and shall immediately call for fresh tenors.

viii)           Formation of Disposal Committee and disposal decision should invariably be advised to        International Division, Head Office.

ix)            If there be nay shortfall after disposal of goods, a case should be filed for the recovery of the short fall amount, in the court of law immediately against the importer/guarantor concerned under intimation to Head Office.

x)             The branches shall invariable send monthly LIM statement on the prescribed form duly        filled in as usual to Head Office (ID).

LOAN AGAINST TRUST RECEIPT (LTR)

When a bill is received covering import of raw materials or other items, it is released by payment of the importer out of his own resources. If the importer has arrangement of cash credit facilities (pledge), it is essential that the goods  are in the possession of the bank and not delivered to the importer. The imported goods thus stand as security for the cash credit allowed.

The difficulty is obviated by taking a Trust Receipt from the importer and allowing him to take delivery of the goods and place them in the godown. Letter of Trust Receipt is a document duly stamped and signed in bank’s prescribed format by the importer before getting delivery of the import shipping documents. In the Trust Receipt the importer specifies the goods  and agrees that he is holding the goods not as their owner but as an agent for the bank until the goods are sold or used for the express purpose for which they were released to him. Thus, the bank continues to have the rights of the pledge. In getting such facility, the importer is to offer sufficient tangible securities acceptable to the bank equivalent to loan amount.

Value of Trust Receipt : In the trust letter the importer acknowledges that the goods are held by him in trust for the bank and agrees to make over the sale proceeds to the bank. He further undertakes to keep the goods and transactions arising out of these goods separate from other transactions. In the case of insolvency of the importer, the bank can repossess the goods; the official receiver cannot claim the goods. The banker can appropriate the sale proceeds, if the goods were already sold by the borrower.

However, in practice, Trust Receipt does not secure the position of the bank to a significant extent. The risks are that—

i)                     The importer may repledge the goods with another bank or person;

ii)                    The importer may sell the goods without remitting the amount into the bank;

iii)                   In case of insolvency of the importer, it would be difficult to trace the proceeds of the goods.

Therefore, release of goods against Trust Receipt involves credit risk to the bank.

 

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