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Foreign Exchange Department
Foreign Exchange Department:
Like, Our is a problematic country, there are a lot of country that has problem. But if we cross the boundaries we will see that the matter we see a problem for us may be used as our resources. The matter on which in our country has little prospect can create it own prospect only by crossing the geographical boundaries. Foreign trade has been born with this view. But the problem is created when two parties have corresponding need but unknown to each other. Bank provides the solution for dealing with this matter. Bank does it through “Foreign Exchange department”. In terms of section 2(d) of the Foreign Exchange Regulations-1947, as adopted in Bangladesh foreign exchange means foreign currency and includes any instrument drawn, accepted, made or issued under clause 13 of article 16 of the Bangladesh Bank Order, 1972, all deposits, credits and balances payable in any foreign currency and draft, travellers cheque, letter of credit and bill of exchange expressed or drawn in Bangladesh currency but payable in any foreign currencies. In exercise of the powers conferred by sec. 3 of the Foreign Exchange Regulations-1947, Bangladesh Bank issues license to scheduled banks to deal with foreign exchange. These banks are known as Authorized Dealers (AD). Licenses are also issued by Bangladesh Bank to persons or firms to exchange foreign currency instruments such as T.C., Currency notes and coins. They are known as Authorized Money Changers. Foreign exchange department of MBL, Main Branch is divided into two sections: ♦ L/C Operation ♦ Foreign Remittance Area of Foreign Exchange Department:
As more than one currency is involved in foreign trade, it gives rise to exchange of currencies which is known as Foreign Exchange. The term 'Foreign Exchange' has three principal meanings. Firstly it is a term used referring to the currencies of other countries in terms of any single one currency. To a Bangladeshi,
Foreign Exchange Department
Dollar, Pound Sterling, etc. are foreign currencies and as such foreign exchanges. Secondly, the term also commonly refer to some instruments used in international trade, such as Bill of Exchange, drafts, travellers cheque and other means of international remittance. Thirdly the term foreign exchange is also quite often referred to the balance in foreign currencies held by a country. Functions of Foreign Exchange Department:
Foreign Exchange Department
L/C openning Loan against imported merhandise d Inward Bills
Payment against Document Loan against trust receipt
Export against Advising Post Shipment Finance Export Certificate
Preshipment Finance Foreign Bills for collection
Quoting rate of Exchange Guidance on rates trend to customer
Forward Cover (Booking of Contract) Reconciliatio n
Outward remittance (FDD, MT,TT)
Inward Remittanc e
Issue and sale of Foreign currency Purchase of foreign currency
Returns to Bangladesh Bank
Figure: Functions of Foreign Exchange
5.3. L/C OPERATION:
as the credit may be amended or cancelled while the goods are in transit and before the documents are presented. The Uniform Customs And Practices for Documentary Credit (UCPDC) published by International Chamber of Commerce (1993) publication no 500 defines Documentary Credit: “Any arrangement however named or described whereby a bank (the issuing bank) acting at the request and on the instructions of a customs (the Applicant) or on it’s own behalf.” Types of Documentary Letter of Credit: Documentary letter of credit. the letter of credit is called Documentary letter of credit. or although presented before payments has been made. basically. The seller would then face the problem of obtaining payment on the other hand revocable credit gives the buyer maximum flexibility. as it can be amended or cancelled without prior notice to the seller up to the moment of payment buy the issuing bank at which the issuing bank has made the credit available. revocable credit involves risk.Chapter: 5 Foreign Exchange Department Letter of credit commonly termed as L/C is defined as “Credit Contract” whereby the buyer’s bank committed (on behalf of the buyers) to place an agreed amount of money at the seller’s disposal under some agreed conditions. or notice to the beneficiary. 55 . can be classified into two segments: a) Revocable letter of credit b) Irrevocable letter of credit Revocable Letter of Credit: This type of letter of credit can be revoked or cancelled at any time without consent of. Since the agreed conditions include amongst other things. In case of seller (beneficiary). In the modern banking the use of revocable credit is not widespread. As per article 8 (a) of UCPDC-500 “A revocable credit may be amended or cancelled by the issuing bank at any moment and without prior notice to the beneficiary”. the presentation of some specified documents. is to make a payment to or to the order of a third party(the beneficiary) or is to accept and pay bills of exchange(Drafts)drawn by the beneficiary or Authorize another bank to effect such payment or to accept and pay such bills of exchange (Drafts) or Authorize another bank to negotiate against stipulated documents provide that terms and conditions are complied with.
buyer (Applicant). provided that the stipulated documents are presented to the Nominated Bank or to the Issuing Bank and that the terms and conditions of the credit are complied with. which cannot be revoked. an irrevocable credit constitutes a definite undertaking of the Issuing Bank.1 Classification of Letter of Credit(_L/C ) Letter of Credit (LC) Cash LC ( Paid in Cash) Back to Back L/C At the sight L/C Deffered L/C Figure: Classification of Different types of L/C Form Of L/C: L/C 56 . and Confirming Bank (in case of confirmed L/C). Irrevocable Credit gives the seller greater assurance of payments. Issuing Bank. seller (Beneficiary). varied or changed/amended or cancelled without the consent of all parties.Chapter: 5 Foreign Exchange Department Irrevocable Letter of Credit: An irrevocable credit is a documentary credit. but he/she remains dependent on an undertaking of a foreign bank. As per Article 9(a) of UCPDC 500. 5.3.
Chapter: 5 Foreign Exchange Department Mail L/C: The L/C which is mailed to Beneficiary SWIFT L/C: The L/C automatically beneficiary which sent is to DOCUMENTS USED IN L/C OPERATION: Documents Particulars in Document Bill of Exchange There are 3 parties Bill of Exchange is one of the o Drawer. to the goods. is a receipt for the o Identifying marks and goods. It is evidence of a contract of credit. or may be. It also constitutes a o The name of the carrying document that is. Bill of Lading – Bill of Lading includesA bill of lading is a document that o A description of the goods in is usually stipulated in a credit general terms not when the goods are dispatched by inconsistent with that in the sea. have been loaded on board. o The names of shipper. o The ports of shipment and discharge. vessel. and is a document of title numbers. o Whether freight has been 57 .The person on as a vital document facilitating whom the bill is settlement of payments between drawn buyer/importer and seller/exporter o PayeeThe person on at home and abroad whom the amount is payable Payment is made under the sales contract or condition of L/C 2. in the mercantile world and used o Drawee. carriage. needed to support an insurance o Evidence that the goods claim.The person who important negotiable instruments draws the bill. consignee and name and address of notifying party.
. as called for in the contract and/or the L/C. o Order or contract number. The buyer who also indicates the type of inspection he wishes the company to undertake usually nominates the inspection company. quantity and description of the goods. A certificate of origin is a signed statement providing evidence of the origin of the goods. o The date of issuance. Net Wt. Packing List This is a unique document and not combined with other document. o Gross Wt.Chapter: 5 Foreign Exchange Department paid or is payable at destination. 5. cartoon etc. Inspection CertificateThis is usually issued by an independent inspection company located in the exporting country certifying or describing the quality. and shipping marks and numbers o Terms of delivery and payment o Shipment details 4. This is a listing of the contents of each packages. and other relevant information. 6. number of packages. Commercial Invoice Commercial Invoice includeA commercial invoice is the o Date accounting document by which o Name and address of buyer the seller charges the goods to the and seller buyer. o The number of original bills of lading issued. & Measurement. unit price and the total o Price o Weight of the goods. specification or other aspects of the goods. Number of Cartons/Packages differ with B/L o Not marked one fold as Original o Not signed by the 58 . 3.
is called Proforma ♦ Sales amount and price invoice ♦ Types of goods. Insurance document generally Insurance is a contract whereby contains the following information: the insurer is undertaking to ♦ The name of the insurer or indemnify the assured to the his agent agreed manner and extent against ♦ The name of the ship/carrier fortuitous losses ♦ The name of assured ♦ The subject matter of insurance ♦ The time and/or voyage insured ♦ The peril(s) insured against ♦ The date and subscription ♦ The valuation ♦ The stamp etc. 5. and exporter. Proforma Invoice/ Indent Proforma Invoice/ Indent Pro Forma Invoice/indent is the containssale contract between seller and ♦ Name of the Beneficiary buyer in import. The ♦ Mode of Payment and sales contract.2 DIFFERENT ACCOUNTS EXCHANGE TRANSACTION: RELATED TO FOREIGN 59 .export business. 8. Insurance Document: . ♦ Mode of transport. which is direct Payment terms and correspondence between importer condition.Chapter: 5 Foreign Exchange Department Beneficiary o Shipping marks differ with B/L 7. ♦ Bill number.3. company There is slight difference between ♦ Address of Beneficiary indent and Proforma invoice.
New York is regarded as it’s nostro account held with Citi Bank. New York. New York regards it as a it’s vostro account held for MBL. Account maintained by third party is known as loro account. With the third party assurance the whole process is covered. New York and at the same time Janata Bank is also maintaining a nostro account with Citi Bank N.3 PARTIES INVOLVED IN L/C OPERATION: The documentary credit is an essential implement for conducting world trade today. US Dollar Account of MBL maintained with Citibank. The account maintained with foreign correspondent in a bank of a particular country is known as Vostro account. suppose MBL is maintaining an account with Citi Bank N. So in the whole L/C operation there are many parties involved.A. LORO ACCOUNT: Loro account means “their account with you”.A. VOSTRO ACCOUNT: Vostro account means “your account with us”. while Citi Bank N. 5.A. From the point of view of MBL Janata Bank’s account maintained with Citi Bank N. These are: NOSTRO ACCOUNT: Nostro account means “our account with you”.3.A New York is the loro account. New York. For example. Documentary credit substantially reduces payment related risks for both exporter and importer. N. A Nostro account is a foreign currency account of a bank maintained its foreign correspondents abroad. What is the nostro account for a bank in a particular country is a vostro account for the bank abroad maintaining the account thus the account of MBL with Citi Bank N.A.A. USA is a Nostro account of MBL.Chapter: 5 Foreign Exchange Department In L/C operation different accounts are maintained which are needed for foreign exchange transaction. The parties are given in a chart in the following page: 60 .
Confirming Bank 61 . The bank that negotiates the bill of exporter drawn under the credit is known as negotiating bank. Advising Bank 4 Beneficiary/Exporter/Seller 5. he becomes the negotiating bank. The most important function of this bank is to make sure the beneficiary about the authenticity of the documents. 2. If the advising bank also adds its own undertaking to honor the credit while advising the same to the beneficiary. If the advising bank is also authorized to negotiate the bill drawn by the exporter. The bank through which the L/C is advise / forwarded to the beneficiary. he becomes the confirming bank. Usually he is the seller or exporter. Importer/Applicant Table : Parties Involve in L/C Description Importer wants to import goods from other countries. Confirming bank is a bank that adds its confirmation to the credit and it is done at the request of the issuing bank. The bank which opens L/C on behalf of the importer is called issuing bank. It provides the credit report of the exporter of his country. Negotiating Bank 6. In terms of the Importers (Registration) Order-1981 no person can import goods into Bangladesh unless he is with the Chief Controller of Import And Export (CCI&E). In reimbursing bank the issuing bank maintains its nostro account. Reimbursing Bank 7. Beneficiary is the party in whose favor the L/C is issued. The bank opened L/C on the importer’s application. he is also called applicant. becomes liable to pay for documents in conformity with the L/C’s terms and condition. Issuing bank’s obligation is to make payment against presentation of documents drawn strictly as per terms of L/C. in addition. complying with the reimbursement bank. The bank nominated in the credit by the issuing bank to make payment stipulated in the document. Issuing Bank/Opening Bank 3.Chapter: 5 Foreign Exchange Department Parties involving L/C 1. It is situated in the beneficiary’s country.
firms.4 Operation of L/C: The L/C operation section is divided into two. They are a) Import and b) Export.3.Chapter: 5 Foreign Exchange Department 5. in brief. REGULATION OF IMPORT: 62 . Normally consumers.3 Mechanism for L/C opening: Issuing Bank Advising Bank (against of the issuing bank) Negotiating Bank (Exporter has an account with this bank) Reimbursement Bank (The bank that debit the importers account Add confirming Bank (Confirmation of the L/C opening bank if wanted by the negotiation Bank) 5.1 IMPORT: Import means purchase of goods and services from the foreign countries into Bangladesh. 5. industries and Government of Bangladesh import foreign goods / materials to meet their various necessities.4. we can say that import is the flow of goods and services purchased by economic agent staying in the country from economic agent staying abroad. So.
5. And to serve its client’s demand to import goods.Chapter: 5 Foreign Exchange Department Import of goods into Bangladesh is regulated by the Ministry of Commerce in terms of the Import and Export (Control) Act-1950 with Import Policy Order issued periodically and public notices issued time to time by the office of the Chief Controller of Import and Export (CCI&E). which administers the whole activity. 1998. it always maintains required formalities that are collectively termed as The Import Procedure are given in the next page. is assigned to perform this job. which is under Foreign Exchange Department of the branch. At present. And Import Policy directs certain Import Procedure. Import Section. it is regulated by the Import Policy (1997-2002). 63 . MBL.2 IMPORT PROCEDURE FOLLOWED BY MBL: As an Authorized Dealer.4. Main Branch is always committed to facilitate import of different goods into Bangladesh from the foreign countries. which was come into effect on June14..
Then the remitting bank sends the draft/bill (with or without documents) and a collection instruction letter to the collecting bank. Tax Indification Number VAT Registration Number In case of company. Importer will take delivery of the goods and makes payment by foreign DD. Documentary Collection may be Document against Payment(D/P) or Document against Acceptance(D/A). 64 . exporter will send the goods and the transport receipt to the importer. The collection procedure is the exporter ships the goods and draws a draft/ bill on the buyer. MT or TT. Bank Solvency Certificate etc. Nationality and Asset Certificate. Acting as an agent of the remitting bank. The exporter submits the draft/bill (only or with documents) to the remitting bank for collection and the bank acknowledges this. the collecting bank notifies the importer upon receipt of the draft. Foreign Missions in Bangladesh Journals etc. Other sources are: Trade fair.Importer pays full.Exporter ships the goods and sends transport receipt to the importer. are: Cash in Advance. The title of goods is released to the importer upon full Continuation to next Page payment or acceptance of the draft/bill. After receiving payment. Again. Chamber of Commerce. Importer will take delivery of the goods from the transport company. MT.Collection methods are either clean collection or documentary collection. Collection Method. Memorandum & Articles of Association and Certificate of Incorporation. Step-2 Step-3 Step-4 Open Account. After that the importer has to collect a proforma Invoice/Indent or sales contract which will meet his demand. An indenter is the local agent.Chapter: 5 Foreign Exchange Department Step -1 The importer must obtain Import Registration Certificate (IRC) from the CCI&E submitting the following papers: Up to date Trade License. partial or progressive payment by a foreign DD. After importer has has to settle about the means of payment. They Then the importer to accept the terms and condition of the Proforma Invoice/Indent. or TT at some specified date.
Fig: Import procedure Import section deals with L/C opening and post import financing i.3 APPLICATION FOR OPENING L/C: At first. an importer will request banker to open L/C along with the following documents.4.e. ♦ ♦ ♦ ♦ ♦ ♦ ♦ An application Indent or Pro forma Invoice Import Registration Certificate (IRC) Taxpayer’s Identification Number (TIN) Insurance cover note with money receipt A bank account in MBL.Chapter: 5 Foreign Exchange Department d. Main Branch Membership of chamber of commerce 5.4. upon submission of some stipulated documents and fulfilling the terms and conditions mentioned in the letter of credit. Step-5 Requesting the concerned bank (importer’s bank /issuing bank) to open a L/C(irrevocable) on behalf of importer favoring the exporter/seller. LIM & LTR. Step-4 (Rest ) Letter of credit: Letter of credit is the well accepted and most commonly used means of payment. officer delivers the following forms to be filled up by importer and the banker should check: a) Whether the goods permissible or not. 65 to be imported is . It is an undertaking for payment by the issuing bank to the beneficiary.4 DELIVERED FORMS BY BANKER TO IMPORTER: After scrutinizing above-mentioned documents carefully. Now the procedure from opening L/C to disbursement against L/C is given below: 5.
Main Branch provides a printed form for opening of L/C to the importer. the stamp is cancelled. etc.150.1 L/C APPLICATION FORM (LCAF): L/C Application Form is a sort of an agreement between customer and bank on the basis of which letter of credit is opened. Usually the importer gives the following information – ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ Full name and address of the importer Full name and address of the beneficiary Draft amount Availability of the credit by sight payment/acceptance/negotiation/deferred payment Time bar within which the documents should be presented Sales type (CIF/FOB/C&F) Brief specification of commodities.5. indent no. to be imported is 5.Chapter: 5 Foreign Exchange Department b) Whether the goods demanding or not.Different forms involved in L/C : 5. 66 . Usually the importer expresses his decision to open the L/C quoting the amount of margin in percentage. Special adhesive stamp of value Tk. While opening.. quantity. MBL.5. price. date.00 is affixed on the form in accordance with Stamp Act. amount Name and address of Insurance Company Whether the partial shipment is allowed or not Whether the transshipment is allowed or not Last date of shipment Last date of negotiation Other terms and conditions (if any) Whether the confirmation of the credit is requested by the beneficiary or not. Country of origin Bangladesh Bank registration number Import License/LCAF number IRC number Account number Documents number Insurance Cover Note / Policy number.
Chapter: 5 Foreign Exchange Department ♦ The L/C application must be completed/filled in properly and signed by the authorized person of the importer before it is submitted to the issuing bank. it has to be registered with Bangladesh Bank’s Registration Unit located in the concerned area office of the CCI&E. The LCA Forms available with authorized dealers are issued in set of five (05) copies each. Second Copy is the custom purpose copy. which is used for clearance of imported goods from custom authority.4. Quadruplicate Copy is kept as office copy by authorized dealer/Registration Unit.2 L/C AUTHORIZATION FORM (LCAF): The Letter of Credit Authorization Form (LCAF) is the form prescribed for the authorization of opening letter of credit/payment against import and used in lieu of import license. which is used for opening of L/C and effecting remittance. The Letter of Credit Authorization Form (LCAF) contains the followings – ♦ ♦ ♦ ♦ ♦ ♦ ♦ Name and address of the importer IRC number and year of renewal Amount of L/C applied for (both in figure and in word) Description of item(s) to be imported HS Code number Signature of the importer with seal List of goods to be imported 5. First Copy is exchange control copy. Triplicate and Quadruplicate Copy of LCAF are to be sent to concerned area of CCI&E office by authorized dealer/Registration Unit of Bangladesh Bank. 5. If foreign exchange is intended to be bought from the Bangladesh Bank against an LCAF.4.3 IMPORT PERMIT FORM (IMP): ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ L/C authorization form number Date Value in Taka Registration of LCAF Quantity of goods Invoice value Country of origin Port of shipment Name of the steamer 67 . The authorized dealers are empowered to issue LCA Forms to the importers as per basis of licensing of the Import Policy Order in force to allow import into Bangladesh.5.5.
Then issuing bank inform its corresponding bank. and others. Cr. The terms and conditions of the L/C must be complied with UCPDC 500 and Exchange Control & Import Trade Regulation. 2. Cr. Foreign Exchange Department 5. 1. Cr. Corresponding credit vouchers to be passed. Dr. (margin.C(foreign corresponding charge) A/C Telex charge A/C Other A/C Dr./Cr . stamp.) Liability voucher to be passed. 4.C. postage. 68 . Eligibility of the goods to be imported. ACCOUNTING TREATMENT: Particulars L/C Applicant A/C or Customer’s A/C Margin A/C Commission A/C Postage A/C Stamp A/C F. called “Advising Bank’ or ‘Confirming Bank” located in exporter’s country to advise and credit forward to the exporter and simultaneously officer makes L/C opening vouchers. 3.5. Radioactivity report in case of food item. Cr. 5.4. The L/C must not be opened in favor of the importer.F. F. Cr. Cr. Before preparing L/C MBL officer scrutinizes the application in the following manner.Chapter: 5 ♦ Indentor’s address. Bank of the importer is called ‘L/C Issuing Bank’.F.5 DESK WORK: One debit voucher to be passed.4 PREPARATION OF L/C BY BANKER: Bank’s officer prepares L/C when above-mentioned forms are to be submitted by customer or importer. Survey reports or certificate in case of old machinery is required. commission. Cr.
it will mention that when it forwards the credit to seller. If the 2nd bank is simply “advising the credit”. Cr. Then the bank is called confirming bank also.5.1FORWARDING DOCUMENTORY CREDIT BY ADVISING OR CONFIRMING BANK: There are usually two banks involved in a documentary credit operation. The issuing bank and the advising bank which is usually a bank in the seller’s country. must pay accept or negotiate without recourse to seller. Issue L/C & request to Add Confirm L/C Confirming Bank Exporter or L/C Beneficiary 5. The seller then sends the documents evidencing the shipment to the bank.5. 69 . If the advising bank is also “confirming the credit”.2 SUBMISSION OF NECESSARY DOCUMENTS BY EXPORTER TO THE NEGOTIATING BANK: As soon as the seller/exporter receives the credit and is satisfied that he can meet its terms and conditions. regardless of any other consideration.Chapter: 5 Customer’s liability A/C Banker’s liability A/C THE L/C CONFIRMING PROCESS: L/C Issuing Bank Foreign Exchange Department Dr. The issuing bank asks another bank to advise or confirm the credit. 5. he is in position to load the goods and dispatch them. such a bank is under no commitment or obligation to pay the seller. this mention that the confirming bank.
These are as follows ♦ Intertek Testing Service ♦ Inspectorate Griffith Ltd. Generally the documents observed in the foreign exchange department are: ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ Bill of exchange Commercial invoice Bill of lading Certificate of origin Packing list Clean Report of Finding (CRF) Weight list Insurance cover note Pre-shipment certificate Clean Report Of Findings (CRF): This certificate is provided by the Pre Shipment Inspection (PSI) Concerns. or negotiate in accordance with the terms and conditions of the credit. The entire world has been brought under the three supervision of the three pre shipment inspection concerns based on different territory. the bank will pay.Chapter: 5 Foreign Exchange Department Exporter will submit those documents in accordance with the terms and conditions as mentioned in L/C. and if the documents meet all the requirement of the credit. accept.3 THE DOCUMENTS SENT TO THE ISSUING BANK THROUGH THE NEGOTIATING BANK: The negotiating bank carefully checks the documents provided by the exporter against the credit. Then the bank sends the documents to the L/C opening bank. Negotiating Bank Sending L/C Documents L/C Issuing Bank BILL THROUGH THE MAKING THE PAYMENT REIMBURSING BANK: OF FOREIGN 70 .5. ♦ Bureau Veritas 5.
♦ The L/C has not been amended or subjected to any special instructions. ♦ Bill of Exchange ♦ Commercial Invoice ♦ Bill of Lading ♦ Certificate of Origin ♦ Others 5. 0 ♦ Documents have been negotiated within the negotiation period. it will arrange to make payment against L/C through reimbursement bank and will send the importer the document arrival notice. The bank official must make sure that the following documents are given and then he should scrutinize the documents. The amount in words and figures should be same.4.Chapter: 5 Foreign Exchange Department The L/C issuing bank getting the documents checks immediately and if they are in order and meet the credit requirements. The bill of exchange should be properly endorsed. 5.5. which are to be scrutinized.4 SCRUTINY OF THE DOCUMENTS: First of all it must be ensured that full set of documents as mentioned in the L/C has been received.5. which might alter the value of L/C. ♦ The Bill of Lading/Air-Way Bill/ Railway receipt is not dated later than the last date of shipment mentioned in the L/C.1Bill of Exchange: It has to be verified that the bill of exchange has been properly drawn and signed by the beneficiary according to the terms and conditions of L/C. ♦ Import bills include following documents. 71 . The amount in the bill is identical with that mentioned in the invoice. The amount drawn does not exceed the amount mentioned in the L/C.
Chapter: 5 5. which are also attached.4. 72 . The beneficiary should properly invoice the merchandise.5 Others: There are some other documents. date of shipment and the name of the consignee are in agreement with those mentioned in the L/C. 5.5.3 Bill of Lading: First of all it has to be cleared that the Bill of Lading is showing “Shipped on Board” and it has to be properly endorsed to the bank. indenter’s registration number and number of Letter of Credit Authorization number are incorporated in the Invoice. The import license or IRC number of the importer. 5. These documents are also verified carefully before lodgment. The merchandise is invoiced to the importer on whose account the L/C is opened. The date on the B/L is not ‘stale’ which means it is not dated in unreasonably long time prior to negotiation.5. The B/L should include the description of the merchandise according to invoice. The description of merchandise and the unit price correspond with that given in the L/C. 5.4.4. pre-shipment inspection certificate etc. The shipping company or their authorized agents properly sign the B/L.4.5.2 Commercial Invoice: Foreign Exchange Department It has to be verified that the commercial invoice has been properly drawn and signed by the beneficiary according to the terms and conditions of L/C. with the shipping documents like packing list.4 Certificate of Origin: The Merchandise described in the Certificate is in accordance with the L/C. The port of shipment and destination.5.
if no discrepancy are found then it is treated to be accepted after the end of seven banking days following the day of receipt of the document under “Article 1(b) of UCPDC –500”. As soon as the above formalities are completed. Cr. the banker (PBL) informs it to the negotiating bank within seven banking days from the date of receipt of the documents. Bank prepares cost memo in printed form on account of the concerned party giving detailed read of charges payable. The shipping documents then stamped with PAD number and entered in the PAD register.Chapter: 5 Foreign Exchange Department 5.O. PAD (Payment Against Document) Account H. Reverse entry is given.6 LODGMENT DOCUMENTS: & RETIREMENT OF SHIPPING After scrutinizing the import negotiating document. On intimation the importer calls on the bank’s counter requesting retirement of the shipping documents against payment to the debit of their account by the bill amount and other charges payable. 5. International Division Account Dr.1 ACCOUNTING TREATMENT: The office passes the following vouchers after negotiation. If any discrepancy is found then the banker inform it to the importer that whether he accept the bills with discrepancies or not. Banker’s liability Account Customer’s liability Account Dr. 73 . Cr. If the importer does not accept.6. otherwise it is treated to be accepted and the opening bank (MBL) must bound to pay against the bill and no complain against the bill will be accepted more than 4 banking days following the date of receipt of the documents under article number K1 (d) & article number 14 (c) of the UCPDC-500. the importer is served with PAD bill intimations for retirement of concerned import documents.
1.6. endorsement is made on the back of the bill of exchange as ‘Received Payment’ & bill of leading is endorsed to the effect that ‘Please deliver to the order of M/S’ under two authorized signatures of the bank officials of MBL. 5. But if there is any discrepancy in the documents. Proper sanction from the competent authority is to be obtained before clearance of consignment. Cr.Chapter: 5 Foreign Exchange Department Vouchers passed in retiring documents: L/C margin Account Party Account PAD Account Income Account interest on PAD Commission on PAD Miscellaneous earning Dr. importer may request the bank for clearance of goods from the port (custom).1 LTR: On the arrival of goods and lodgment of import documents. he can request the bank to grant loan against the documents for the purpose of post import finance. After the vouchers are passed. Cr. Cr. Cr. Then the documents are delivered to the L/C applicant (importer). There is one form of post import finance available in MBL Main Branch.1 POST-IMPORT FINANCING: If there is no available cash in importer’s hand.6. 74 . 5. ♦ LTR (Loan Against Trust Receipt). the L/C issuing bank send message to the negotiating bank to rectify it under its risks and responsibilities. Dr.
75 . bank grants loan in the form of LTR. through their representative bodies and chambers are consulted in the formulation of export policies and are also represented in the various export promotion bodies set up by the government. For exporting goods by the local exporter.S. Readymade textile garments (both knitted and woven).7 EXPORT: Creation of wealth in any country depends on the expansion of production and increasing participation in international trade. bank may act as advising banks and collecting bank (negotiable bank) for the exporter. Bangladesh exports a large quantity of goods and services to foreign households. 5.A and European Community (EC) countries. Bangladesh exports about 40% of its readymade garments products to U.A. Jute-made products. 5. which provide the overall guideline and incentives for promotion of exports in Bangladesh. It’s needless to say that bank only deals with the documents. Garments sector is the largest sector that exports the lion share of the country's export.1 EXPORT POLICY: Export policies formulated by the Ministry of Commerce.Chapter: 5 Foreign Exchange Department For giving these types of loan.7. officer makes loan proposal and sends it to H/O for approval. tea are the main goods that Bangladeshi exporters export to foreign countries. frozen shrimps. Most of the exporters who export through MBL are readymade garments exporters.S. Export policies also set out commodity-wise annual target. Jute. not with goods & services in case of foreign exchange business. After getting approval from H/O. The export-oriented private sector. which they open against the import L/Cs opened by their foreign importers. They open export L/Cs here to export their goods. It has been decided to formulate these policies to cover a five-year period to make them contemporaneous with the five-year plans and to provide the policy regime. By increasing production in the export sector we can improve the employment level of such a highly populated country like Bangladesh. Bangladesh exports most of its readymade garments products to U. Export L/C operation is just reverse of the import L/C operation.
♦ Arrangement of international trade fairs. ♦ 50% tax rebate on export earnings. 5.2 GENERAL INCENTIVES: ♦ National Export Trophy to successful exporters. commodity-based exhibitions in the country and participation in foreign trade fairs. ♦ Export Development Fund.Chapter: 5 5. of quality and packaging of ♦ Simplification of export procedures. Under the export policy of Bangladesh the exporter has to get valid Export registration Certificate (ERC) from Chief Controller of Import & Export (CCI&E).3 EXPORT PROCEDURES: The import and export trade in our country are regulated by the Import and Export (Control) Act.3 OTHER INCENTIVES: ♦ Assistance in improvement exportable items. ♦ Convertibility of Taka in current account. ♦ Duty free import of capital equipment for 100% export oriented firms.1Financial Incentives: ♦ Restructuring of Export Credit Guarantee Scheme.7.2. The ERC 76 .2. ♦ Bonded warehouse facilities to 100% export oriented firms. The ERC is required to renew every year. ♦ Exporters can deposit 40% of FOB value of their export earnings in own accounts in dollar and pound sterling. ♦ Duty draw back.7.2 EXPORT INCENTIVES: Different incentives are: Foreign Exchange Department 5. 5.7. ♦ Training course on external trade.7. 5.2.7. ♦ Expansion of export credit period from 180 days to 270 days. 1950.
intending Bangladeshi exporters are required to apply to the controller/ Joint Controller/ Deputy Controller/ Assistant Controller of Imports and Exports. Bangladesh Mission Abroad. He can do this by contacting the buyers directly or through agent. inspection and arbitration etc.6 SIGNING THE CONTRACT: After communicating buyer. Export Promoting Organization. Buyer’s Local Agent. insurance and marks. 5. 5. shipment. exporter has to get contracted (writing or oral) for exporting exportable items from Bangladesh detailing commodity. ♦ Income Tax Certificate. 5.7.7. In this purpose the exporter may get help from: ♦ ♦ ♦ ♦ ♦ ♦ License Officer. ♦ Memorandum and Article of Association and Certificate of Incorporation in case of Limited Company.7 RECEIVING LETTER OF CREDIT: 77 .7. ♦ Bank Certificate.7.5 SECURING THE ORDER: After getting ERC Certificate the exporter may proceed to secure the export order. Chamber of Commerce (local & foreign) Trade Fair etc. ♦ Trade License etc.4 REGISTRATION OF EXPORTERS: For obtaining ERC. 5. quantity. Dhaka/ Chittagong/ Rajshahi/ Mymensingh/ Sylhet/ Comilla/ Barishal/ Bogra/ Rangpur/ Dinajpur in the prescribed form along with the following documents: ♦ Nationality and Assets Certificate. price.Chapter: 5 Foreign Exchange Department number is to incorporate on EXP forms and other papers connected with exports.
Documents for shipment: ♦ EXP form. (2)The L/C is an irrevocable one. ♦ Customer Duty Certificate. ♦ Shipping Instruction. • Collection basis (Documentary/ Clean) (Here the regulatory framework is URC-525. ♦ Transport Documents. • Open account.7. ♦ Insurance Documents. ♦ Invoice. ♦ Other Documents. preferably confirmed by the advising bank. ♦ L/C copy. (3)The L/C allows sufficient time for shipment and negotiation.Chapter: 5 Foreign Exchange Department After getting contract for sale. the next step for the exporter is to set about the task of procuring or manufacturing the contracted merchandise. ♦ ERC (valid).8PROCURING THE MATERIALS: After making the deal and on having the L/C opened in his favor. ICC publication) 5. prepare and submit shipping documents for Payment/ Acceptance/ Negotiation in due time. The following are the main points to be looked into for receiving/ collecting export proceeds by means of Documentary Credit: (1)The terms of the L/C are in conformity with those of the contract. ICC publication) Terms and conditions should be stated in the contract clearly in case of other mode of payment: • Cash in advance. 5. 78 .7.9 SHIPMENT OF GOODS: Then the exporter should take the preparation for export arrangement for delivery of goods as per L/C and incoterms. (Here the regulatory framework is UCPDC-500. exporter should ask the buyer for Letter of Credit (L/C) clearly stating terms and conditions of export and payment.
♦ G. In that case. exporter gives lien of export L/C to bank as security and opens an L/C against it for importing raw materials.10 FINAL STEP: Foreign Exchange Department Submission of the documents to the Bank for negotiation. exporter). Certificate. This L/C is called Back To Back L/C. BTB is opened.S. very frequently exporters face problems of scarcity of raw material. ♦ Phyto-sanitary Certificate 5.e. PBL gives the payment to the beneficiary after receiving the payment from the L/C of the finished product (i. In back to back L/C.1 Payment of Back to Back L/C: Client gives the payment of the BTB L/C after receiving the payment from the importers. opener has to pay interest at LIBOR rate (London Inter Bank Offering Rate). Bank gives the payment from DFC Account (Deposit Foreign Currency Account) where Dollar is deposited in national rate. Generally LIBOR rate fluctuates from 5% to 7%. the PBL sends it for collection. Because some raw materials are not available in the country. But in some cases. 5. PBL keeps no margin. Sometimes there is provision in the export L/C that the importer can use the certain portion of the export L/C amount for importing accessories that are necessary for the making of the product. 5. In case of BTB L/C.P. 79 . Only in that case.8. But if there is discrepancy. client sells the bills to the PBL. ♦ Quality Control Certificate.8 BACK TO BACK LETTER OF CREDIT (BTB): Bangladesh is a developing country. After receiving order from the importer.Chapter: 5 ♦ Bills of Exchange (if required) ♦ Certificate of Origin. For BTB L/C.7. ♦ Inspection Certificate. These have to be collected from abroad.
ii. iii. A slight deviation of the documents from those specified in the L/C may rise an excuse to the issuing bank to refuse the reimbursement of the payment already made by the negotiating bank.1 NEGOTIATION OF DOCUMENTS UNDER L/C: The exporter presents the relative documents to the negotiating bank after the shipment of the goods. systematic and indifferent while scrutinizing the documents relating to the export.8.2.8. bank purchases the bill and 80 . Banks in our country extend post shipment credit to the exporters through: 1. iv. Necessity for such credit arises as the exporter cannot afford to wait for a long time for without paying manufacturers/suppliers. Reference number of the beneficiary’s bank and date. 2. Beneficiary’s name. This schedule contains the followings: i.8. it is necessary on the part of banks to look into carefully the financial soundness of exporters and buyers as well as other relevant documents connected with the export in accordance with the rules and regulations in force. v. So the negotiating bank must be careful. Before extending such credit. Foreign Documentary Bill Purchase (FDBP): 3. prompt. In that case.1 FOREIGN DOCUMENTARY BILL PURCHASE (FDBP): Sometimes the client submits the bill of export to bank for collection and payment of the BTB L/C.2POST SHIPMENT CREDIT: This type of credit refers to the credit facilities extended to the exporters by the banks after shipment of the goods against export documents. Forwarding Schedule is prepared while making the payment. Equivalent amount in Taka. Advances against Export Bills surrendered for collection. Payment order number and date. Negotiation of documents under L/C. 5.2.Chapter: 5 Foreign Exchange Department A schedule named Payment Order. Bill value. 5. This schedule is prepared when the payment of L/C is made. 5.
This register contains the following information: ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ Date Reference number (FDBP) Name of the drawee Name of the collecting bank Conversion rate Bill amount both in figure & in Taka. Bills drawn under L/C. Export form number Export L/C number 5. without any discrepancy in the documents. PBL maintains a separate register named FDBP Register. banks may ask for collateral security like a guarantee by a third party and equitable/registered mortgage of property. However. the exporter may obtain advance from the bank against the security of export bill.8. For this purpose. if the bill is not eligible for negotiation. 81 . are generally negotiated by the bank and the exporter gets the money from the bank immediately.3ADVANCES AGAINST EXPORT BILLS SURRENDERED FOR COLLECTION: Banks generally accept bills for collection of proceeds when they are not drawn under an L/C or when the documents. General verification: a) L/C restricted or not.Chapter: 5 Foreign Exchange Department collects the money from the exporter. 5. even though drawn against an L/C contain some discrepancies. b) Exporter submitted documents before expiry date of the credit.3EXPORT DOCUMENTS CHECKING: 1. PBL subtracts the amount of bill from BTB and gives the rest amount to the client in cash or by crediting his account or by the pay order. In addition to the export bill.8.2.
And this section of Foreign Exchange Department deals with incoming and outgoing foreign currencies.2 FOREIGN DEMAND DRAFT (FDD) ISSUED: People have to send money to abroad for various purposes. 5. Foreign Exchange Department Particular verification: a) Each and every document should be verified with the L/C. Inward Foreign Remittance 5. Outward Foreign Remittance and 2.9 FOREIGN REMITTANCE: Foreign remittance section of MBL. Main Branch to foreign correspondents to fulfill its customers’ needs are considered to be the Outward Foreign Remittances.9. Cross verification a) Verified one documents to another. Therefore on the basis of its function. It comprises the followings: ♦ FDD Issued ♦ FTT Issued ♦ TC Issued ♦ Endorsement of foreign currencies in the passport. 3.Chapter: 5 c) Shortage of documents etc. foreign remittance is divided into two types. MBL issues most of the FDD for the purpose of payment of the application fees to 82 . 5. ♦ Sale of foreign currencies. Main Branch is an integral part of Foreign Exchange Department.1 OUTWARD FOREIGN REMITTANCES: Remittances issued by MBL.9. These are: 1. 2.
Passport number. For the issuance of FDD. ♦ Date and place of issue of the passport are given. and two copy for the customer. Cr. 1947. customer has to fill up T/M form. This form is filled up under the Foreign Exchange Regulation Act. In case of application fee. This form has to be duly signed by the applicant. He has to fill up the purchase form also. Dr. the applicant has to mention the name of the university in whose favor the FDD is issued.3TRAVELER’S CHEQUE (TC) ISSUED: MBL issues only American Express Traveler’s Cheque (TC). one copy for PBL. Requirements for purchasing TC: There are some requirements that are to be fulfilled by the Traveler’s Cheque purchaser.9.Chapter: 5 Foreign Exchange Department the foreign universities. Purchase form has four copies. For TC. This form contains: ♦ The purpose of travel. 400 for each FDD. One copy for American Express Bank. 5. The requirements are --i) Passport holder himself has to be present while issuing Traveler’s Cheque. Accounting Treatment: MBL gives the following entries while issuing FDD: Client’s Account/ Cash Commission IDT Cr. FORM T/M has to be filled-in duly. 83 . Name of the air or shipping company. For TC MBL charges 1% as commission. ♦ ♦ ♦ Name of the country where the applicant will go. MBL charges TK.
00 as cash at a time. the customer has to purchase TC. the requirements are similar to those of Traveler’s Cheque. For giving cash foreign currency. 5. For cash endorsement PBL maintains a separate register. In the application the customer states the amount he is willing to endorse and it is being verified that his required amount is within the stipulated. Then the customer pays cash or by debiting his account the Traveler’s Cheque is issued. For more than $600. In case of endorsing cash in the passport. Air ticket has to be confirmed.00 as service charge. PBL cannot endorse more than $600.00 in cash in a year. Customer fills up the T/M Form.1947 an individual cannot take more than $1000. 5. Entry has to be given in the Foreign Currency Register and in the Traveler’s Cheque Register. PBL charges Tk. 4.00. 5.9. 6.1 Opening Of Foreign Account: 84 . Endorsement is given on the passport and on the ticket. 100. then the officer will deduct the amount and will give the rest to the purchaser.9. But according to the foreign exchange Regulation Act.4 ENDORSEMENT OF CASH: Cash foreign currency can also be remitted through the cash endorsement in the passport. 3. After verifying all these documents the customer is asked to fill up prescribed application form. If he/she made any voyage and if he/she purchase dollar at that time. 2. the concerned officer checks the last voyage of the purchaser. Steps involved in issue of Traveler’s Cheque: 1. That’s why.Chapter: 5 ii) iii) Foreign Exchange Department The passport must be a valid one. Purchased application form has to be filled up by the purchaser.4.
It can be used in favor of a person or in favor of exporters. Letter of approval by the university of the student. b) Power of Attorney. iv) Attested photocopy of the membership certificate of the concerned association (BGMEA/ Others). 85 .Chapter: 5 Foreign Exchange Department MBL opens foreign currency account. c) Resolution of the Board of Directors. A filled-in application form for foreign currency in abroad. e) Certificate of Commencement of Business.declaration / undertaking regarding the utilization of foreign currency. iii) Export registration certificate. ii) Two copies of passport size photographs of each operator attested by Chairman of the company.00. g) Trade License. the following documents are required: i) ii) iii) Preliminary application and information for admission. vi) Incase of Limited Company: a) Memorandum & Articles of Association of the Company.4. 5.2 Student File Opening: Student can endorse $200. Following papers are required to open a foreign currency account: i) Exporters’ foreign currency account opening form (application form. f) List of Directors. For opening a student file. two signature cards duly filled-in and signed by the potential account-holder with authenticated seal and introduction bya valued customer the bank). But if the amount exceeds $200. d) Certificate of Incorporation. v) Export proceeds realization certificate--. Foreign currency account is used for receiving foreign currency from abroad or for sending the currency to abroad.9.00 at a time in his own name. then the student has to open a student file.
Main branch are considered to be its Inward Foreign Remittances.4. 86 .4FOREIGN TT PAYABLE: Foreign remittance section also pays the claim of the foreign TT. 3) PBL.9. 2) The dollar amount comes to the Head office of PBL through American Express. e.C. He cannot take the fees of the institute with him personally.4.00. Usually a student has to endorse at least one third of the fees of a year. FDD Payable b. Followings are the Inward Foreign Remittances of MBL. Remittances issued by the correspondent banks situated in the foreign countries and thereby drawn on MBL. Purchase of foreign currencies. FTT Payable c.3 INWARD FOREIGN REMITTANCE: Normally. TC Payable d. In case of tuition fees. Encashment of foreign currencies endorsed in the passport.S.C. Main branch. 56. New York. a.Chapter: 5 iv) v) Foreign Exchange Department “Transcript of Records” given for the last degree by the university. 5.S. applicant must send the currency in favor of the institute. Inward Foreign Remittance comprises of all incoming foreign currencies.9. 5. “C Form” describes the purpose of sending the TT. / H. or equivalent examination.50 (this rate was applicable when I was in Foreign Remittance Section) and collects the money in local currency. After receiving TT payable. Motijheel branch sells the dollar to Head Office @ Tk. Certificate given by the Board for S. MBL performs the following functions:-1) Customer has to fill up a “C Form” if the amount exceeds $2000.
11. 3.One credit voucher for other fees & commission.One credit voucher for commission on TC.One credit voucher for foreign currency USD (cash sold) 5. the foreign remittance department gives the following vouchers: 1. 6.One debit voucher for FDD.One debit voucher for IDT (For total amount) 4. 8. 87 .Chapter: 5 5.One credit voucher for photocopy.5 ACCOUNTING TREATMENT: Foreign Exchange Department Each day.9.One debit voucher for cash USD sold. 12.One debit voucher for Prime General Account (For FDD).One debit voucher for TC sold. 10.One credit voucher for account payable TC sold.One debit voucher for Prime General Account (For TC sold). 2.One debit voucher for account payable TC sold. 7. 9.
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