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International Trade and Foreign

Exchange

International Trade
Foreign Exchange concepts
Letter of Credit
International Organizations

Developed & edited by:

S.M. Hafizur Rahman

SVP & Head of Training

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 International Trade

International Trade:

When the trade takes place between two counties it is called International Trade. The trade may
include both merchandise and services. The commodities which a country can economically
produce it exports, while imports those items which has great disadvantage.

In the early days of Human civilization, Goods were exchanged for goods, called Barter.
Subsequently the goods were exchanged against Gold, silver, brass bullions and subsequently
against gold, silver, brass coins.

The transformation took place in Indian Sub-continent sometimes in 1000 BC. By the 8th century
BC the Turks were using coins: so were the Greeks by the 5th century BC.

Complications and risks involved in International Trade:

i) Trade barriers: Restrictions, Tax, duties, dumping

ii) Legal difference: different legal environment, restrictions
iii) Transport related Risks – damage, delay, theft, pilferage, non delivery, riot, civil commotions,
tide, siltation, piracy, mechanical etc.
iv) Payment related Risks - modes of Payments, non-payment, delay.
v) Exchange related risks - fluctuation, availability, acceptability

Gold Standard:

Gold is used for minting of Gold coins. Value of money was judged by the gold contents in the
specific coins and it was common in 19th century. There were mono-metallic and bi-metallic
standards and multi-metallic standards. There were official ratios among these coins made of
say, gold , silver, brass or bronze etc.

Gold Bullion Standard:

Under the Gold Bullion Standard the money in circulation consisted partly or entirely of paper.
Unlike the Gold Standard the Bank of Issue was not required to hold full gold cover. Bank of
England was bound to buy and sell gold bars at statutory buying and selling prices.

Gold Exchange Standard:

Under this system, the central bank was not bound to redeem its notes in gold coin, or to buy or
sell gold coins. The foreign dues were met through the gold exchange standard by getting gold
from Bank of England. In the face of 1930s depression Bank of England discontinued this system
. In 1936 in the face of devaluation of French and Swiss Francs the Gold Exchange Standard
shattered.

Post War monetary arrangement:

To correct the exchange disparities the countries resorted to massive devaluations of their
currencies and adopted exchange controls. Forty four allied nations of both sides of Atlantic
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converged in Breton Woods, New Hampshire, USA in 1944, for a new monetary order, whose
outcome is the creation of IMF and World Bank in1944. Under the Breton Woods system , each
country was required to declare the initial par value of currency of each country in terms of gold
or US Dollar with 1% fluctuation of both sides.

Flexible Rate of Exchange:

USA first devalued US Dollar in 1971 and second time in 1973, which cosigned the world
economy order into FLEXIBLE or FLOATING rate system, nobody consciously created the
Flexible rate of Exchange. And until to date the rate is still in force to fix up the rate of exchange
between currencies through open quotation in offshore centres through out the world.

Movement of a foreign currency exchange rate in response to changes in the market forces of
supply and demand; also known as flexible exchange rate. Currencies strengthen or weaken
based on a nation's reserves of hard currency and gold, its international trade balance, its rate of
inflation and interest rates, and the general strength of its economy. The country itself does not
engage in policies that would affect this value

Paper Currency:

The central Bank of countries issues and supplies currency notes against the assets created,
Govt. Guarantee, Foreign exchange Reserve and Gold Reserve. The external value of the
currency depends upon the domestic purchasing power, investment , employment,
industrialization, political stability, Fiscal and monetary measures, export, import, Balance of
Payments etc.

Balance of Trade

The Balance of Trade refers to the net difference between the value of exports and imports of
commodities from / into a country. The movements of goods and commodities is known as
VISIBLE Trade. When the difference is in excess of exports over imports, the country is said to
have FAVORABLE Balance of Trade and when the imports are more than the exports it is said
that the country is having an UNFAVORABLE Balance of Trade.

Balance of Payments

In the language of IMF “The Balance of Payment for a given period is defined as a systematic
record of all economic transactions during the period residents of the reporting countries.” All
international transactions, both commercial and non-commercial, visible and invisible, current
or capital accounts are included in Balance of Payment.

When the difference is in excess of both visible and invisible exports over imports, the country is
said to have FAVORABLE Balance of Payment and when the visible and invisible imports are
more than the exports it is said that the country is having an UNFAVORABLE Balance of
Payment.

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Current Account Transactions
Credit
1. Merchandise Export
2. Invisible Exports
i) Freight
ii) Insurance Policy earning from foreigners
iii) Tourist Income
iv) Income from other service to foreigners
v) Income from foreign Investment
vi) Rent, Royalty, Donation income abroad
vii) Education income from foreigners
viii) Expenses by local Diplomats/ Missions
3. Loan from foreign Sources
Balance of Payment Transactions
Credit
1. Current Account:
i) Merchandise Export or visible Export
ii) Service Export or Invisible Export
2. Capital Account
i) Capital Receipt
ii) Non-payable Receipts
(Grants, Gifts etc from abroad)
3. Gold Account (Gold export)
4. Transfer Account
5. Errors and Omissions
Debit
1. Merchandise Import
2. Invisible Imports
i) Freight paid
ii) Insurance Policy in foreign currency
iii) Tourist Expenses abroad
iv) Expenses for other service from foreigners
v) Repatriation of Income from foreign Investment
vi) Rent, Royalty, Donation paid in FC
vii) Education expenses abroad
viii) Expenses by our Diplomats/ Missions abroad
3. Making investment in Foreign Currency.
Debit
1. Current Account:
i) Merchandise Import or visible Import
ii) Service Import or Invisible Import
2. Capital Account
i) Capital payment/ expenditure
ii) Non-payable Payments
(Grants, Gifts etc from abroad)
3. Gold Account (Gold import)
4. Transfer Account
5. Errors and Omissions
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Foreign Exchange, AD License, Resident, Non-resident, Foreign
Currency Accounts, Retention Quota, EPZ A/c, NRTA, Travel
Quota, Rate of Exchange, Student File

Foreign Exchange:

We use the term Foreign Exchange every now and then but many of us are not very conversant with
its meaning. Basically Foreign Exchange is found in the form of:

a) Foreign Currency
b) Instruments and
c) Deposits and Credits

As per Article 2 (d) of The Foreign Exchange Regulation Act, 1947 "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 any drafts, traveler's cheques, letters of credit
and bills of exchange, expressed or drawn in Bangladesh currency but payable in any
foreign currency;

To clear the term Currency, Foreign Currency and Foreign Security is interpreted in the Act as
under:

Article 2 (b) "Currency" includes all coins, currency notes, bank notes, postal notes, money
orders, cheques, drafts, traveler's cheques, letters of credit, bills of exchange and promissory
notes;

Article 2 (c) "Foreign Currency" means any currency other than Bangladesh currency;

Article 2 (e) "Foreign Security" means any security issued elsewhere than in Bangladesh and
any security the principal of or interest on which is payable in any foreign currency or
elsewhere than in Bangladesh;

Authorized Dealers and Money Changers:

Application for AD license

Bangladesh Bank issues licenses normally to scheduled banks to deal in foreign exchange. All
applications for Authorized Dealer License should be made to the General Manager, Foreign Exchange
Policy Department, Bangladesh Bank, Head Office, Dhaka with a declaration that 'Guidelines on
Managing Core Risks in Banking' (as prescribed by Bangladesh Bank vide BRPD Circular No. 17, dated
07 October, 2003) pertaining to treasury functions in foreign exchange are already in place and all steps
have been taken by the bank for internal monitoring and supervision of the branches for carrying out
foreign exchange transactions.

Besides, the bank should also provide information showing that it has adequate manpower
trained in foreign exchange and there is prospect to attract reasonable volume of
foreign exchange business in the desired location and the applicant bank meticulously
complies with the instructions of the Bangladesh Bank especially with regard to submission of
periodical returns.

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Application for license to perform limited function

Licenses with limited scope are also issued to persons or firms (e.g. hotels, bank booths,
gift shops etc.) to exchange foreign currency notes, coins, and travelers' cheques (TCs) in
places where money changing facilities are required. The authorizations are granted to
persons or firms of adequate means and status who, in the opinion of the Bangladesh Bank, will
be able to conduct their dealings strictly in accordance with the foreign exchange regulations.
Applications for the grant of licenses with limited scope should be made to the General
Manager, Foreign Exchange Policy Department, Bangladesh Bank, Head Office, Dhaka.

Authorized Money Changer

Bangladesh Bank may also issue "Money Changer" licenses to license persons or firms desirous of
undertaking, as their sole line of business, the purchase and sale of foreign currency notes, coins, TCs
from and to incoming and outgoing tourists. ADs are advised to process applications for licenses on
behalf of their customers provided Bangladesh Bank decides to issue new licenses and
forward the same with recommendation to the General Manager, Foreig n Exchange
Policy Department, Bangladesh Bank, Head Office.

Money Changer shall have no branch office. The premise to be used for Office for
money changing business shall not be used for any other space business
activity.
Money Changers are allowed to buy foreign currency notes, coins and TCs from
incoming foreign and Bangladesh nationals coming/returning from abroad. For each such
purchase an encashment certificate shall be furnished to the seller in prescribed format as per
Appendix 5/1

Money Changers may sell foreign currency notes, coins and TCs only to outgoing Bangladesh
nationals against their annual private travel entitlements (per calendar year) subject to
a maximum limit of USD 1000 or equivalent in the form of cash and /or TC. Re lease of
foreign exchange in excess of USD 200 or equivalent shall require valid visa. Money
Changers may also sell foreign currency notes, coins and TCs to outgoing foreign nationals
having duly issued encashment certificates, subject to a maximum limit of USD 500 or
equivalent by reconversion of Bangladesh Taka proceeds of foreign exchange sold by a
tourist during his/her stay in Bangladesh. Only the Money Changer that issued the
encashment certificate can make such re-conversion.

Resident and Non-Resident

Section 20 (l) of Foreign Exchange Regulation Act, 1947 stipulates, that any person who has at any time
after the commencement of the Act been resident in Bangladesh be treated as resident in
Bangladesh until Bangladesh Bank by general or special order, directs otherwise. Where such
directions are given, the Act also empowers Bangladesh Bank, to declare the territory in which
such persons be treated as resident. Section 20 of the said Act as a -whole delineates the
authority to Bangladesh Bank with respect to resident status of any person, firm, bank,
corporate body etc. and treatment of transactions by different kind of entities. For the purpose
of the said Act, ordinarily, a resident is a person, bank or firm who / which resides/has established a
place of business in Bangladesh.

A person is deemed to be ordinarily resident if he maintains a, home in Bangladesh or

resides in the country for a substantial part of each year or pays income tax as a resident of
Bangladesh.

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In addition to that:

i) in terms of Section 5 of Article 11 of the schedules appended to the United Nation (Privileges
and Immunities) Act, 1948, the accounts of United Nations and its Organizations,
ii) persons holding Office in the service of the Republic of Bangladesh who go abroad or who
are already in abroad and residing outside Bangladesh for the time being either on duty or on
leave,
iii) foreign nationals residing in Bangladesh for work or self employment,
iv) foreign nationals residing in Bangladesh for study under student visa,
v) foreign nationals staying in Bangladesh with of Bangladesh with residence visa,
vi) officials of Bangladesh Government and public sector undertakings deputed abroad on
assignment with foreign governments/ organizations or posted to their own offices (including
Diplomatic Missions abroad) and
vii) foreign nationals residing continuously in Bangladesh for six months or more would be
treated
as residents.

A non-resident is a person, bank or firm who/which resides/has a place or business outside

Bangladesh. Non-residents include Bangladesh nationals who go out of Bangladesh for any
purpose. On the other hand, the fact that a person gives an address in Bangladesh does
not necessarily mean that he should be regarded as a resident if he is, in fact, only a temporary
visitor and is ordinarily resident elsewhere.

Private Foreign Currency Accounts

In Bangladesh the Authorized Dealers can open Foreign Currency Accounts in US Dollar, Euro, Pound
Sterling, Japanese Yen or any other approved foreign currencies. The following category of
persons/organizations can open F.C. Accounts:

Different types of persons / organizations opening Foreign Currency Accounts:

1. Overseas Bangladeshis (NRBs); can be operated by nominee; can open NFCD; can purchase
WEDB; can encash for local expenses; Bangladeshis can maintain their FC Account on return
from abroad; freely transferable abroad.
2. Foreign Expatriates and Firms
3. United Nations and other International Organizations
4. Foreign Embassies and High Commissions
5. Diplomatic bonded warehouses (Duty Free Shops)
6. Bangladeshi working with International Organizations in Bangladesh and drawing Salary in
foreign currency.
7. Joint Venture Companies/ Firms.
8. EPZ Companies A, B and C Type organizations.
9. Foreign companies, contractors and consultant etc
10. FC Accounts opened under Foreign Exchange Retention Quota of Exporters and others.
11. Against payment received in FC where the Payee has the general / special permission from
Bangladesh Bank to retain the proceeds in foreign exchange.
12. FC Account for Initial Public Offering (IPO).
13. Any other organization(s) permitted by Bangladesh Bank to open FC Account.

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General Rules of operations in FC Accounts
1 The FC Account Shall be credited by :
a. Remittance from abroad
b. Sale / Deposit of foreign exchange: T.C., Bank draft, cheques, cahier’s cheque etc.
c. Sale / deposit of Foreign Currency notes and coins to the Bank
d. Transfer from another FC Account

2 The FC Account Shall be debited :

a. Payment may be made freely abroad

b. Account may be debited to the extent of balances
c. Local disbursements may also be made freely in Taka
d. No payment in Foreign Exchange to any resident in Bangladesh

3 The Authorized Dealers can issue Cheque book to FC Account holders.

4 Balance in FC a/c will not be taken in the Exchange position of the AD.
5 No interest is given in FC Account
6 NFCD Accounts may be opened by debiting the FC Account
7 Wage Earners Development Bonds can be issued by debiting equiv. Foreign Currency.
8 The Credit Balance is freely transferable / remittable anywhere in abroad.
9 This account may be maintained as long as the account holders desire (including Bangladeshi
nationals).
10 Any Bangladeshi can open the account even after their return to Bangladesh, within six months
of their arrival.

Non-Resident Foreign Currency Deposit (NFCD) A/C

All non-resident Bangladeshi and person of Bangladeshi origin with dual nationality can open the NFCD
A/c. Bangladesh National serving abroad can open NFCD A/c. The A/c can also be opened by wage
earners with fund transferred from Their FC A/c. The exporters can also open NFCD A/c from their
retention quota for merchandise or service export. The interest is payable in respective foreign currency.
The term deposit is of one month, three months, six months and one year duration; can be opened in US
Dollar, Pound Sterling, Euro and Japanese Yen; initially with minimum Amount of US$ 1,000 or 500
Pounds or equivalent. The ADs will pay interest in Foreign Currency on deposits into the Account at the
Eurocurrency deposit rate. In case of premature encashment the interest amount will be forfeited by the
AD. The principal and interest is freely transferable to anywhere.

The ADs may sell the FE (only USD) to BB at their buying rate and repurchase the principal & interest at
BB’s selling rate on the day of repurchase. The ADs may also invest abroad.

Foreign nationals and companies/ firms registered abroad, banks, other financial institutions, institutional
investors and 100% foreign owned A-Type EPZ Companies; in these cases the minimum amount of time
deposit is US Dollar 25,000 or its equivalent in Pound Sterling, Euro or Japanese Yen.

This account may be maintained as long as the account holder desires. Any Bangladeshi can open the
account even after their return to Bangladesh, within six months of their arrival.

Resident Foreign Currency Deposit (RFCD) A/c

RFCD can be opened in approved foreign currency by the persons ordinarily resident in Bangladesh with
cash foreign currency brought at the time of their return to Bangladesh. This is an interest bearing Account
and interest is payable in foreign currency in such accounts if the deposits are for a term of not less than
one month and the balance is not less than US$ 1,000 or £ 500 or its equivalent. The rate of interest shall
be 0.25% that the rate given by BB to ADs. The account can be continued as long as the account holder
desires.

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 Exporter's Retention Quota (ERQ) Account

As per Bangladesh Bank Guidelines for Foreign Exchange Transactions, Volume -1 of 2009, CH - 13,
Section - IV; the following provisions are there:

Retention quota for merchandise exporters

28. (a) Merchandise exporters: are entitled to a foreign exchange retention quota of 50% of
repatriated FOB value of their exports. However, for exports of goods having high import content (low
domestic value-added) products including naphtha, furnace oil and bitumen, readymade garments
made of imported fabrics, electronic goods etc. the retention quota is 10% of the repatriated FOB value.

(b) Retention quota for deemed exporters: Retention quota account may also be opened and
maintained in the names of deemed exporters for supplying. inputs against inland back to back letter of
credit denominated in foreign currency. Since foreign exchange earned from direct export is to be shared
among direct and deemed exporters, ADs are obliged for the meticulous compliance of the followings:

(i) the total amount credited to the direct exporter's retention quota account together with foreign exchange
paid to the deemed exporter against supply of input must not exceed the net repatriated FOB export value of
the direct exporter; and
(ii) the foreign exchange shall be credited to the retention quota account of the deemed exporter only after
settlement of the amount against back-to-back LC for deemed export.

Retention quota for export of software and data entry/ processing services

(c) Exporters of computer software: and data entry/processing services may retain 50% of export
earnings repatriated in foreign exchange in ERQ accounts.

(d) Retention quota for service exporters: Service exporters other than those mentioned at Para 'c'
above may retain 5% of their repatriated earnings in ERQ accounts.

However, foreign exchange earnings on account of indenting commission or agency commission for
export from Bangladesh cannot be credited to such accounts since these incomes originate from
Bangladesh sources.

Eligible currency and utilization

29.(i) Foreign exchange out of the retention quota may be maintained in FC accounts with the
concerned ADs in US Dollar, Pound Sterling, Euro or Japanese Yen upon realization of the export proceeds.
Balances in these accounts may be used by the exporters for bonafide business purposes, such as
business visits abroad, participation in export fairs and seminars, establishment and maintenance
of offices abroad, import of raw materials, machineries and spares etc. without prior approval of
Bangladesh Bank. It should be noted that since exporters will use foreign exchange from the
retention quota for business visits abroad, no separate business travel quota will be admissible
(other than for new exporters as per paragraph 7(i), chapter 12). Foreign exchange from the exporter's
retention quota cannot be used for investment abroad by the exporter.

Term deposit and interest thereon

(ii) Foreign exchange out of exporter's retention quota may also be kept as interest bearing
renewable term deposits with the concerned ADs in Bangladesh in US Dollar, Pound Sterling, Euro
or Japanese Yen, with minimum balances of US$ 2,000 or its equivalent. Periods of such term
deposits may be determined in accordance with normal banking practices/normal banking
considerations. Interest on such deposits may be allowed at rates comparable to the prevailing euro
deposit rates for the relevant currency.

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Advance payment against import using ERQ accounts

(iii) ADs may effect advance payment not exceeding USD 5,000 or its equivalent from the Exporters'
Retention Quota Account against bonafide business purposes provided the relevant contract/
proforma invoice stipulates for such payment subject to the following terms and conditions:

(a) The ADs shall have to be satisfied that repayment guarantee is not obtainable from the supplier against
the remittance to be made in advance;
(b) Import Policy Order (IPO) in force shall have to be meticulously followed;
(c) The ADs shall, at their own responsibility, have to arrange for repatriation of the remittance made in
advance in case the entry of goods into the country is not effected within the stipulated time;
(d) While opening Back to Back L/C, the ADs should adjust the value of advance payment to
ensure that the value addition requirement as stipulated in the IPO is not breached ; and
(e) Before effecting the advance payment, the ADs must obtain Form of Undertaking (Appendix 5110)
duly signed by the importer.

International debit / credit Cards:

30. International cards may be issued to the exporters against balances held in ERQ accounts.
The arrangements for issuance of international cards and use thereof by exporters are described in
chauter-

Foreign Currency Accounts for the EPZ Companies:

As per Bangladesh Bank Guidelines for Foreign Exchange Transactions, Volume -1 of 2009, Chapter
13, Section – V; the following procedures shall apply to release of foreign exchange to the enterprises
against exports made from the EPZs:

(i) 100% of repatriated export proceeds of a Type A industrial unit in EPZ may be retained in FC
account in the name of the unit with an AD in Bangladesh. Balances in the FC account may freely be
used to meet all foreign payment obligations including import payment obligations of the unit
and payment obligations in foreign exchange to BEPZA. Balances from the FC account will also be
freely encashable for local disbursements or for crediting Taka account maintained with an
AD for meeting Taka payment obligations like wages, rents, rates, taxes etc. Taka account
maintained with ADs by Type A units in EPZ may be credited only with encashments of funds from
FC accounts or of other inward remittances from abroad. However, receipts from Taka sales of factory
refuses and of unusable portion of raw materials of Type A industries may be credited to the Taka
accounts provided the permission letter of BEPZA for the sale and evidence of payment of duties/taxes on
sale proceeds are produced to the AD. Balances in these Taka accounts cannot be converted to
foreign exchange and may only be used for meeting local expenses.

(ii) Upto 80% of the repatriated export proceeds of Type B and Type C units other than those in the
garments sector may be retained in FC Accounts maintained in the names of the units with
their ADs; for a Type B or Type C unit in the garments sector, upto 75% of the repatriated export
proceeds may be credited to FC account maintained in the name of the unit with an AD. The
remainder of the export proceeds should be encashed to taka at the prevailing exchange rate. All foreign
payment obligations of Type B and Type C units including import payment and repayments of foreign loans
may be met out of the balances in their FC accounts; payment obligations in foreign exchange of
a type B unit to the BEPZA may also be settled from balances in its FC account. Balances in the
FC accounts of the Type B and Type C units are freely encashable to Taka for local disbursements.

Type A: 100% foreign Ownership Companies

Type B: Local and foreign Ownership (joint venture) Companies
Type C: 100% local Ownership Companies

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 Non-Resident Taka Account
New Non-Resident A/c other than Bank:
– New non-resident Accounts in the name of Persons or firms or companies other than Banks may be
opened only with the prior approval of Bangladesh Bank.
– Non-resident Taka Accounts may however, be opened without prior approval of Bangladesh Bank in
cases where the accounts are required to be opened for crediting proceeds of remittances received
from abroad through banking channels.

Account of Foreign Nationals:

• The Account of Foreign nationals or Companies or Firms having head office or controlling interests are
outside Bangladesh but those Accounts are operated by persons in Bangladesh may be treated as
RESIDENT A/c.
• Prior approval of BB for opening such A/c not necessary but
• Q.A. 22 Form in duplicate shall be signed by A/c holder or operators and a copy forwarded to BB for
record, when the above A/c is opened.
• Q.A. 22 Form not required for members of foreign embassies, Legations, consulate and foreign Govt.
officers in Bangladesh.
• Non-AD branches can open NRTA subject to signing Q.A. 22 Form

Form: Q. A. 22

• This form is an undertaking that the Signatory:

– Will not provide any foreign currency against re-imbursement in Taka

– And that any transaction on the Account not directly connected with the Signatory’s business in
Bangladesh
– Or which represents remittance from overseas will be reported to Bangladesh Bank on Form – A – 7.

When NRTA treated as Non-Resident A/c:

• Any Account opened and operated by Individuals, firms or companies resident in countries outside
Bangladesh ( No requirement of declaration on Q.A. 22 Form )
• If a Joint Account is operated solely by non-residents, the A/c will be treated as NON-RESIDENT A/c.
• Account of all Bangladeshis who goes abroad for employment, study, business tour pleasure trip etc.
so long as they remain abroad ( except persons holding office in the Services of Bangladesh, already
abroad, residing abroad either on duty or on leave)
• BB may be consulted whether an account treated as NRTA or not.

When NRTA is treated as Resident A/c:

• The Account of Foreign nationals or Companies or Firms having head office or controlling interests are
outside Bangladesh but those Accounts are operated by persons in Bangladesh may be treated as
RESIDENT A/c.
• The Account of Residents held jointly with non-residents if the A/c is operated solely by the
RESIDENT.
• Any Joint account operated jointly by the non-residents and RESIDENT.
• Bangladeshi ordinarily resident abroad, when comes on temporary visit .

Non-Resident Taka Account can be opened by:

• Individuals, firms or companies resident in countries outside Bangladesh
• Account is treated as the account of the country in which the A/c holder is permanently residing.
• The Country of permanent residence should be marked.

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 • Credited with:
• Remittance received from abroad through banking channel
• Receipts of salary, allowances, bonus, commission etc.
• Dividend and Interest Income
• Income from landed property and agricultural rent
• House rent & sale proceeds of properties
• Interest accrued on the non-resident accounts
• Sale proceeds of share and bonds
• Refund of amount previously debited or overcharged

• Debited with:

• Payment insurance premiums, club bills or any regular nature exp.

• Govt. or Municipal bills
• Cost of Passage by air or sea
• Other payments up to Tk 3,000 per month.
• Purchase of shares and govt. bonds
• Debits to the extent of funds received from abroad.

Convertible Taka Account

• Convertible Taka Accounts are those Taka accounts whose Taka balances comes by converting
Foreign Currency into Taka balances and the can easily be re-converted to Foreign Currency at any
time.
• Can be opened by: All Diplomatic Missions, International NGOs, UN bodies & their respective
expatriates, Foreign Oil Companies, All Foreign nationals including UN, Diplomatic missions, USAID,
Ford Foundations etc.

• Credited with:
• Remittance received from abroad through banking channel
• Foreign Exchange encashed with any AD
• Foreign Exchange encashed from any FC A/c
• Fund transferred from any other Convertible Taka A/c

• Debited with:
• Payment in Foreign Currency abroad
• Hotel bill payment in Bangladesh
• Cost of Passage in local currency
• All local expenses in local Taka
• Transfer to Non-Convertible Taka Account
• Transfer to Convertible Taka Account
• 7- 30 days’ STD in Taka and interest in Non- convertible Taka A/c.

Non-Convertible Taka Account

• Are those Taka accounts whose Taka balances comes by converting Foreign Currency into Taka
balances and the same cannot be re-converted into Foreign Currency any more.

• Credited with:
• Fund transferred from any other Convertible Taka A/c
• Inward Remittance from abroad through banking channel
• Taka received from authorized sources including interest from STD A/c

• Debited with:
• For meeting local expenses in Bangladesh Taka
• No remittance abroad by debiting Non-Convertible Taka Accounts

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 Non-Resident Blocked Taka Account
• A Blocked Taka Account means an account opened as a blocked account at any branch or office in
Bangladesh of a Bank authorized in this behalf by Bangladesh Bank or an account blocked by the
order of Bangladesh Bank.

• FE R Act, 1947 confers power on Bangladesh Bank to “Block” accounts in Bangladesh of any person
resident outside Bangladesh and to direct that payment of any sum due to a non-resident may be
made only to such a blocked account.

Non-Resident Investor's Taka Accounts (NITA)

Bangladesh Bank Guidelines for Foreign Exchange Transactions,
Volume-1 of 2009, CH - 14, Section – IV

24. (i) In respect of portfolio investment in Bangladesh (as mentioned in Para-4, Chapter 9) the non-resident
investor (non-resident person/institutions including non-resident Bangladesh nationals) shall open a
NITA with any AD in Bangladesh, with freely conve rtible foreign currency remitted from abroad
through normal banking channel or by transfer of funds from the non-resident investor's foreign currency
account, if any, in Bangladesh;
(ii) Balances in the NITA may freely be used to buy Bangladeshi shares/securities. These
balances are also freely transferable to the Foreign Currency Account (opened as per instructions
at chapter 13, Para 1 & 2) of the same person with the respective AD as well as remittable
abroad in equivalent foreign exchange. Transfer and outward remittances will be reported to the
Bangladesh Bank in the monthly statements of NITA and returns along with the TM Form approved
by the ADs respectively in terms of this general authorization.
(iii) The NITA can be operated by the account-holder himself or by a nominee, including the AD
itself. Purchase and sale of shares/securities listed in a stock exchange in Bangladesh shall be made
only through a member/registered broker of the exchange.
Purchase of new public issues not yet listed in a stock exchange may, however, be made directly from
the company issuing the stock/security.
(iv) Dividends/interest earnings on the shares/securities bought through the NITA, net of taxes payable
on such earnings of the non-resident holder, received from the issuing company/institution may be
credited to the NITA. In these cases (unless the payment is accompanied by a certificate from the
issuing company's auditor that the tax payable on the earning of the non -resident holder has been
withheld and the net post-tax amount has been paid for credit to the NITA) the AD will ensure that
an amount representing taxes payable on the earning of the non-resident holder is withheld from the
gross amount received (for eventual payment to the tax authorities) and only the net post-tax
amount is credited to the NITA.
(v) Sale proceeds of the shares/securities purchased through the NITA (net of taxes payable, if any, on
the capital gain) may also be credited to the NITA. Before crediting the sale proceeds of the
stocks/shares held by the non-resident into the NITA, the AD shall ensure that the tax payable (if
any) on the capital gain is withheld from the sale proceeds for eventual payment to the tax authorities.
(vi) No local funds from any sources other than those mentioned at (i), (iv) and (v) above can be credited to NITA.
(vii) The AD must ensure that NITA is debited or credited for purchase or sale of shares at the prices prevailing
in the stock market on the day of the relative purchase/sale.
(viii) Relevant instructions contained in The Securities and Exchange Commission (SEC) Notifications
regarding placements, allotments and issuance of right shares/bonus shares are to be meticulously complied
with.
(ix) No loan facilities shall be allowed by the ADs in the Non-resident Investor's Taka Accounts.
(x) Incidental expenses related to sales and purchases of shares/ securities and to operation of the accounts
may be debited to NITA.

In addition to the routine reporting regarding inward and outward remittance to and from the NITAs in the
usual monthly returns, the ADs will furnish monthly statements of transactions in the NITAs, as per prescribed

14
proforma (Appendix 5/74), to the Foreign Exchange Investment Department of Bangladesh Bank, Head
Office, Dhaka. The ADs will also submit with the monthly statements their own certificates/certificates
from the auditors of the concerned companies regarding payment/ withholding or exemption of taxes
payable on the capital gains and on dividend/interest earnings of the non-resident holders, as
applicable.

Application of Rate of Exchange

A. Buying Rates:
1 T. T. Clean Rate : For encashment of T. T. received from abroad
and encashment of Foreign Currency from F. C. Accounts

2 O.D. Sight Export Bills: For negotiation / collection of sight Export Bills

3 O.D. Transfer Rate: For purchase or encashment of Travelers'

Checks, Demand Draft, Checks, Int. money orders, Cashiers'
Cheque, etc and Cash Foreign Currency notes and coins (other
than the export bills)
B. Selling Rates:

4 T. T. and O.D. Rate: For sale of Travelers' Checks, Demand Draft, T.T.,
Cash Foreign Currency notes and coins (other than the import bills)
5 B. C. Rate: For retirement of import bills.

Some Banks quote separate rates for buying and selling of Cash Foreign Currency.

Annual Travel Quota for Bangladeshis

Now Previously
TQ for SAARC Countries (including Myanmar) : USD 5,000 USD 1,500
TQ for Non-SAARC Countries : USD 7,000 USD 5,000
Total Annual Personal Travel Quota(TQ) (Infant
upto 12 years entitled 50%) : USD 12,000 USD 6,500

15
 Opening and Operations of Student File
for Bangladeshi Overseas Studies

A. A Bangladeshi Student is entitled to get foreign currency covering Tuition, Fees, maintenance and
other related expenses from the AD to pursue regular fulltime under graduate and post graduate
studies abroad including the following areas:

a) Commercial Flying
b) Computer Programming
c) Hotel Management and Catering
d) Charted Accountancy
e) Cost and Management Accountancy
f) Banking Diploma, for Bank Employees only.

B. No FC will be released for Language Course abroad. But if it is a pre-condition for a Full time
course, in that case FC may be released.

C. No FC will be released for School level study abroad. Exception only for the students whose
parents under got posting or study leaves her abroad in the middle of any class or faces difficulty
in pursue study in Bangladesh; under Government approval.

D. Every student has to open a Student File. Application and Documents Required

a) Properly filled in Application Form(Annexure – Ka)

b) Declaration (Annexure – Kha)
c) Letter of Acceptance, I-20 for U.S., Certificate of Acceptance of Studies (CAS) for U.K. both
original and photocopy.
d) Letter of Cost Estimation / I-20 for U.S. regarding Tuition, food, lodging and other expenses
both original and photocopy.
e) Academic Certificates, Mark sheets, testimonials original and photocopy.
f) Valid Passport original and photocopy of relevant pages.

E. The FC shall be issued in the form of Cash, TC, FDD etc. by adjusting the same with the Travel
th
Quota. As per FE Circular - 21 dated 28 May 2014 the ADs may release the entire unused
annual travel quota in Foreign Exchange to Bangladeshi students proceeding abroad against
one way ticket to study in admissible courses.

F. The issuance of FC shall be recorded at the front of the Letter of Acceptance and at the back of I-
20 for U.S., Certificate of Acceptance of Studies (CAS) for U.K. with Authorized signature and with
round seal of the AD Branch.

G. No FC shall be released for any person other than Student like, spouse, attendant etc.

H. On scrutiny of above papers and documents shall be attested by the Authorized Officer and the
originals shall be returned.

I. The amount meant for Educational Institutions shall be paid in the form of TT, FDD favouring the
Academic Institution only.

J. The amount meant for living expenses if not payable in favour of the Hostel or Catering Authority;
the cash or TT, FDD can be paid in favour of the student.

K. Generally the FC shall be released before 15 to 20 days before commencing the Course. In
special consideration this may be extended upto 2 months.

L. In exceptional circumstances the FC can be released in advance

a. Where most of the amount shall be refunded if finally admission is cancelled

b. Or the amount is required for booking accommodation or processing Admission.

16
M. No student shall be allowed to enroll in more than one subject at a time.

N. The student shall not be able to change Course; if changes the FC release shall be stopped. But if
the existing study / credit is allowed by the receipt Educational Institution, then FC can be
released.

O. The Tuition, Fees, maintenance and other related expenses shall be released for one year at a
time. FC shall not be released for expenses for more than one year.

P. The Tuition, Fees, maintenance and other related expenses shall be released for subsequent year
on the basis of the Progress Report of the current year. Individual File shall be maintained for
each student for a particular Course of study. Those shall be kept up-to-date for BB inspection.

Q. The student shall buy FC from his particular Branch. The File can be transferred from one bank to
another; in that case File shall never handed to Student.

R. The student Files which are kept with BB those shall be collected from BB in case of studying
student
rd rd
** The Article is the summery of FE Circular - 10, dated 3 March 1993 effective from 3 March, 1993
plus other up to date Circulars.

17
 Letter of Credit: Opening, Advising, Amendment, Scrutiny,
Lodgment and Retirement

01 Letter of Credit :

Letter of Credit is a documentary instrument issued by a bank (opening bank) in favour of beneficiary
engaging & undertaking to the drawers, endorsers or bonafide holders of the beneficiary's draft(s) that
the same will be honoured on COMPLYING presentation provided the required documents are drawn
strictly as per the terms of the said instrument (LC).

LC may be advised in two manners:

i) Airmail: The instrument is typed on specific printed forms according to LC application. The
instrument is signed jointly by authorized officers of opening bank and ,the original (plus duplicate
copy) is dispatched either by Registered Mail or by Courier Service, as the case nay be, to the
beneficiary through the advising bank.

ii) SWIFT/ Cable/ Telex: The text of the LC is suitably prepared as per LC application and the text is
transmitted to the beneficiary through advising bank. Since the cable/ telex message will not bear
authorised signatures, the same is authenticated by Test number (Test key arrangement between
opening bank and advising bank).By SWIFT LC is transmitted in MT 700.

At request of openers/ applicant, a brief description of the LC may be advised by SWIFT/ cable/ telex
to beneficiary under test (where applicable) through advising bank. In such case, it has to be
mentioned in the message that full details are being airmailed.

02, Irrevocable LC and Issuing Bank Undertaking

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

Irrevocable LC: As per UCP 600 Article 3 A credit is irrevocable even if there is no indication to
that effect. An irrevocable credit constitutes a definite undertaking of the issuing bank,

UCP 600 Article 7:

a. Provided that the stipulated documents are presented to the nominated bank or to the issuing bank
and that they constitute a complying presentation, the issuing bank must honor if the credit is
available by:

i. sight payment, deferred payment or acceptance with the issuing bank;

ii. sight payment with a nominated bank and that nominated bank does not pay;

iii. deferred payment with a nominated bank and that nominated bank does not incur its deferred
payment undertaking or, having incurred its deferred payment undertaking, does not pay at maturity;

iv. acceptance with a nominated bank and that nominated bank does not accept a draft drawn on it
or, having accepted a draft drawn on it, does not pay at maturity;

v. negotiation with a nominated bank and that nominated bank does not negotiate.

b. An issuing bank is irrevocably bound to honor as of the time it issues the credit.

c. An issuing bank undertakes to reimburse a nominated bank that has honored or negotiated a
complying presentation and forwarded the documents to the issuing bank. Reimbursement for the
amount of a complying presentation under a credit available by acceptance or deferred payment is

18
due at maturity, whether or not the nominated bank prepaid or purchased before maturity. An issuing
bank's undertaking to reimburse a nominated bank is independent of the issuing bank's
undertaking to the beneficiary.

04. Parties in Credit operations:

01. Opening Bank:

a) That Banks must examine before opening of letter of credit that the goods under Import are
permitted as per Import policy order read with Exchange Control Regulation in force.
b) That the bank must take reasonable care with regard to the following points:
i) Beneficiary’s worth and respectability.
ii) Credit is assigned a number.
iii) It stipulates the amount, the period of validity, quantity price specification of goods,
packing port of shipment and other papers as required by the opener.
iv) Mode of shipment whether partial/full/ transshipment etc.
c) That the Banks must see before payment is made correct documents have been furnished.
d) That Bank has no liability with regard to physical existence of goods as all parties concerned
deal in documents but not in goods.
e) That Bank is liable to honor payment if documents drawn strictly in terms of letter of credit even
if the importers do not turn up to retire document.
f) That the bank must take reasonable time to examine the document. If they fail to hold the
documents at the disposal of the remitting Bank or fail to return within reasonable time the bank
shall be precluded from claiming.
g) That the Bank assumes no liability or responsibility for the form, sufficiency, accuracy,
genuineness, legal effect of any documents against all obligations and responsibilities imposed
by foreign laws and usages.
h) That bank also assumes no liabilities arising out of the interruption of business by act of god,
civil commotion war or any other causes beyond their control or any strike or lock out.

2. Advising Bank:
a) That the bank must ensure timely dispatching of Letter of Credit in the manner they receive from
opening bank to the beneficiary.
b) That they shall not be held responsible for any eventuality in the event of non- payment of bill
drawn under Letter of credit and advised through them.

3. Negotiating Bank:
a) That the negotiating bank must ensure that documents are presented within the period of
validity.
b) That properly drawn bills supported by invoice price and others in terms of credit are
furnished.
c) That the necessary shipping documents including Bill of Lading ,invoice, Certificate of origin and
other documents specified in the letter of credit are prepared and submitted in terms of credit
and in sets of required number.
d) That the relative documents describing the goods show correctly the Marks, Quantity, Weight,
etc.
e) That the bill of Lading is not stale and bears the date within the permitted period of shipment.
f) That before payment is made the correct documents have been furnished. In case of any
discrepancy, it must be brought to the notice of opening bank within reasonable time.

4. Reimbursement Bank:
a) That the bank is responsible to honor reimbursement claim under Letter of Credit Strictly in
accordance with reimbursing authority given by the opening bank.

19
b) That the bank shall not be held responsible for delay in honoring reimbursement claim due to
shortage of fund in the account of opening bank with reimbursement bank and or non-receipt of
instrument from the opening bank.

5. The opener of the credit i.e. Importer –customer.

6. The beneficiary i.e. Seller – Exporter.

The opening bank will authorize the reimbursing bank in writing to honour such claims, without making it a
condition that the bank entitled to claim reimbursement must certify compliance with the terms & conditions
of the credit to the reimbursing bank.

Note : Should a credit require to be confirmed by a third bank (other than the advising bank}, such bank is
termed as the "Confirming Bank". In credit operations, the "Advising Bank" and “Confirming Bank" may be
the same. However, when a credit is confirmed /re-confirmed by the "Confirming Bank" generally
negotiation of the credit is made restricted with that bank.

Responsibility of Confirming Bank:

When the opening/ issuing bank authorizes or requests another bank to confirm its irrevocable credit
and the later has added its confirmation, such confirmation constitutes a definite undertaking of such
bank (the confirming bank) in addition to that of the issuing bank, provided that the stipulated
documents are presented and that the terms and conditions of the credit are complied with.

The confirming bank must:

i. honor, if the credit is available by
a. sight payment, deferred payment or acceptance with the confirming bank;
b. sight payment with another nominated bank and that nominated bank does not pay;
c. deferred payment with another nominated bank and that nominated bank does not incur its
deferred payment undertaking or, having incurred its deferred payment undertaking, does not pay at
maturity;
d. acceptance with another nominated bank and that nominated bank does not accept a draft drawn
on it or, having accepted a draft drawn on it, does not pay at maturity;
e. negotiation with another nominated bank and that nominated bank does not negotiate.

ii. negotiate, without recourse, if the credit is available by negotiation with the confirming bank.
b. A confirming bank is irrevocably bound to honor or negotiate as of the time it adds its confirmation
to the credit. Ref: UCP 600 Art. - 8.

In credit operations, negotiating bank and reimbursing bank may be the same, or advising bank and
negotiating bank may be the same, or advising bank, negotiating bank and reimbursing bank may be
the same.

05. Opening of LC (Credit): General Information

Commodity Import Control: (Section - 3)

Restricted Negative Items: The items of goods and commodities which are not permissible for
Import (Appendix-1)

Restricted list: The items of goods & commodities which are permissible for import only on fulfillment of
specified terms and conditions as mentioned against each item. (Appendix-1).

Freely Importable Items: The items of goods & commodities which are importable except items mentioned
above.

20
Restriction regarding source of procurement of Goods (Sec 4.d): Goods from Israel or goods
originating from that country shall not be importable. Goods shall also not be importable in the flag vessels
of Israel.

General Rules for Commodity Import: (Section – 5)

1. Eight digit H.S. Code based on Harmonized Commodity description and coding system shall be
mandatory in all imports. No import is allowed without HS Code.

2. No objection on Right of Refusal basis.

3. The pre-shipment inspection where mandatory that must be complied.

4. All import shall be made in most competitive rate. CCI&E can call the price related documents any
time. In case of untied commodity aid in private sector three quotations from indenters or suppliers
beyond Tk1.00 lac. The government will scrutiny the price before inviting tenders.

5. Basis of Import:
i) Basis of Import: All imports by air, sea and land route CAN be made on CFR, CPT, FOB, CIF,
CIP, DAT, DAP basis subject to abiding by the Foreign Exchange regulations.
ii) No import shall be allowed on CIF or CIP basis without prior permission from Ministry of
Commerce unless it is a condition of foreign loan or project loan agreement.
iii) Any NRB can import on CIF or CIP basis if the Capital machinery or raw material becomes the
part of foreign equity participation.
iv) The free sample or gift can be sent on CIF or CIP basis.
v) Insurance Cover note must be taken from Sadharan Bima Corporation in case of import made
by the Government. In case of private sector imports from Sadharan Bima Corporation or any
other approved Insurance Companies.

6. In all cases of Imports COUNTRY OF ORIGIN shall be mentioned clearly on goods/ package/
carton/ containers

Certificate of Country of Origin shall be issued by the Govt. agency / approved authority/
organization of exporter’s country and the same must be placed with Import Documents.

Country of Origin will not be required in case of:

 Coal
 Export oriented Garments Industries.
 Raw Cotton (but Country of Origin must be mentioned on Fito Sanitary Certificate)
 Raw materials for 100% export oriented Industries
 Aluminum ingot, Zinc ingot and other ferrous and non-ferrous metals
 Import of Lime Stone through Chhatak Rope Way conveyor belt (once certification is enough)

7. In all cases of Imports the name of the importer, address, TIN number shall be written clearly on
goods/ package/ can/ sack pack/ wooden box/carton/ containers. Exception is allowed for following
fourteen category of items:

 Bulk import without packing

 Import up to US$ 5,000/=
 Import by the Government
 Import under foreign loans/grants
 Gift items, samples, advertising materials up to US$ 1,000/=
 Transfer of Residence
 Import by the Foreign Embassies
 Import under bonded warehouse for 100% export oriented industries
 Import of goods for returning back
 Import for export purpose
 Import under Ontrapo basis

21
 Import by the Schools, Voluntary/ charitable organizations or Hospitals
 Goods sent by NRBs.
 Goods for personal consumption

8. Sources of Finance: Import may be allowed against:

o Cash Foreign Exchange

o Foreign Currency balance of NRB FC Accounts
o External economic aid (Commodity Aid, Loan and Grant )
o Commodity exchange – Barter and Special trading arrangement(STA)

9. Other Restrictions:

1 No import license is required for importing goods if not otherwise stated.

2 Letter of Credit Authorization: Unless otherwise specified, imports irrespective of the source of
finance ( LC, Draft, Remittance) shall be allowed only against valid Letter of Credit Authorization.

3 Import through Letter of Credit: Unless otherwise specified imports shall made by opening
Irrevocable Letter of Credit.

Exceptions--- Perishable food items of US$ 50,000 for Technaf Land Port and US$ 10,000/= for
other land ports and items of daily necessities and capital machineries as declared by the
Government.

10. Import in LCA Form but without LC:

a) Books, Journals, Magazines and Periodicals on sight draft or usance bill.

b) Import of any permissible items for the amount not exceeding US$ 1,00,000 annually. In
case of Myanmar the maximum limit

i) it is US$ 50,000/= for Rice, Wheat Maize, Soybean oil, Palm oil, Onion and fish and US$
30,000/= for other products.
ii) In case of govt. import of Rice the limit will be US$ 2.00 million; in this case the annual limit of
US$ 1,00,000/= will not be applicable.

c) Any commodity to be purchased under specific aid, grants or commodity aid.

d) International Chemical Reference under Drug Administration: Any items specially allocated for
import without LC under Commodity aid, Loan or grant. Medicine under permission from Director,
Drug Administration or import of International Chemical Reference for judging Drug quality.

11. Import through Import Permit and Clearance Permit: without LCA Form or opening LC

a) Import of Books, Journals, Magazines, Periodicals, Scientific & Research apparatus.

b) Import under “Pay as you earn Scheme” under BB clearance
a) New and 10 years old Plant and Machineries
b) New and 5 years old reconditioned motor vehicles
c) Refrigerated Ship not more than 15 years’ old and sea vessels up to 25 years’ old
d) Export oriented Industrial Plant & Machineries subject to clearance from appropriate agency
e) Fishing Trawlers up to 25 years old
f) Goods under Baggage Rule or over the limit
g) Samples Advertisement within or over the limit
h) Herbal medicines or its raw materials
i) Capital Machineries and spares of 100% local foreign joint ventures
j) Any other items which are not exempted from permit.

22
12. Import under Deferred Payment Letter of Credit under suppliers’ credit is allowed by opening Letter
of Credit.

13. Import through direct payment: NRB can send commodities by direct payment in abroad to any
Bangladeshi resident in Bangladesh by mentioning the name and address of the recipient without
import permit along with BB High Commission Certification of wage Earner and value paid certificate

14. Letter of Credit opening:

i) LC shall be opened within 150 days from the date registration of LCA. CCI &E can extend the time.
ii) Import under Barter and STA within CC& E time limit.

15. Commodity Shipment time limit:

i) Shipment shall be made within 17 months from the date of LCA Registration incase of
Machineries and Spares and nine months for other commodities.
ii) In case of Commodity aid or grants Barter and STA, Trade arrangements the CCI& E will fix up
time limit.

16. The nominated Bank or the CCI$ E cannot extend time in case of band or restricted items.

17. Papers required with LCA Form:

 Application for opening Letter of Credit

 Indent or Pro-forma Invoice
 Insurance cover note

18. Government papers for govt. or autonomous body imports.

19. Additional Papers for private sector importers

 Registration certificate of Local Chamber of Commerce and Industries

 Renewal certificate of Import Registration Certificate (IRC)
 Three copies of declaration of Income Tax payment submission of returns.
 TIN number
 CCI& E orders or any papers as required by the policy
 Other relevant papers as required by CCI &E
 Submission Insurance cover note or Insurance Policy with adhesive stamps to Customs authority

20. Shipment of Commodity before issuing or registration of LCA by nominating bank or opening Letter
of Credit; or expiry of LCA or LC expiry will be treated as violation of the Policy. Any mis-declaration
will also be treated as violation of the policy.

21. LC can be opened against Indent from the local Indenters or against Porforma Invoice directly from
foreign Producer or Seller.

22. LCA receiving and Registration:

a) Receiving LCA Form:

i) Private Industrial and commercial will deposit LCA Form and relevant papers to their nominated banks.
ii) Bank will confirm valid IRC, renewed up-to-date, renewal fees paid, description of treasury bill
recorded on IRC,
iii) Import by land shall clearly mentioned in LC.
iv) No IRC is required for importing machineries and spares, Importers or open sectors like garments
v) Import cost shall be paid from the equity of the foreign investor.

23. Eight digit H.S. Code based on Harmonized Commodity description and coding system shall be
mandatory in all imports. No import is allowed without HS Code.

24. LCA Form Reporting shall be reported to BB, CCI&E, Importer and Customs in the monthly reporting
after value payment. One copy shall be retained by the Bank.

23
25. Where LCA Registration is not required incase of govt. import under loan, grant, barter. STA, where
BB registration is not required, the nominated Bank shall write the description of Import on LCA and
rd th
send to LC opening Bank requesting to open LC. The opening Bank shall send the 3 and 4 copy
of LCA to CCI& E.

26. The copy of the LC and its amendments shall be sent to CCI&E within 15 days for record.

27. The copy of Income tax declaration shall be sent to Director, Research and Statistics NBR.

28. The nominated or opening Bank can be changed subject to no objection from both banks and a copy
shall be submitted to CCI&E.

Shipping period: A Financial year means July to June. This period is called shipping period.

Category of Importers: Importers are broadly divided into there group:

Commercial Importers: All Importers who import goods for sale without further processing are Commercial
Importer.

Industrial Consumers : Industrial Consumers are those users who import Machinery, Accessories, spare
parts & Raw Materials for use in their Industry

Shipment on Bangladeshi vessels: Shipment of merchandise shall normally be made on Bangladeshi

Flag vessels

Import of goods up to maximum 20 metric tons in case of individual consignee and up to 100 metric ton in
case of group importers may be made in non-Bangladeshi vessel.

Certificate of waiver from Director General of Shipping is needed in some cases.

ITC committee for settling the product classification disputes.

i) LC shall be opened within 150 days from the date registration of LCA. CCI &E can extend the time.
ii) Import under Barter and STA within CCI&E E time limit.
iii) CCI& E can extend time in case of importer’s out of control situations.

Import under Deferred Payment Letter of Credit:

Capital Machinery import up to 360 days usance basis.

Industrial Raw Material up to 180 days usance basis.
Coastal Vessels Tankers ocean going vessel up to 180 days usance basis
Agricultural implements Chemical Fertilizer up to 180 days usance basis
Import of Life saving drug up to 90 days usance basis

Obtaining Credit Report of the Supplier:

Authorized Dealers should obtain confidential report of the exporters in all cases where the LC / Contract
exceeds USD 10,000 (earlier it was BDT 5.00 Lac) in cases where proforma invoices are issued directly
by foreign suppliers; and USD 20,000 (earlier it was BDT 10.00 Lac) in cases where indents are issued by
local agents of foreign suppliers (BB, FEPD, FE Circular no. 11 dated 03 July, 2013).

Minimum 20% of value addition: In case of Export of Garments under Back-to-back import; the exporter
must repatriate minimum 20% of value addition to Bangladesh ( Chapter 5, Section 24 (9) E)

Back to Back import for Re- Export

Import by EPZ factories for ultimate export
Import of Food items for Human consumption
Testing of Radiation
Import of Milk Food
Import of Animal feed and extra terms and conditions
24
Application for opening LC

All importers must be the members of recognized Chamber of or Bangladesh based Trade
Associations. Importers have to submit following papers / documents at the time of applying for
opening Letter of Credit:

i) LC application form duly signed by the importers.

ii) e-TIN number
iii) VAT Registration no.
ii) Indents issued by registered indentors or proforma invoice issued by the suppliers (as the
case may be).
iii) Insurance Cover note.
iv) Certificate from registered Chamber of Commerce Industry certifying that the importers
are valid members of the chamber.
v) Proof of renewal of the IRC (Import Registration Certificate) for the current shipping period.
vi) Declaration form in three copies declaring payment of income-tax for the previous
financial year.
vii) IMP form duly signed by importers.

S) Importers must obtain insurance cover note from Sadharan Bima Corporation/ Insurance
Companies prior to opening LC.

U) All goods are to be imparted at the most competitive price, Importers will be bound to produce
required documents in this respect to the licensing authorities if required.

V) Banks will open LCs invariably in currencies in which the indents are procured.

W) LCs may provide for negotiation of documents for periods not exceeding 30 days after the date of
shipment / dispatch.

X) It is not permissible to open clean, revolving, packing letters of credit. Bangladesh Bank's prior
approval is needed for opening such LCs.

Z) It is not permissible to open LC in favour of beneficiaries in countries, import from which are
banned by competent authorities.

Checking of documents / papers:

On receipt of necessary papers from the importers, the opening bank will check the followings:

i) Whether the LC application form is properly stamped (non-judicial stamp duly cancelled by
authorities).
ii) Whether the LC application is duly filled in and duly signed by the importer concerned. The
signature of the importer must be verified with the specimen signature recorded with the bank.

iii) Whether the amount mentioned in the application exceeds the amount of LCA Form or pass book
entitlement.

iv) Whether the importer’s registration is valid far current shipping period, and, whether he/they is/are
member(s) of chamber of commerce.

v) Whether the item(s) mentioned in the LC application and indent are same, and, whether the item(s)
are importable under current Import Policy. The H.S. Code number of the item(s) must be

25
checked/verified with ITC schedule to find out whether the item(s) are noted in the "Negative List" &
“conditional Import List".

vi) Whether the LC application is submitted within validity of the LCA Form and whether the shipment
validity (as mentioned in the application) is within the permissible period.

vii) Importers must specifically mention whether LC to be opened by cable/ telex or Airmail, and,
whether partial shipment & transshipment to be allowed or prohibited.

viii) Whether the indentors are registered with CCI&E and permitted by Bangladesh Bank. CCI&E's
registration number and Bangladesh Bank's permission number must be quoted on indent.

ix) The indent must mention details of goods and terms of shipment:

a) detail description of goods with HS Code Number.

b) name & address of importers & suppliers
c) mode of shipment/ dispatch (by steamer or by Air or by Truck/Train)
d) validity of shipment & validity of offer
e) unit price of goods to be imported on C & F terms.
f) indent must be accepted by importers under signature.

x) Whether the insurance policy has been obtained:

a) Whether the insurance has been issued in the name of opening bank A/C openers/importers.
b) Whether the items mentioned in the policy are same as in L/C application.
c) The amount must be equal to L/C value + 10%
d} The risks of the goods should be adequately covered.
e) The premium must be paid before opening the L/C. The premium receipt must be submitted as
proof of payment of premium.

xi) Whether the LCA Form has been duly filled in & signed by importers. The item & H.S. Code
number in the LCA Form must be identical to the same in LC application and indent.
xii) Whether the IMP form set is duly signed by the importers.

Processing of the LC:

If all particulars of the LC application and supporting papers are found in order, bank will fix margin
against the L/C considering the nature of goods, marketability of goods, landing cost of the same.
Adequate margin should be fixed and recovered from the party prior to opening the L/C. Bank will
pass following entries while recovering the margin:

Debit : Party's A/C

Credit: Sundry deposit - margin on L/C

Contra voucher : Debit : Customer's Liability

Credit: Banker's Liability

The L/C particulars are them entered in the L/C opening register. Charges, e.g. : L/C commission,
postage, telex charge, foreign correspondents charges are calculated & recovered to debit of party's
A/c.

The entries in the register are to be checked and authenticated by an authorised officer.
Particulars of margin amount & liability to be entered in the respective registers,

26
Advising of Credits and Amendments: UCP 600 Article- 9.

a. A credit and any amendment may be advised to a beneficiary through an advising bank. An advising
bank that is not a confirming bank advises the credit and any amendment without any undertaking to
honor or negotiate.

b. By advising the credit or amendment, the advising bank signifies that it has satisfied itself as to the
apparent authenticity of the credit or amendment and that the advice accurately reflects the terms and
conditions of the credit or amendment received.

c. An advising bank may utilize the services of another bank ("second advising bank") to advise the
credit and any amendment to the beneficiary. By advising the credit or amendment, the second
advising bank signifies that it has satisfied itself as to the apparent authenticity of the advice it has
received and that the advice accurately reflects the terms and conditions of the credit or amendment
received.

d. A bank utilizing the services of an advising bank or second advising bank to advise a credit must
use the same bank to advise any amendment thereto.

e. If a bank is requested to advise a credit or amendment but elects not to do so, it must so inform,
without delay, the bank from which the credit, amendment or advice has been received.

f. If a bank is requested to advise a credit or amendment but cannot satisfy itself as to the apparent
authenticity of the credit, the amendment or the advice, it must so inform, without delay, the bank from
which the instructions appear to have been received. If the advising bank or second advising bank
elects nonetheless to advise the credit or amendment, it must inform the beneficiary or second
advising bank that it has not been able to satisfy itself as to the apparent authenticity of the credit, the
amendment or the advice.

Amendments: UCP 600 Article- 10

a. Except as otherwise provided by article 38, a credit can neither be amended nor cancelled without
the agreement of the issuing bank, the confirming bank, if any, and the beneficiary.

b. An issuing bank is irrevocably bound by an amendment as of the time it issues the amendment. A
confirming bank may extend its confirmation to an amendment and will be irrevocably bound as of the
time it advises the amendment. A confirming bank may, however, choose to advise an amendment
without extending its confirmation and, if so, it must inform the issuing bank without delay and inform
the beneficiary in its advice.

c. The terms and conditions of the original credit (or a credit incorporating previously accepted
amendments) will remain in force for the beneficiary until the beneficiary communicates its acceptance
of the amendment to the bank that advised such amendment. The beneficiary should give notification
of acceptance or rejection of an amendment. If the beneficiary fails to give such notification, a
presentation that complies with the credit and to any not yet accepted amendment will be deemed to
be notification of acceptance by the beneficiary of such amendment. As of that moment the credit will
be amended.

d. A bank that advises an amendment should inform the bank from which it received the amendment
of any notification of acceptance or rejection.

e. Partial acceptance of an amendment is not allowed and will be deemed to be notification of rejection
of the amendment.

27
f. A provision in an amendment to the effect that the amendment shall enter into force unless rejected
by the beneficiary within a certain time shall be disregarded.

Standard for Examination of Documents: UCP Article- 14

a. A nominated bank acting on its nomination, a confirming bank, if any, and the issuing bank must
examine a presentation to determine, on the basis of the documents alone, whether or not the
documents appear on their face to constitute a complying presentation.

b. A nominated bank acting on its nomination, a confirming bank, if any, and the issuing bank shall
each have a maximum of five banking days following the day of presentation to determine if a
presentation is complying. This period is not curtailed or otherwise affected by the occurrence on or
after the date of presentation of any expiry date or last day for presentation.

c. A presentation including one or more original transport documents subject to articles 19, 20, 21, 22,
23, 24 or 25 must be made by or on behalf of the beneficiary not later than 21 calendar days after the
date of shipment as described in these rules, but in any event not later than the expiry date of the
credit.

d. Data in a document, when read in context with the credit, the document itself and international
standard banking practice, need not be identical to, but must not conflict with, data in that document,
any other stipulated document or the credit.

e. In documents other than the commercial invoice, the description of the goods, services or
performance, if stated, may be in general terms not conflicting with their description in the credit.

f. If a credit requires presentation of a document other than a transport document, insurance

document or commercial invoice, without stipulating by whom the document is to be issued or its data
content, banks will accept the document as presented if its content appears to fulfill the function of the
required document and otherwise complies with sub-article 14 (d).

g. A document presented but not required by the credit will be disregarded and may be returned to
the presenter.

h. If a credit contains a condition without stipulating the document to indicate compliance with the
condition, banks will deem such condition as not stated and will disregard it.

i. A document may be dated prior to the issuance date of the credit, but must not be dated later than
its date of presentation.

j. When the addresses of the beneficiary and the applicant appear in any stipulated document, they
need not be the same as those stated in the credit or in any other stipulated document, but must be
within the same country as the respective addresses mentioned in the credit. Contact details (telefax,
telephone, email and the like) stated as part of the beneficiary's and the applicant's address will be
disregarded. However, when the address and contact details of the applicant appear as part of the
consignee or notify party details on a transport document subject to articles 19, 20, 21, 22, 23, 24 or
25, they must be as stated in the credit.

k. The shipper or consignor of the goods indicated on any document need not be the beneficiary of
the credit.

l. A transport document may be issued by any party other than a carrier, owner, master or charterer
provided that the transport document meets the requirements of articles 19, 20, 21, 22, 23 or 24 of
these rules.

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Complying Presentation: Article 15.
a. When an issuing bank determines that a presentation is complying, it must honor.

b. When a confirming bank determines that a presentation is complying, it must honor or negotiate and
forward the documents to the issuing bank.

c. When a nominated bank determines that a presentation is complying and honors or negotiates, it must
forward the documents to the confirming bank or issuing bank..

Discrepant Documents, Waiver and Notice: Article 16.

a. When a nominated bank acting on its nomination, a confirming bank, if any, or the issuing bank
determines that a presentation does not comply, it may refuse to honor or negotiate.

b. When an issuing bank determines that a presentation does not comply, it may in its sole judgment
approach the applicant for a waiver of the discrepancies. This does not, however, extend the period
mentioned in sub-article 14 (b).

c. When a nominated bank acting on its nomination, a confirming bank, if any, or the issuing bank decides
to refuse to honor or negotiate, it must give a single notice to that effect to the presenter.

The notice must state:

i. that the bank is refusing to honor or negotiate; and

ii. each discrepancy in respect of which the bank refuses to honor or negotiate; and

iii.
a) that the bank is holding the documents pending further instructions from the presenter; or

b) that the issuing bank is holding the documents until it receives a waiver from the applicant and agrees to
accept it, or receives further instructions from the presenter prior to agreeing to accept a waiver; or

c) that the bank is returning the documents; or

d) that the bank is acting in accordance with instructions previously received from the presenter.

d. The notice required in sub-article 16 (c) must be given by telecommunication or, if that is not possible,
by other expeditious means no later than the close of the fifth banking day following the day of
presentation.

e. A nominated bank acting on its nomination, a confirming bank, if any, or the issuing bank may, after
providing notice required by sub-article 16 (c) (iii) (a) or (b), return the documents to the presenter at any
time.

f. If an issuing bank or a confirming bank fails to act in accordance with the provisions of this article, it shall
be precluded from claiming that the documents do not constitute a complying presentation.

g. When an issuing bank refuses to honor or a confirming bank refuses to honor or negotiate and has
given notice to that effect in accordance with this article, it shall then be entitled to claim a refund, with
interest, of any reimbursement made.

Transferable Credits: Article 38.

a. A bank is under no obligation to transfer a credit except to the extent and in the manner expressly
consented to by that bank.
b. For the purpose of this article:

29
Transferable credit means a credit that specifically states it is "transferable". A transferable credit may be
made available in whole or in part to another beneficiary ("second beneficiary") at the request of the
beneficiary ("first beneficiary").

Transferring bank means a nominated bank that transfers the credit or, in a credit available with any bank,
a bank that is specifically authorized by the issuing bank to transfer and that transfers the credit. An issuing
bank may be a transferring bank. Transferred credit means a credit that has been made available by the
transferring bank to a second beneficiary.

Scrutiny of Documents

1. Bank must examine the documents with reasonable care, whether they are complied with the
L/C terms.
2. Documents not stipulated in the L/C will not be examined by the Bank.
3. Any discrepancy found in the document shall be lodged within five (5) working days following
the day of receipt of the instrument by the issuing Bank.
4. If a L/C contains conditions without stating the documents to be presented, Banks will deem
such conditions are not required.
5. Banks assumes no liability or responsibility for the genuineness, sufficiency, accuracy,
falsification or legal effect of the document submitted by the exporter / supplier.

On receipt of the original shipping documents, the L/C opening bank must scrutinize / check the
shipping documents which generally include the following: -

a) Bill of Exchange
b) Bill of Lading
c) Invoice
d) Packing list
e) Inspection certificate
f) Certificate of Origin
g) Any other documents specially called for in the Credit.

While checking the shipping documents the following points should be checked meticulously: -

- L/C No., date and amount

- Name & address of the applicant(opener)
- Name and address of the beneficiary (supplier)
- Commercial Invoice
- Shipment date, “ Shipped on Board with date”, “Freight prepared” to be mentioned on B/L
- Bill o Exchange, Packing list, Certificate of origin, Bill of Lading, Shipping Marks, Port of
Shipment.

Checking Bill of Lading

01. Full set of “Clean” Bill of lading, whether any super imposed clause.
02. “Shipped on Board”
03. Ocean Bill of lading
04. Drawn or endorsed to the order of ONE Bank Limited
05. Showing “Freight prepared”
06. Marking “ applicant” or us
07. Notify applicant and us
08. Evidencing shipment of invoiced goods by beneficiary
09. Beneficiary as shipper on Board
10. Named steamer

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11. Shipped on Board a named steamer on date of Bill of Lading i.e. the date of B/L and date of
shipped on Board will be the same date.

Negotiating bank should certify on the forwarding schedule of the documents that: -
All the terms and conditions of the L/C have been complied with.

- Drawing has been endorsed on reverse of the Letter of Credit.

Lodgment
After getting the shipping documents in order, lodgment of documents should be made there against
complying with the following points and formalities: -

- Bank’s crossing seal to be affixed on B/L and Bill of Exchange to protect loss or fraudulent use of
the same.
- PAD seal to be affixed and number to be given on all shipping documents.
- To make entry in the PAD Register under the heads- Sl. No., Party’s name, PAD No., Foreign
Currency amount, rate of F.C., equivalent Taka, Negotiating Bank Charges, Reimbursement Bank
Charges, total amount, Description of goods, B/L No. & date, Name of Steamer etc.
- To send intimation letter to the party to retire documents against payment of bank’s dues.
- To make the L/C file upto date incorporating lodgment date, PAD Number and invoice value over
the L/C file.
- Inside the L/C file to put the date of lodgment date, PAD No. amount of the document, PAD
amount in Taka.
- To fill up the IMP form
- To keep both the original and duplicate documents in safe custody will the party retire the
documents.

It may be mentioned here that if any discrepancy is found in the documents, the same should be
informed to the party. After acceptance by the party (importer) and full payment realised the
documents should be lodged in PAD. If the party refuses to accept the documents, the documents
should be returned to the negotiating bank if the documents sent on collection basis or if desired by
the applicant, negotiating bank may be advised for sending revised documents.

Retirement
On receipt of intimation letter the importer approaches for retirement of the documents. after recovery
of Bank dues in full; the documents should be endorsed in favour of the importer in the following
manner: -

a) Bill of Exchange - Received payment

For ONE Bank Limited

Authorized Signature

b) Commercial Invoice - Certified that the invoice has been drawn under L/C No.
for US$--------------

For ONE Bank Limited

Authorized Signature

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(c) Bill of Lading : Please deliver to the order of
M/S…

For ONE Bank Limited

Authorised signature

Discrepant Document & Notice

(1) In case of complying the L/C terms the payment must be made to the negotiating Bank.

(2) In case of non-compliance the re-imbursement Bank/ Confirming Bank may refuse to take up
the document.
(3) The issuing Bank can approach the applicant for waving of the discrepancies. The
acceptance of discrepant documents should be received from the applicant within 7 days from
the date of lodgment of discrepancies.
(4) The issuing / Confirming / Nominated Bank if decides to refuse the document it must give
notice that effect by telecommunication. If not possible, by other expeditious means within the
5th working days following the date of receipt of Documents.
(5) While lodging discrepancy the issuing Bank must mention whiter they are holding the
documents at their disposal or returning the same to the presenting/-negotiating Bank.
(6) The issuing Bank is entitled to get the fund back from negotiating / presenting Bank with
interest.
(7) If issuing Bank fails to lodge the discrepancy properly they will lose their ground of claims to
be established.
(8) Bill negotiated under reserve / indemnity concerns only the relation between the remitting /
negotiating Bank and the party. It is not at all concerned with issuing / confirming Bank.

Disposal of IMP Form, Bill of Entry & online reporting:

a) The Original and Duplicate copy of the IMP get signed by the ADs and submitted to BB with
monthly statement along with LCAF, Commercial Invoice and Bill of Lading (E2P2). The
duplicate is kept with AD for record.
b) As and when the LC is opened that must be reported online to BB.
c) When the payment is made or acceptance is given against Usance LC that also must be
reported online to BB.
d) The Bill of Entry must be submitted to ADs within 120 days from custom clearing. The four digit
C 0000 Bill of Entry must be reported online to BB.

Export Procedures and Export Finance

Introduction:

Now a days globalization of trade is being widely discussed but every nation tries to adopt some
protective measures safeguard the interest of national economy and as such, export and import
business are to be done or handled in compliance with the laws of land as well as international
business laws. In Bangladesh import and export of goods are being regulated by the Ministry of
Commerce in terms of the Import and Export Control Act 1950 with Import & Export Policy Orders

32
issued currently for three years 2012-2015 and public notices issued from time to time by the office of
Chief Controller of Import & Export (CCI & E) but the policy decisions regarding settlement of import &
proceeds of exports are being formulated by Bangladesh Bank in accordance with Foreign Exchange
Regulation Act-1947 as adopted in Bangladesh. Regarding international business laws we have to
follow the publications of International chamber of Commerce (ICC) as adopted in member countries
with particular reference to UCPDC-600. So the bankers as well as customer must go through the
following books intensively to understand export & import procedure.

i) Current Export Policy order

ii) Current Import Policy order
iii) Guidelines for Foreign Exchange Transactions (BB Exchange Cotrol Manual).
iv) I CC Publication specially UCP-600 and ISBP
v) Rules of procedures & guidelines of particular bank being circulated form ID from time to time.

Registration:

An exporter must obtain Export Registration Certificate (ERC) from the offices of the Chief Controller
of Imports & Exports (CCI & E) Govt. of Bangladesh. No person is allowed to export any goods from
Bangladesh to any other country without obtaining such a certificate.

For the purpose of registration, an application in the prescribed form is required to be submitted to the
CCI & E authority along with the following documents:

a) Nationality Certificate / National ID

b) Trade License
c) Bank solvency certificate
d) TIN Certificate
d) Other documents according to the nature of the company or firm.
i) Copy of rent receipt of the business premises If it is rented.
g) Treasury Challan showing the payment of required fee.
h) Certificate from BGMEA or other applicable Institutions.

But incase of Jute, Jute goods, Tea and Tobacco export licenses are being issued by Bangladesh
Jute Mills Corporation, Tea Board & Tobacco Development Board etc.

Exportable Items:

All items except restricted and prohibited items as mentioned in the current EPO & amendments there
against from time to time.

Export Order & Contract:

On receipt of registration the exporter has to find prospective buyers of his product in abroad directly
through:
Personal Contact, through a business visit to different foreign countries, searching yellow pages, ware
pages etc.
Through Local representatives of foreign buyers or buying house.
Trade Enquiries in different association of chambers, Trade & Commercial counselor of Bangladesh
Embassy abroad
Entered into the contract by providing Proforma Invoice / Trade Agreement

33
Export letter of Credit:

Normally the export is executed against letter of credit opened by overseas buyers. When export is
made against LC the bankers as well as the exporter should examine the following terms of LC to
avoid any further complicacy to execute the order:

a) The L/C is irrevocable and opened by a first class / internationally reputed bank.
b) The terms & condition of L/C are definite clear and explicit also are in conformity with those of the
contract.
c) The LC is valid.
d) That the terms of the LC export / contract do not violate exchange control regulations.
e) Negotiation of the documents under the LC may or may not be restricted.
f) Signature of the signatories of the LC are genuine and authenticated in case of mail LC and in case of
SWIFT transmitted it must be MT 700.
g) Reimbursement / Payment instruction clause of LC is clearly stated.
h) Amount of LC is distinctly mentioned.
i) If the LC is transferable or otherwise, it should be clearly mentioned in the LC.
j) The LC should provide sufficient time for shipment and a reasonable time for negotiation. If nothing is
mentioned: the supplier would be allowed 21 days to negotiate the documents.

Production or collection of goods

If the exporters are manufacturers of exportable items to be produced immediately so that shipment
of goods can be made within the validity of shipment. If the exporter is a trader he will collect the
goods as per specification form market & arrange shipment in time. Goods can be manufactured in
others factory by opening BB LC or by transfer of LC.

Issuance of EXP Form

All Exports must be declared on EXP Form which will be supplied by the Authorised Dealers for use of the
exporters for export of goods and signed by exporter.

After receipt of the EXP Form from the exporters for certification purpose, the AD will see and ensure that
each set of the Forms is duly filled in.

Thereafter they will record full particulars of the forms in the Export Register to be maintained and assign a
number for each set of the EXP Forms in the following manner, which is to be inserted in the space
provided at the top of the each form.

EXP No A. D's Code Serial Number Year

Shipment of Goods or Shipping Requirements
For timely shipment the following steps to be taken by the exporter. As the steps involved in shipment
are complex, the service of C& F Agent are necessary.
Shipping space booking through C&F Agent, Local Agent of shipping company.
Packing exportable items should be in accordance with the terms of Credit.
Storage arrangement of goods to be done at loading port ii necessary.
To observe the custom formalities, the following documents should be sent to C&F agent by the
exporter:

i) DT form
ii) Commercial Invoice
iii) Packing List
iv) Copy of the export LC / Sale Contract
v) Insurance
vi) Form VBP 9A prescribed by the Custom Authority for declaration of export goods.
vii) Issuance of Bill of Lading from shipping company.

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Export Bills:

Export Bills means a full set of shipping documents relating to Export.

The documents are generally divided into two parts:

a) Substantive: Bill of Exchange, Transport Document, Insurance Document, Com. Invoice

b) Auxiliary: Other documents.

The documents which are required in L/C are substantive and the documents which are sometimes
required are auxiliary.

The exporter must be very careful in preparation of export documents otherwise he will face difficulty
in negotiation of export documents.

After the shipment of the goods in terms of LC the exporter presents the relative documents to the
Negotiating Bank in conformity with the terms & conditions of the Credit. As soon as the Bill of Lading
or AWB or Postal Receipt is received by the exporter , he would prepare the relevant documents and
submit the same immediately to the Negotiating Bank.

The Documents in the set generally include:

i) Bili of Exchange
ii) Bill of Lading / AWB /Truck Receipt / Railway Receipt etc.
iii) Commercial Invoice
iv) Packing list
v) Weight & measurement list
vi) Certificate of Origin
vii) Inspection Certificate
viii) Insurance Policy
ix) GSP Certificate
viii) Other documents as stipulated in the LC

Submission of Documents to Bank for Negotiation :

After preparation of all documents in conformity with terms & conditions of the Credit to be presented
to nominated/restricted bank counter within the period of negotiation as stipulated in the LC.

When the documents are received form the exporter under a Letter of Credit for negotiation, the
negotiating bank shall thoroughly scrutinize or examine the documents from the point of view of
correctness, completeness in all respect and as per the terms of the LC. Every clause in the LC
should be carefully compared with the export documents to ensure that the documents comply with the
terms of LC.

The main points to be verified for negotiation of the documents are the following:

a) The documents should be presented for negotiation before the expiry date of credit
b) The amount of the bill does not exceed the amount available under the LC.
c) All the documents stipulated in the LC are submitted and these are prima facie in order.

When the Bank is satisfied that the documents comply with the requirements of the credit, the bill may
if the documents are in order particulars of bill is to be entered in Export Bill Register allotting serial
number FDBP in case of negotiated bill or FDBC for collection documents & the same to be recorded
in all documents with branch rubber stamp.

Conversion of foreign currency in Bangladesh Taka at the prevailing rate.

Voucher to be passed as under:

35
Dr. H0 ID (at OD sight + Tk 0.10)
Cr. Party s a/c ( In case of no back to back or credit facility extended )

Before realization of export proceeds if we have negotiated the bill the following vouchers to be
passed (in general) :

Dr. FDBP
Cr. Party's a/c
Cr. Packing Credit.(!f party availed PC)
Cr. Income A/c Misc. earning
Cr. Postal Charges recovered against Courier.
Cr. 0.25% Tax at source.

After realization of export proceeds the following voucher to be passed:

Dr. HO ID (at OD sight + Tk 0.10)

Cr. Sundry Deposit a/c Margin on Accepted bill

Dr. Sundry Deposit a/c Margin on Accepted bill

Cr. FDBP (OD Sight)
Cr. Income a/c Exchange earnings.

BE & BL to be endorsed property as stipulated in the LC.

Full set of documents to be enclosed in forwarding schedule duly signed by authorised officer &
dispatched by courier or registered air mail.

Persuasion & contact to be made to Foreign Customer for early realization of proceeds. On
realization of proceeds, register to be marked off, contingent liability to be reversed. In case of
creation of documents, steps relating to payment of bill to be done after realization of proceeds.

Disposal of EXP Form:

a) After certification by AD, all EXP Forms to be submitted to custom authority along with shipping
documents. The Customs keeps the first copy of EXP and reports ONLINE to BB.

b) Custom Authority will pass the EXP duly sealed and signed, return duplicate triplicate and quadruplicate
to exporter retaining the original.

c) Exporter must submit remaining EXP Forms to AD along with invoices- Duplicate to AD for sending the
Issuance & Duplicate to Bangladesh Bank ONLINE within 14 days of negotiation, triplicate to be submitted
after realization of proceeds but not later than four months & the last COPY remains with bank as record.

Responsibility of Bankers:
Advising LC after ascertaining genuineness.
Guidance in documentation.
Export financing - pre-shipment & post-shipment
Ensure repatriation of export proceeds in time.
Scrutinize export documents properly whether they have been submitted as per LC terms.

36
 SOME RELEVANT CONCEPTS

Parties to Letter of Credit:

UPAS Letter of Credit

UPAS means Usance paid at sight, in few words, beneficiary present a draft with tenor xxx days
drawn on a bank, then it will remit complying documents to issuing bank and draft to another
bank, this bank on discount will pay the presenting bank at sight, normally a foreign branch of the
issuing bank and will charge interests to the issuing bank. The cost of discounting to be borne by
the Applicant. However this cost shall not exceed 6% of the LC value as per Bangladesh Bank
circular.

Standby Letter of Credit

Whereas a commercial letter of credit is a payment mechanism for a particular international trade
transaction, a standby letter of credit serves as a secondary or back-up means of payment. Issuing
banks issue standby letters of credit in order to provide comfort to other parties that the bank’s
customer can perform some financial obligation to the beneficiary. Usually, it is not expected that the
issuing bank will ever be called upon to fund the standby letter of credit.

Domestic standby letters of credit are governed by the Uniform Commercial Code. They are generally
less complex transactions than are commercial letters of credit, and they do not require a
correspondent bank to carry out the advising or confirming functions.

A standby letter of credit can only be drawn on if the customer has failed to perform some required
action, as specified in the letter of credit, and before the letter of credit’s expiration date. To draw on
the letter of credit, the beneficiary presents evidence that the customer has not performed some
required action and may include copies of various documents depending on the transaction, invoice
copies, and a draft for the amount due under the letter of credit. Under the Uniform Commercial Code,
a bank is allowed until the close of the third banking day after the receipt of the required documents to
honor the draft.

Standby letters of credit often are used as a credit enhancement or to guarantee a beneficiary that
payment will be made. They can also be used for any situation where a future payment needs to be
guaranteed.

Bill of Lading:

It is a document signed by the master of a ship or his agent acknowledging the receipt of goods on
board the vessel for shipment .Bill of lading contains the following:

1. Name
2. Port of shipment and destination
3. Consignee’s name
4. Conditions, packing and shipping marks
5. On deck or under deck
6. Indication of freight and transshipment
7. Terms and conditions of contract of carriage are printed on the reverse

A Bill of Lading which does not contain the above terms but refers to some other documents for them
is called short From of Bill of Lading.

Types of Bill of Lading:

37
i) Shipped: A Bill of Lading which acknowledges the presence of the goods on board the ship
stating that there would not be any delay for commencement of the voyage. This types of Bill of
Lading is acceptable to Bank for negotiation of export documents.

ii) Received for Shipment: It states that the specified goods are held awaiting a suitable vessel; such
a Bill of Lading is not acceptable to Bank

iii) Ocean Bill of Lading: It implies that the goods will be carried over seas and ocean to reach the
destination. This types of Bill of Lading is readily acceptable to Bank for negotiation of export
document.

iv) Through /Transportation: It indicates transshipment i.e. carriage of the goods by different ships or
by ship and rail during the transit. This type of Bill of Lading is not readily acceptable to Bank.

v) Clean Bill of Lading: It stipulates that goods when accepted were in apparent good order without
imposing any qualification. This type of Bill of Lading is a good tender and is universally preferred
by Bank.

vi) A Claused /Dirty / Foul: It bears super- imposed clause by the ship-owner declaring goods were
accepted in defective order and or packing. Such a Bill of Lading is not a good tender.

vii) Stale Bill of Lading: It has been tendered so late that the banker to whom it is tendered cannot
dispatch it in good enough time for it to reach in the country of import before the arrival of goods.
This type of Bill of Lading is not readily acceptable to Bank.

viii) Electronic Bill of Lading: For many years, the industry has sought a solution to the difficulties,
costs and inefficiencies associated with paper bills of lading. The obvious answer is to make the
bill an electronic document. Electronic Bill of Lading or eB/L is the legal and functional equivalent
of a paper bill of lading.

An electronic bill of lading (eB/L) must clearly replicate the core functions of a paper bill of lading,
namely its functions as a receipt, as evidence of or containing the contract of carriage and, if
negotiable, as a document of title.

ix) Charter party bill of lading: is another type of bill of lading used under sea mode of transport. If
one shipper or a group of shippers arrange to charter their goods to final destination, a vessel is
chartered. This chartered vessel is meant to move the goods exclusively for such shipper or
shippers. In such cases, as a proof of receipt of goods, the charterer who charters the ship issues
a document of title which is called Charter party bill of lading.

B/L issued by the hirer (charterer), and not by the owner of the ship (vessel) transporting
the shipment. Since the owners of the vessel often have the right to lay claim to the cargo aboard
the ship (in case of a dispute with the charterer) banks generally refuse to accept such B/Ls
as collateral for loans, or for payment under a letter of credit.

x) Sea waybill: Shipping document that is only a receipt of cargo taken 'on board' a vessel and
which, unlike a bill of lading, is not a document of title. Shipping companies issue sea waybills to
shippers as a sort of proof or evidence that there is a contract of carriage between the shipper in
question and the shipping company. In order words, the sea waybill is a document that serves
as proof that the Shipping company actually received the goods from the shipper and
agreed to carry it to a stated destination.

38
xi) Mate’s Receipt:
Document signed by an officer of a vessel evidencing receipt of shipment onboard the
vessel. It is not a document of title and is issued as an interim measure until a proper bill of
lading can be issued.

Marine Insurance Policy:

Marine Insurance is a contract by which the insurer gets the risk of merchandise cover against perils
of the Sea and or other eventuality that may cause damage to the merchandise on payment of
premium.

ii) Single Cargo Risk: It covers a single cargo risk.

iii) Open or blank: It covers all the shipments up to an estimated amount during a given period.

iv) Floating: An open marine policy which covers the cargo that is ready for shipment but
for which shipping space is still awaited is called a floating policy.

Marine Risks:

i) Periods of the Sea

ii) Fire
iii) Piracy
iv) Jettisoning- This refers to throwing of cargo to lighten the ship to avoid sinking or damage.
v) Theft pilferage and non- delivery.

Export Finance
An exporter can have his exports financed by any of these methods:

Advance Payment:

Advance payment is received where very extra ordinary business relationship exists between the
exporter and the importer. It is necessary because manufacturer needs finance before shipment of
goods.

Open Account basis:

Bill of Exchange is drawn under letter of Credit. An exporter when ships goods without receiving
either Contract and or Letter of Credit may be termed bills is on an Open Account Basis. The
exporter is to give bills along with the document for collection and wait for payment by the importer
which may take a considerable time .Many exporters would not lock up their funds in this manner and
consequently approach banker for bills purchase facilities. This facility may be either for sight bill or
Usance. Exporters having such facilities can sell the bill to bank and obtain immediate payment.
Bank will collect such bills in due course.

Bill of Exchange drawn under Letter of Credit:

When a bill of drawn under a letter of credit Banks may negotiate such bills by making payment to
the exporter on the basis of assurance given by the banker who opens such export letter of credit .
The negotiating bank must ensure to check the following before a particular bill is negotiated:

39
Documents:

a) Whether the LC is restricted or open; whether the same is valid or expired.

b) That the documents are drawn strictly in terms of Letter of Credit.
c) That amount of the bill is within the credit amount.
d) That description, specification and price of goods are as per terms of letter of credit.
e) That the goods are covered by marine insurance.
f) That the Bill of Lading must be clean and the full set must be obtained.
g) The Bill of lading must be made out to the order of the shipper and endorsed by him in blank.
h) There must be indication payment of freight in the Bill of Lading.
i) All the documents must bear identical marks and show the value of good.

Pre-shipment Export Credit:

O/D (Hypothecation): Limit is sanctioned against Export LC/ Contract on hypothecation of raw
materials and finished goods. The exporter creates charged in favour of the Bank and the Bank
should periodically obtain Stock Report of hypothecated goods and conduct Inspection of exporter’s
warehouse.

Packing Credit: This credit is given to the exporter against the Confirmed Irrevocable LC from the
Exporter in order to cover the expenses of procurement, processing, packing and shipment and other
relevant expenses of the exportable merchandise. The is also called pre-shipment Credit. The Credit
is released on the basis of Hypothecated exportable merchandise and other charge documents. The
previous drawings under OD are normally adjusted from packing credit.

In turn the Packing Credit is finally liquidated by negotiation/ purchase of Export Bills.

Back to Back LC: The Back to Back LC is opened by the Exporter’s Bank in favour of the actual
Manufacturer or producer of the raw materials and spares to facilitate the production of finished goods
for ultimate export. The BBLC is opened on the strength of the Export LC. The Bank in due course will
receive Import Documents. Usually payment terms of BBLC IS 90/ 120 days deferred.

Advance against Red Clause LC: Here the LC opening Bank authorizes the Exporter’s nominating
Bank to make advance to the Exporter/ Beneficiary prior to shipment of exportable merchandize. (not
common in Bangladesh).

40
 Procedures of Back to Back
Import Letter of Credit
General

The branch may open back-to-back import LCs against export LCs received by export oriented
industrial units operating under the bonded warehouse system, subject to observance of
domestic value addition requirement (stated in terms of permissible limit of CFR value of
imported inputs as percentage of FOB export value of output) prescribed by the Ministry of
Commerce from time to time

Opening of Back to Back Import LCs

In addition to the general instructions in the foregoing sections, the following instructions should
be complied with while opening back to back import LCs.

• Only recognized export oriented industrial units operating under bonded warehouse system will
be allowed the back to back LC facility. The unit requesting this facility should possess valid
registration with the CCI&E and valid bonded warehouse license.

• The Master Export LC (against which opening of back to back LC is requested) should have
validity period adequate to cover the time needed for import of inputs, manufacturers of
merchandise, and shipment to the consignee.

• The back to back LC value shall not exceed the admissible percentage of net FOB value of the
respective master export LC (as per prescribed value addition requirement)
For computation of net FOB value of a master export LC, the freight charges, insurance cost and
commission, if payable by the exporter, shall be deducted from the LC value. If the freight
element is not shown separately, a certificate from the shipping company or the shipping agent
should be asked for.

The back to back import LCs shall be opened for upto 180 days usance (DA) basis except in
case of those opened against Export Development Fund (EDF) administered by the Department
of Banking Operation and Development of Bangladesh Bank. In the latter case the back to back
L/C wiII be opened on sight basis. Interest for the usance period shall not exceed Libor, or the
equivalent interest rate in the currency of entitlement.

All amendments to the master export LC should be recorded carefully to rule out chances of
incu,, rring excess obligation under the back to back import LC.

Back to back import LC shall contain condition of pre-shipment inspection by an internationally

reported inspection firm regarding quality and quantity of the merchandise.

Inland back to back LCs denominated in foreign currency may be opened in favour of local
manufacturer-cum-suppliers of inputs against master export LCs received by export oriented
manufacturing units operating under the bonded warehouse system up to value limits applicable
as per prescribed value addition requirement/utilization permit.

Back to back LC may in turn be opened for import necessary inputs, against inland back to back
LC in favour of local manufacturer-cum-supplier operating under the bonded warehouse system
in accordance with the instructions, mutatis mutandis, as explained above.
Inland back to back LCs denominated in foreign currency may be opened in favour of local
manufacturer-cum-suppliers of inputs against master export LCs received by export oriented
manufacturing units operating under the bonded warehouse system up to value limits applicable
as per prescribed value addition requirement/utilization permit.

41
Back to back LC may in turn be opened for import necessary inputs, against inland back to back
LC in favour of local manufacturer-cum-supplier operating under the bonded warehouse system
in accordance with the instructions, mutatis mutandis, as explained above.

Payment against Back to Back LCs,

 Payment in settlement of usance bill against back-to-back import LCs shall be made at
maturity, out of proceeds of the relative export repatriated in foreign exchange.
 The required foreign exchange will be set aside, out of the export proceeds, in a separate
foreign currency account in the subsidiary ledger of the branch.
 Before of making the remittance, the branch should see that the exchange control copy of Bill
of Entry for bond as evidence of actuai arrival of 'he relative imports has been submitted.
Usance bill against back to back import LC should be settled at maturity even if for some
reason export has not taken place, or where the export proceeds have not been realized, or
where the realized export proceeds net of value addition requirement do not cover the back
to back import payment.
 In such cases port facto approval of Bangladesh Bank will have to be applied for, explaining
fully the circumstances of non-realization/short realization of export proceeds with relevant
supporting documents.
 Cases of failure of export against the relative master LCs should also be reported to the
National Board of Revenue (NBR) and the concerned Commissioner of Customs so that they
may monitor closely the level of stock of the relative goods in the bonded warehouse.
 A copy of the letter to NBR reporting the export failure should be submitted to Bangladesh
Bank alongwith the application for post facto approval to remittanc for back to-back import
payment.
 Also, all applications for post facto approval of such remittance in the event of export failure
and short realization/non-realization of export proceeds should be accompanied by the
exchange control copy of the relative Bill of Entry, evidencing actual receipt of the back to
back imports.
 The branch maintain effective watch on the stock of inputs procured under the back to back
arrangement and of the finished products made therewith.
 Any indication of illegal disposal of stocks from the bond coming to the knowledge of the
branch should immediately be reported to the concerned commissioner of Customs and
NBR.

Operation of back to back letter of credit:

On receipt of Authenticated Export L/C, client submits the same to the bank alongwith the
following papers and documents with a request to open a Back to Back Letter of Credit on the
basis of export L/C:

01. Export L/C must be marked under Lien.

02. Back to Back LC Opening Form duly Filled and Signed. 03. Valid IRC and ERC.
04. Proforma Invoice/ Indent.
05. Marine Insurance Cover Note with Form: GA, Money Receipt and Payment advice.
06. Insurance Risk Coverage.
07. IMP Form.
08. Letter of Credit Authorization Form (LCAF)
09. Valid Bonded warehouse License.
10. VAT Registration.
11. Back to Back L/C may be opened upto 180 days usance basis against Export LC.
12. Back to Back L/C may be opened on sight basis under EDF against sight export L/C.
13. Interest for the usance period are allowed but should not exceed Libor.

42
14. Credit Report on the supplier is a must for opening of L/C if the Indent value is Tk, 5.00 lac and
above or Proforma Invoice value is Tk. 2.00 lac and above.

15 If the bank accept the export LC for lien, it will ensure the following while processing
BBLCs.

a) Export LC details will be recorded in to Export Performance Register. Name of the buyer,
Bank, LC Number, Date, Value, Shipment Date, Expiry Date etc are recorded.
b) The Raw materials to be procured through BBLC has to be inconformity with the products to
be supplied under the export LC.
c) Total value of the BBLC opened under 1 Particular export LC should not exceeds allowable
limit prescribed by the Ministry of Commerce from time to time.
d) Shipment/Delivery time of raw materials must be reasonably ahead of the shipment date of
ultimate goods.
e) Payment terms of BBC has to be inconformity with that of export L/C. That is payment terms
in BBLC has to be set in a manner that it should not become due before of export proceeds.

16 What are the Major information incorporated in LC.

a) L/C Number and Date

b) Name and address of the LC Opening and Advising Bank
c) Name and address of the LC Applicant and Beneficiary
d) Details description of goods to be imported (including quantity, Country of
Origin)
e) LC Value including sales terms (Such as CFR/FOB/CPT etc)
f) Shipment and expiry date (including period of presentation of documents to the bank)
g) Mode of Shipment, Port of Shipment, Place of Expiry, Partial Shipment, Transshipment.
h) H S Code Number
i) Payment type (Sight/Deferred/Acceptance)
j) Mode of Payment : Reimbursement Authority / Payment Authority.
k) Detail list of the documents that will be required to submit to the bank for
claiming payment.
l) Indentor name, address, Indentor Registration Number, Bangladesh Bank
Permission Number/LCAF/IRC/Marine Insurance Cover Note Number.
m) Any other terms and Condition / documents as per requirement of the buyer country regulation.
n) Instruction regarding Freight Payment (Pre-Paid/Collect), Name of
Consignee, Notifying Party has to be clearly defined in the LC.
o) Charges of advising bank, corresponding bank.
p) Reference of relevant UCPDC version has to be in the LC.
q) Terms, Conditions and documents as per regulatory requirements.
r) Terms, Conditions and documents as per applicant requirements.

17. Usance period are counted:

a) From the Date of Bill of Lading/AWB/Delivery Challan/Consignment Note/Railway Receipt.

b) From the date of Negotiation/Presentation of Documents
c) From the date of Acceptance of Draft.

43
 Generalized System of Preference
and post 2005 perspective

Generalized System of Preference

• GSP, is a formal system of exemption from the more general rules of the WTO, formerly the GATT.
• Under this system the Developed countries extend preferential treatment to a range of specified
products imported from developed countries.
• The preferential treatment is provided either by reduced or zero rates of import tariff duties on the
goods imported
• GSP giving countries are called Donor countries and GSP receiving countries are called Beneficiary
countries.

Benefits from GSP

• Bangladesh may quote more competitive prices
• Can stimulate to buy more as the relative price is lower than others.
• Increases the export earnings.
• Scope for diversification of products and Market base.

GSP Offering Countries

• EC Countries: Belgium, Denmark, Germany, France, Ireland, Italy, Luxembourg,
Netherlands, United Kingdom, Greece, Portugal, Spain, Finland
• Japan, USA, Australia, New Zealand, Norway, Sweden, Switzerland, Bulgaria, Hungary,
Poland, Russia, Austria, Canada etc.

How to export under GSP

• Find whether the Product is eligible for GSP.
• Identify the classification of products within the tariff schedule of the importing country.
• Calculate the preferential margin , by taking the difference between normal and GSP rate of duty.
• If the margin is higher the exporter may loose some portion of the GSP.
• Quotas: Tariff quotas and ceilings have been fixed under some of the GSP schemes for specified
products
• Here only a limited amount of the listed products can be imported under GSP,
• Import in excess of the set quota levels are charged at the normal rate of duty.
• So two factors to look into: Quantitative limitation and expiry of relevant time period.

Rules of Origin

• GSP giving countries specifies the rules of origin criteria.

• Type of Origin:
• Wholly produced in exporting country.
• Manufactured wholly or partly from imported materials.
• Wholly produced goods in exporting country are eligible for GSP.
• Goods produced with imported materials have to satisfy specific Rules of Origin Criteria, which may
vary from scheme to scheme.
• GSP facilities is contingent upon strict rules of origin criteria.
• Rules of Origin Criteria is hindrance to avail GSP facilities by Bangladesh.
• Until 1999 our GSP utilization rate was between 1/5th to 1/3rd
• Due to change of rules of origin criteria in Knit Fabric in 1999, allowing us of imported yarn in Knitwear
production enabled us to qualify for GSP.
• In past we could hardly qualify for the rules of origin in Woven RMG.

44
• But now in woven Garments Bangladesh is receiving GSP because of relaxation of origin rules.
• Benefits of SAARC cumulation: For Apparel we require 50% value addition to receive GSP.
• If Bangladesh imports fabric from Pakistan and India to use in RMG and value addition is less than
50%we will qualify only for 15% waiver of tax liability.

Post 2005 Perspective

• Under Every thing but Arms (EBA) initiative in the European Union (EU), it has liberalized nine
hundred nineteen new tariff line (at 8 digit HS code level)at zero duty access; some of them is effective
from 2006.
• Most of the Export in EU enters under duty free quota free trade regime
• We may gain from EBA initiative in future by considerable amount if Bangladesh can diversify its
export.

Action needed for Post 2005 Perspective

• Diversification of Products with more focus on Agro-based Export.

• More emphasize on Knitwear.
• Development of Backward linkage Industries
• Government Private sector Partnership
• Business advocacy and maintaining relations with present buyers.
• Develop sourcing strategies
• Develop e-applications
• Enhance relationship with EU and western Countries

The U.S. Generalized System of Preferences

• The U.S. Generalized System of Preferences (GSP) is a program designed to promote economic
growth in the developing world by providing preferential duty-free entry for about 4,800 products from
131 designated beneficiary countries and territories.
• GSP was instituted on January 1, 1976, by the Trade Act of 1974. Congress has authorized GSP
through December 31, 2009.
• The GSP Guidebook and other information sources are available regarding the use of GSP duty-free
treatment, and the fostering of economic growth through the expansion of trade between the United
States and GSP beneficiaries.

45
 The World Bank Group & Other Int. Organizations
The World Bank Group (WBG) is a family of five international organizations responsible for
providing finance and advice to countries for the purposes of economic development and
eliminating poverty. The Bank came into formal existence on 27 December 1945 following
international ratification of the Bretton Woods agreements, which emerged from the United
Nations Monetary and Financial Conference (1 July - 22 July 1944). Commencing operations on
25 June 1946, it approved its first loan on 9 May 1947 ($250m to France for postwar
reconstruction, in real terms the largest loan issued by the Bank to date). Its five agencies are:

 International Bank for Reconstruction and Development (IBRD)

 International Development Association (IDA)
 International Finance Corporation (IFC)
 Multilateral Investment Guarantee Agency (MIGA)
 International Centre for Settlement of Investment Disputes (ICSID)

The term "World Bank" generally refers to the IBRD and IDA[1], whereas the World Bank Group is
used to refer to the institutions collectively.
The World Bank's (i.e. the IBRD and IDA's) activities are focused on developing countries, in
fields such as human development (e.g. education, health), agriculture and rural development
(e.g. irrigation, rural services), environmental protection (e.g. pollution reduction, establishing and
enforcing regulations), infrastructure (e.g. roads, urban regeneration, electricity), and governance
(e.g. anti-corruption, legal institutions development). The IBRD and IDA provide loans at
preferential rates to member countries, as well as grants to the poorest countries. Loans or
grants for specific projects are often linked to wider policy changes in the sector or the economy.
For example, a loan to improve coastal environmental management may be linked to
development of new environmental institutions at national and local levels and to implementation
of new regulations to limit pollution.
The activities of the IFC and MIGA include investment in the private sector and providing
insurance respectively.
The World Bank Institute is the capacity development branch of the World Bank, providing
learning and other capacity-building programs to member countries.

Organizational structure
Together with four affiliated agencies created between 1956 and 1988, the IBRD is part of the
World Bank Group. The Group's headquarters are in Washington, D.C. It is an international
organization owned by member governments; although it makes profits, these profits are used to
support continued efforts in poverty reduction.
Technically the World Bank is part of the United Nations system, but its governance structure is
different: each institution in the World Bank Group is owned by its member governments, which
subscribe to its basic share capital, with votes proportional to shareholding. Membership gives
certain voting rights that are the same for all countries but there are also additional votes which
depend on financial contributions to the organization. The President of the World Bank is
nominated by the President of the United States and elected by the Bank's Board of Governors.
As of November 1, 2006 the United States held 16.4% of total votes, Japan 7.9%, Germany
4.5%, and France and the United Kingdom each held 4.3%. As major decisions require an 85%
super-majority, the US can block any such major change.

World Bank Group agencies

The World Bank Group consists of

46
 the International Bank for Reconstruction and Development (IBRD), established in 1945,
which provides debt financing on the basis of sovereign guarantees;
 the International Finance Corporation (IFC), established in 1956, which provides various
forms of financing without sovereign guarantees, primarily to the private sector;
 the International Development Association (IDA), established in 1960, which provides
concessional financing (interest-free loans or grants), usually with sovereign guarantees;
 the Multilateral Investment Guarantee Agency (MIGA), established in 1988, which provides
insurance against certain types of risk, including political risk, primarily to the private sector;
 and the International Centre for Settlement of Investment Disputes (ICSID), established in
1966, which works with governments to reduce investment risk.

The IBRD has 185 member governments, and the other institutions have between 140 and 176
members. The institutions of the World Bank Group are all run by a Board of Governors meeting
once a year.[2] Each member country appoints a governor, generally its Minister of Finance. On a
daily basis the World Bank Group is run by a Board of 24 Executive Directors to whom the
governors have delegated certain powers. Each Director represents either one country (for the
largest countries), or a group of countries. Executive Directors are appointed by their respective
governments or the constituencies.[3] The agencies of the World Bank are each governed by their
Articles of Agreement that serve as the legal and institutional foundation for all of their work [4].
The Bank also serves as one of several Implementing Agencies for the United Nations Global
Environment Facility (GEF).

The International Monetary Fund (IMF)

The International Monetary Fund (IMF) is an international organization that oversees the global
financial system by observing exchange rates and balance of payments, as well as offering
financial and technical assistance. Its headquarters are located in Washington, D.C., USA.

Organization and purpose

IMF describes itself as "an organization of 185 countries, Montenegro being the 185th as of
January 18th, 2007, working to foster global monetary cooperation, secure financial stability,
facilitate international trade, promote high employment and sustainable economic growth, and
reduce poverty". With the exception of North Korea, Cuba, Andorra, Monaco, Liechtenstein,
Tuvalu, Nauru, and more recently Venezuela, all UN member states participate directly in the
IMF. Some are represented by other member states Vatican City, the Republic of China
(Taiwan), the Palestinian Authority and the Sahrawi Arab Democratic Republic (Western Sahara)
are the non-UN member entities not participating in the IMF.

History
In the Great Depression of the 1930s, economic activity in the major industrial nations slumped.
Ricardian comparative advantage states that all countries gain from trade without restrictions. It
is noteworthy to mention that, although the "size of the pie" is enhanced according to this theory
of free trade, improving all industries, when distributional concerns are taken into account, there
are always industries that lose out even as others benefit in any given country. World trade
declined sharply, as did employment and living standards in many countries.

As World War II came to a close, the leading allied countries considered various plans to restore
order to international monetary relations, and at the Bretton Woods conference the IMF emerged.
The founding members drafted a charter (or Articles of Agreement) of an international institution
to oversee the international monetary system and to promote both the elimination of exchange
restrictions relating to trade in goods and services, and the stability of exchange rates.
47
The IMF came into existence in December 27, 1945, when the first 29 countries signed its
Articles of Agreement. The statutory purposes of the IMF today are the same as when they were
formulated in 1944

Today

From the end of World War II until the late-1970s, the capitalist world experienced
unprecedented growth in real incomes. (Since then, the integration of China and Eastern and
Central Europe into the capitalist system has added substantially to the growth of the system.)
Within the capitalist system, the benefits of growth have not flowed equally to all (either within or
among nations) but overall there has been an increase in prosperity that contrasts starkly with
the conditions within capitalist countries during the interwar period. The lack of a recurring global
depression is likely due to improvements in the conduct of international economic policies that
have encouraged the growth of international trade and helped smooth the economic cycle of
boom and bust.
In the decades since World War II, apart from rising prosperity, the world economy and monetary
system have undergone other major changes that have increased the importance and relevance
of the purposes served by the IMF, but that has also required the IMF to adapt and reform. Rapid
advances in technology and communications have contributed to the increasing international
integration of markets and to closer linkages among national economies. As a result, financial
crises, when they erupt, now tend to spread more rapidly among countries.
The IMF's influence in the global economy steadily increased as it accumulated more members.
The number of IMF member countries has more than quadrupled from the 44 states involved in
its establishment, reflecting in particular the attainment of political independence by many
developing countries and more recently the collapse of the Soviet bloc. The expansion of the
IMF's membership, together with the changes in the world economy, have required the IMF to
adapt in a variety of ways to continue serving its purposes effectively.
During April 2007 Ecuador announced its withdrawal from the IMF, followed by Venezuela which
made this step public on April 30, 2007.

Membership qualifications
Any country may apply for membership to the IMF. The application will be considered first by the
IMF's Executive Board. After its consideration, the Executive Board will submit a report to the
Board of Governors of the IMF with recommendations in the form of a "Membership Resolution."
These recommendations cover the amount of quota in the IMF, the form of payment of the
subscription, and other customary terms and conditions of membership. After the Board of
Governors has adopted the "Membership Resolution," the applicant state needs to take the legal
steps required under its own law to enable it to sign the IMF's Articles of Agreement and to fulfill
the obligations of IMF membership.
A member's quota in the IMF determines the amount of its subscription, its voting weight, its
access to IMF financing, and its allocation of SDRs. A member state cannot unilaterally increase
its quota - increases must be approved of by the Executive Board. For example, in 2001, China
was prevented from increasing its quota as high as it wished, ensuring it remained at the level of
the smallest G7 economy (Canada).[1] Since then, its contribution has been allowed to be
increased slightly further.
As of 2006, participating nations were discussing changes to the voting formula, to increase
equity.

Special Drawing Rights (SDRs)

Special Drawing Rights (SDRs) is a potential claim on the freely usable currencies of
International Monetary Fund members. SDRs have the ISO 4217 currency code XDR.

48
Definition

SDRs are defined in terms of a basket of major currencies used in international trade and
finance. At present, the currencies in the basket are the euro, the pound sterling, the Japanese
yen and the United States dollar. Before the introduction of the euro in 1999, the Deutsche mark
and the French franc were included in the basket. The amounts of each currency making up one
SDR are chosen in accordance with the relative importance of the currency in international trade
and finance. The determination of the currencies in the SDR basket and their amounts is made
by the IMF Executive Board every five years. The weights of the currencies in the basket in the
past were and currently are:

 1981–1985: USD 42%, DEM 19%, JPY 13%, GBP 13%, FRF 13%
 1986–1990: USD 42%, DEM 19%, JPY 15%, GBP 12%, FRF 12%
 1991–1995: USD 40%, DEM 21%, JPY 17%, GBP 11%, FRF 11%
 1996–2000: USD 39%, DEM 21%, JPY 18%, GBP 11%, FRF 11%
 2001–2005: USD 45%, EUR 29%, JPY 15%, GBP 11%
 2006–2010: USD 44%, EUR 34%, JPY 11%, GBP 11%

Purpose
SDRs are used as a unit of account by the IMF and several other international organizations. A
few countries peg their currencies against SDRs, and it is also used to denominate some private
international financial instruments. For example, the Warsaw convention, which regulates liability
for international carriage of persons, luggage or goods by air uses SDRs to value the maximum
liability of the carrier.
SDRs basically were created to replace gold in large international transactions. Being that under
a strict (international) gold standard, the quantity of gold worldwide is relatively fixed, and the
economies of all participating IMF members as an aggregate is growing, a need arose to
increase the supply of the basic unit or standard proprotionately. Thus SDRs, or "paper gold", are
credits that nations with balance of trade surpluses can 'draw' upon nations with balance of trade
deficits.
So-called "paper gold" is little more than an accounting transaction within a ledger of accounts,
which eliminates the logistical and security problems of shipping gold back and forth across
borders to settle national accounts.
Some economists have argued that usage by central banks of SDRs as foreign exchange
reserve is the prelude to the creation of a single world currency.

Other Uses

SDRs are used to limit carrier liability on international flights. See Montreal Convention, Warsaw
Convention. SDRs are also used to transfer Roaming charge files between international mobile
telecoms operators.

Value of SDR
The value of one SDR in terms of United States dollars is determined daily by the IMF, based on
the exchange rates of the currencies making up the basket, as quoted at noon at the London
market. (If the London market is closed, New York market rates are used; if both markets are
closed, European Central Bank reference rates are used.)
The latest value of the SDR in terms of the US dollar is available from the IMF, updated daily.

49
 OTHER ORGANIZATIONS

The Islamic Development Bank (IDB)

The Islamic Development Bank (IDB) is a Multilateral Development Bank (MDB), established to
foster the economic development and social progress of its member countries and Muslim
communities in non-member countries in accordance with the principles of Shari'ah (Islamic
Law).

Establishment

The Islamic Development Bank is an international financial institution established in pursuance of

the Declaration of Intent issued by the Conference of Finance Ministers of Muslim Countries held
in Jeddah in Dhul Q'adah 1393H, corresponding to December 1973. The Inaugural Meeting of
the Board of Governors took place in Rajab 1395H, corresponding to July 1975, and the Bank
was formally opened on 15 Shawwal 1395H corresponding to 20 October 1975.

Purpose

The purpose of the Bank is to foster the economic development and social progress of member
countries and Muslim communities individually as well as jointly in accordance with the principles
of Shari'ah i.e., Islamic Law.

Functions

The functions of the Bank are to participate in equity capital and grant loans for productive
projects and enterprises besides providing financial assistance to member countries in other
forms for economic and social development. The Bank is also required to establish and operate
special funds for specific purposes including a fund for assistance to Muslim communities in non-
member countries, in addition to setting up trust funds. The Bank is authorized to accept deposits
and to mobilize financial resources through Shari'ah compatible modes. It is also charged with
the responsibility of assisting in the promotion of foreign trade especially in capital goods, among
member countries; providing technical assistance to member countries; and extending training
facilities for personnel engaged in development activities in Muslim countries to conform to the
Shari'ah.

Membership

The present membership of the Bank consists of 56 countries. The basic condition for
membership is that the prospective member country should be a member of the Organization of
the Islamic Conference, pay its contribution to the capital of the Bank and be willing to accept
such terms and conditions as may be decided upon by the IDB Board of Governors.

Capital

Up to the end of 1412H (June 1992), the authorized capital of the Bank was two billion Islamic
Dinars (ID) {A unit of account of IDB which is equivalent to one Special Drawing Right (SDR) of
the International Monetary Fund (IMF)}. Since Muharram 1413H (July 1992), in accordance with
a Resolution of the Board of Governors, it became six billion Islamic Dinars, divided into 600,000
shares having a par value of 10,000 Islamic Dinars (ID) each. Its subscribed capital also became
four billion Islamic Dinars payable according to specific schedules and in freely convertible
currency acceptable to the Bank. In 1422H, the board of governors at its annual meeting held in
Algeria decided to increase the authorized capital of the Bank form ID 6 billion to ID 15 billion and
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the subscribed capital from ID 4.1 billion to ID 8.1 billion. According to the Directive of the Third
Extra-Ordinary Session of the OIC Islamic Summit Conference held in Makkah Al-Mukarramah
on 7- 8 December 2005, calling for a substantial increase in the capital stock of IDB in order to
enable it to strengthen its role in providing financial support and technical assistance to its
member countries, the Board of Governors of the IDB in its 31st Annual Meeting in Kuwait
decided to increase the authorized capital stock of IDB by 15 billion Islamic Dinars to become 30
billion Islamic Dinars and the subscribed capital by 6.9 billion Islamic Dinars to become 15 billion
Islamic Dinars.

Head Office and Regional Offices

The Bank's principal office is in Jeddah in the Kingdom of Saudi Arabia. Two regional offices
were opened in 1994; one in Rabat, Morocco, and the other in Kuala Lumpur, Malaysia. In July
1996, the board of Executive Directors also approved the establishment of an IDB
Representative Office at Almaty, Kazakhstan, to serve as a link between IDB member countries
and Central Asian Republics. The office became operational in July 1997 and is now a full-
fledged Regional Office. The Bank also has field representatives in eleven member countries.
These are: Indonesia, Iran, Kazakhstan, Libya, Pakistan, Senegal, Sudan, Gambia, Guinea
Bissau, Mauritania and Algeria.

Financial Year and Language

The Bank's financial year is the lunar Hijra Year. The official language of the Bank is Arabic, but
English and French are additionally used as working languages.

The Asian Development Bank (ADB)

The work of the Asian Development Bank (ADB) is aimed at improving the welfare of the people
in Asia and the Pacific, particularly the 1.9 billion who live on less than $2 a day. Despite many
success stories, Asia and the Pacific remains home to two thirds of the world's poor.
ADB is a multilateral development financial institution owned by 67 members, 48 from the region
and 19 from other parts of the globe.
ADB's vision is a region free of poverty. Its mission is to help its developing member countries
reduce poverty and improve the quality of life of their citizens.
ADB's main instruments for providing help to its developing member countries are

 policy dialogue
 loans
 technical assistance
 grants
 guarantees
 equity investments.

ADB's annual lending volume is typically about $6 billion, with technical assistance usually
totaling about $180 million a year. Its headquarters is in Manila. We have 26 other offices around
the world:

 19 resident missions in Asia

 3 sub-regional offices in the Pacific

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 representative offices in Frankfurt for Europe, Tokyo for Japan, and Washington, DC for
North America
 a special liaison office in Timor-Leste

We have more than 2,000 employees from over 50 countries. Learn more about how ADB is
managed: our Board of Governors, Board of Directors and Senior Management.

Headquarters: 6 ADB Avenue, Mandaluyong City 1550, Philippines

The World Trade Organization (WTO)

The World Trade Organization (WTO) (OMC - French: Organisation Mondiale du Commerce,
Spanish: Organización Mundial del Comercio) is an international organization designed to
supervise and liberalize international trade. The WTO came into being on January 1, 1995, and
is the successor to the General Agreement on Tariffs and Trade (GATT), which was created in
1947, and continued to operate for almost five decades as a de facto international organization.

The World Trade Organization deals with the rules of trade between nations at a global or near-
global level; it is responsible for negotiating and implementing new trade agreements, and is in
charge of policing member countries' adherence to all the WTO agreements, signed by the bulk
of the world's trading nations and ratified in their parliaments.[3] Most of the WTO's current work
comes from the 1986-94 negotiations called the Uruguay Round, and earlier negotiations under
the GATT. The organization is currently the host to new negotiations, under the Doha
Development Agenda (DDA) launched in 2001.[4]

The WTO is governed by a Ministerial Conference, which meets every two years; a General
Council, which implements the conference's policy decisions and is responsible for day-to-day
administration; and a director-general, who is appointed by the Ministerial Conference. The
WTO's headquarters are in Geneva, Switzerland

The General Agreement on Tariffs and Trade (GATT)

The General Agreement on Tariffs and Trade (typically abbreviated GATT) was originally
created by the Bretton Woods Conference as part of a larger plan for economic recovery after
World War II. The GATT's main purpose was to reduce barriers to international trade. This was
achieved through the reduction of tariff barriers, quantitative restrictions and subsidies on trade
through a series of different agreements. The GATT was an agreement, not an organization.
Originally, the GATT was supposed to become a full international organization like the World
Bank or IMF called the International Trade Organization. However, the agreement was not
ratified, so the GATT remained simply an agreement. The functions of the GATT have been
replaced by the World Trade Organization which was established through the final round of
negotiations in the early 1990s.

The history of the GATT can be divided into three phases: the first, from 1947 until the Torquay
round, largely concerned which commodities would be covered by the agreement and freezing
existing tariff levels. A second phase, encompassing three rounds, from 1959 to 1979, focused
on reducing tariffs. The third phase, consisting only of the Uruguay Round from 1986 to 1994,
extended the agreement fully to new areas such as intellectual property, services, capital, and
agriculture. Out of this round the WTO was born.

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 Agreement on SAARC Preferential Trading Arrangement
(SAPTA)
The Government of the People's Republic of Bangladesh, the Kingdom of Bhutan, the Republic of
India, the Republic of Maldives, the Kingdom of Nepal, the Islamic Republic of Pakistan and the
Democratic Socialist Republic of Sri Lanka hereinafter referred to as "Contracting States", Motivated
by the commitment to promote regional cooperation for the benefit of their peoples, in a spirit of
mutual accommodation, with full respect for the principles of sovereign equality, independence and
territorial integrity of all States;
Aware that the expansion of trade could act as a powerful stimulus to the development of their
national economies, by expanding investment and production, thus providing greater opportunities of
employment and help securing higher living standards for their population; Convinced of the need to
establish and promote regional preferential trading arrangement for strengthening intraregional
economic cooperation and the development of national economies; Bearing in mind the urgent need
to promote the intraregional trade which presently constitutes a negligible share in the total volume of
the South Asian trade;
Recalling the direction given at the Fourth SAARC Summit meeting held in Islamabad in December
1988 that specific areas be identified where economic cooperation might be feasible immediately;
Guided by the declared commitment of the Heads of State or Government of the Member Countries
at the Sixth SAARC Summit held in Colombo in December 1991 to the liberalization of trade in the
region through a step by step approach in such a manner that countries in the region share the
benefits of trade expansion equitably;
Cognizant of the mandate given by the Sixth SAARC Summit in Colombo to formulate and seek
agreement on an institutional framework under which specific measures for trade liberalization among
SAARC Member States could be furthered and to examine the Sri Lankan proposal to establish the
SAARC Preferential Trading Arrangement (SAPTA) by 1997; Recognizing that a preferential trading
arrangement is the first step towards higher levels of trade and economic cooperation in the region.

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