4.4.6 Retirement of the Documents:
The process of collecting documents from bank by the importer is called retirement of the documents. The importer gives necessary instructions to the bank for retirement of the import bills or for the disposal of the shipping documents to clear the imported goods from the customs authority. The importer may instruct the bank to retire the documents by debiting his current account with the bank or by creating Loan Against Trust Receipt (LTR). Following steps are taken while retiring the documents –
Calculation of interest.
Calculation of other charges.
Passing vouchers.
Entry in the register.
Endorsement in the Bill of Lading And other transport documents and in the Bill of Exchange.
Accounting Treatment:
Suppose the banker has the following information:
Document Value :Tk. 100000.00
Margin : Tk.10000.00
Date of negotiating 03.07.01
Date of retirement 20.08.01
Rate of interest : 16%
Interest paid for (20.08.01 to 03.07.01) = 48 days.
(100000.00 – 10000.00)* 16% * 48
Interest =
360 = Tk. 1920.00
Then the following vouchers will be made:
a) For interest:
PAD Account Dr. 1920.00
Interest on PAD Account Cr. 1920.00
b) While receiving the payment:
Party Account Dr. 91920.00
Margin Account Dr. 10000.00
PAD Account Cr. 101920.00
But when the party takes the endorsement of the non-negotiable copy, then “Other Fees & Commission “takes place instead of “Interest on PAD Account”. Generally, DBBL charges .11% on the document value for collecting the document at that time.
4.4.7 Non-Negotiable Copy Document:
Party can clear goods only after receiving the document by the bank. Exporters send all the relevant documents to the bank after the shipment. They also send the duplicate copy of the documents to the importers.
But sometimes bank does not receive the document in due time. In that case, the importers submit the duplicate copy to the bank and pay the due bills. Bank endorses the duplicate documents and through these documents importers clear the goods from the customs. These duplicate copies are called the Non-negotiable copy.
4.4.8 Forward Booking Contract:
It is a contract made by the opener of the L/C with a bank that the foreign currency value would not fluctuate for a certain period even though the value of the currency changed from the date of issue of L/C.
For example, Singer (Bd.) Ltd. opened an L/C for purchasing the parts and components of sewing machine. At that time, singer made a contract with DBBL that it would give Singer dollar @ Tk. 49.61 for a period of one month. If the dollar value rose to Tk. 11.27 in that month, DBBL would be bound to give Singer @ Tk. 49.61 for that month. This contract is called Forward Booking Contract.
4.4.9 Loan against Trust Receipts (LTR):
Advance against a Trust Receipt obtained from the Customers are allowed to only first class tested parties when the documents covering an import shipment or other goods pledged to the Bank as security are given without payment. However, for such advances prior permission/sanction from Head Office must be obtained.
The customer holds the goods or their sale-proceeds in trust for the Bank, till such time, the loan allowed against the Trust Receipts is fully paid off.
The Trust Receipt is a document that creates the Banker’s lien on the goods and practically amounts to hypothecation of the proceeds of sale in discharge of the lien.
4.5 Export Section:
Creation of wealth in any country depends on the expansion of production and increasing participation in international trade. By increasing production in the export sector we can improve the employment level of such a highly populated country like Bangladesh. Bangladesh exports a large quantity of goods and services to foreign households. Readymade textile garments (both knitted and woven), Jute, Jute-made products, frozen shrimps, tea are the main goods that Bangladeshi exporters export to foreign countries. Garments sector is the largest sector that exports the lion share of the country's export. Bangladesh exports most of its readymade garments products to U.S.A and European Community (EC) countries.
4.5.1 Export Policy:
Export policies formulated by the Ministry of Commerce, GOB provide the overall guideline and incentives for promotion of exports in Bangladesh. Export policies also set out commodity-wise annual target. It has been decided to formulate these policies to cover a five-year period to make them contemporaneous with the five-year plans and to provide the policy regime.
4.5.2 Export Incentives:
A. Financial Incentives:
Restructuring of Export Credit Guarantee Scheme;
Convertibility of Taka in current account;
Exporters can deposit 40% of FOB value of their export earnings in own accounts in dollar and pound sterling;
Export Development Fund;
Expansion of export credit period from 180 days to 270 days;
10% tax rebate on export earnings;
Duty draw back;
Bonded warehouse facilities to 100% export oriented firms;
Duty free import of capital equipment for 100% export oriented firms;
B. General Incentives:
National Export Trophy to successful exporters;
Training course on external trade;
Arrangement of international trade fairs, commodity-based exhibitions in the country and participation in foreign trade fairs;
4.5.3 Export Procedures:
The import and export trade in our country are regulated by the Import and Export (Control) Act, 1910. Under the export policy of Bangladesh the exporter has to get valid Export registration Certificate (ERC) from Chief Controller of Import & Export (CCI&E). The ERC is required to renew every year. The ERC number is to incorporate on EXP forms and other papers connected with exports.
Registration of Exporters:
The prescribed form needs the following documents:
Nationality and Assets Certificate;
Memorandum and Article of Association and Certificate of Incorporation in case of Limited Company;
Bank Certificate;
Income Tax Certificate;
Trade License etc.
Securing the Order:
After getting ERC Certificate the exporter may proceed to secure the export order. He can do this by contacting the buyers directly or through agent.
In this purpose the exporter may get help from:
License Officer;
Buyer’s Local Agent;
Export Promoting Organization;
Bangladesh Mission Abroad;
Chamber of Commerce (local & foreign)
Trade Fair etc.
Signing the Contract:
After communicating buyer, exporter has to get contracted (writing or oral) for exporting exportable items from Bangladesh detailing commodity, quantity, price, shipment, insurance and marks, inspection and arbitration etc.
Receiving Letter of Credit:
After getting contract for sale, exporter should ask the buyer for Letter of Credit (L/C) clearly stating terms and conditions of export and payment.
The following are the main points to be looked into for receiving/ collecting export proceeds by means of Documentary Credit:
(1) The terms of the L/C are in conformity with those of the contract;
(2) The L/C is an irrevocable one, preferably confirmed by the advising bank;
(3) The L/C allows sufficient time for shipment and negotiation.
(Here the regulatory framework is UCPDC-100, ICC publication)
Terms and conditions should be stated in the contract clearly in case of other mode of payment:
• Cash in advance;
• Open account;
• Collection basis (Documentary/ Clean)
(Here the regulatory framework is URC-121, ICC publication)
Procuring the materials:
After making the deal and on having the L/C opened in his favor, the next step for the exporter is to set about the task of procuring or manufacturing the contracted merchandise.
Shipment of goods:
Then the exporter should take the preparation for export arrangement for delivery of goods as per L/C and incoterms, prepare and submit shipping documents for Payment/ Acceptance/ Negotiation in due time.
Documents for shipment:
EXP form,
ERC (valid),
L/C copy,
Customer Duty Certificate,
Shipping Instruction,
Transport Documents,
Insurance Documents,
Invoice,
Other Documents,
Bills of Exchange (if required)
Certificate of Origin,
Inspection Certificate,
Quality Control Certificate,
G.S.P. Certificate,
Phyto-sanitary Certificate.
Final Step:
Submission of the documents to the Bank for negotiation, then bank will pay the party money for finance.
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