View with images and charts “Export Procedures & Risk Involved in Repatriation”:The Trust Bank Ltd (Agrabad Branch, Chittagong). The Trust Bank Limited …………………………….. Servers with Trust Address
Registered Office: Peoples Insurance Bhaban (2nd, 16th & 17th Floor) 36, Dilkusha C/A, Dhaka-1000.
Head Office: Peoples Insurance Bhaban (2nd, 16th & 17th Floor) 36, Dilkusha C/A, Dhaka-1000.
THE TRUST BANK LIMITED has introduced itself with strong-based bank backed by the best & strongest institution of Bangladesh i.e. The Bangladesh Army. It is an enterprise of Bangladesh Army Welfare Trust with 100% computerization with focus to on-line system. The bank has started its function with authorized capital of Tk.1, 000 million in the year 1999, now it is 2,000 million. The composition of the Board of the bank consists of Exofficio from in service Senior Army Personnel with the Chief of Army Staff as its Chairman. The Army Welfare Trust is the only shareholder. Recently the bank is going to issue IPO for the first time. At present it has 18 branches across the country & plan to open more across Bangladesh particularly in the major cities of Dhaka, Chittagong, Khulna, Sylhet. The branch at BSB Bhaban, 106, Agrabad Commercial Area, Chittagong has started its operation since 27.07.2002.The Trust Bank Limited, Agrabad Branch is providing financial products and services like any other commercial public, private and foreign banks. Their wide range of service includes Foreign Exchange Products, Deposit Products, Loans / Advance Products. It has many agents & correspondents across the globe to facilitate its international trade & business. Special Feature of TBL The special features of THE TRUST BANK LIMITED are as follows:
The bank has a very strong base backed by the best & strongest institution of Bangladesh i.e. The Bangladesh Army. It is an enterprise of Bangladesh Army Welfare Trust with 100% computerization with focus to on-line system. The Bank is assuring to its customers, best cooperation & service all the times with attractive & competitive rates.
To act as official liquidator and receiver. To provide for safe deposit vaults and custody of valuables of all kinds. To act as agents for the sale and purchase of any stocks, shares or securities or for any other monetary or mercantile transaction. To promote or take part in the formation, management, supervision or control of the business or operation of any company or undertaking in Bangladesh or elsewhere and to render all assistance in this regard. To form, manage, join or subscribe to any syndicate, or any holding company or trust to carry on business of an investment trust company. To act as executors and trustees of wills, settlements and trust deeds of any kind made by customers and other matters related thereto.
Philosophy of TBL At present, the bank has as many as 26 branches across the country and it is committed to become equal service providers compatible with the norms of commercial schedule bank. It renders all types of personal, commercial and corporate banking services to its customers within the purview of the Bank Companies Act, 1991 and in line with the directives and policy guidelines laid by down by Bangladesh bank. Objective of the Bank The Trust Bank Limited has been established with the objective of providing efficient and innovative banking services to the people of all sections of our Society .One of this bank is that it is backed by the disciplined and strongest Institution of Bangladesh i.e. Bangladesh Army and there is a synergy of welfare and profits in the dynamics of this institution. Bank is service-oriented industry and we on our part are committed to ensure customized Qualitative and hassle free service in our banking operations along with the focus to broaden the clientele base. The bank has extensively in the country's industrial and agricultural sectors in the coming days. The bank is committed to contribute as such as possible within its limitations for the economic growth and for ensuring value of its available resources. Performance of Trust Bank Limited TBL a blend of expertise and technological excellence is in place of meet varied needs of modern customers. The bank aims at mobilizing untapped money of the country and prudent deployment for production activities in the form of lading at a competitive interest rates/loan pricing. Towards attainment of its goals and objectives, the bank pursues diversified credit policies and strategic planning in credit management. To name a few, the bank has extended micro credit, consumers durable scheme loans, house building loans etc. to cater to the needs of the individuals, which in turn has helped thousands of families. The bank also extends loan in the form of trade finance, industrial finance, and project finance, export & import finance etc. The bank's credit polices aimed at balanced growth and harmonious development of all the sectors of the country's economy with top most priority to ensure quality of lending by averting growth of non-performing assets. The performance of the bank is shown below, Performance at a glance In million Particulars Authorized capital
Paid up capital Share money deposit Statutory Reserve Retained Earning Total equity Deposit Loans and Advances Import Export Foreign Remittance Investment
0.12 0.23 250.35 1148.99 525.74 561.30 1.20 10.40 202.00
10.98 15.34 276.32 2553.72 1603.95 625.90 22.60 22.00 363.11
10.98 (124.82) 236.16 2991.19 1897.63 1349.20 71.15 46.00 493.19
350.00 150.00 24.60 (70.30) 454.30 4483.26 4358.31 2761.00 326.60 151.30 1896.92
500.00 250.00 111.16 275.92 1287.08 13601.10 9250.59 8495.40 1533.80 244.50 4544.64
7858.83 535.49 447.06 88.43 20.29 68.14
500.00 200.00 67.88 102.81 870.69 9042.18 6804.45 5628.20 930.20 197.90 3220.78 12085.8 2 1046.36 782.09 264.27 47.89 216.38
Total Asset Total Income Total Expanse Operating Profit Total Provision Profit Before Tax Provision for Tax Net Profit ROE ROA Credit Deposit Ratio EPS Employees Branches
1427.92 84.77 78.94 5.83 5.21 0.62 0.25 0.37 0.02 0.00 0.46 1.48 64.00 8.00
3153.04 235.03 164.29 70.74 16.48 54.26 28.30 25.96 0.26 0.02 0.63 103.88 124.00 10.00
3424.33 347.10 469.03 (121.93) 18.23 (140.16) (140.16) (51.63) (0.04) 0.63 (532.63) 138.00 11.00
68.14 0.19 0.01 0.97 194.70 209.00 13.00
216.38 0.30 0.02 0.75 44.16 273.00 15.00
364.62 0.41 0.03 0.53 (106.38) 337.00 18.00
16312.81 1557.23 1117.12 440.11 75.49 364.62
Valu Milli e in on\
Authorized Capital & Paid up Capital 5000 0 Authorized capital Paid up capital
The above chart presents the Authorized Capital & Paid up Capital from 2001-2006. It is seen that the all things are positive indication for the bank to compete in the competitive banking business in Bangladesh.
Deposit, Statutory Reserve & Retained Earning
Value in Million
300 200 100 0 -100 -200
Share money deposit
Year respectively Share money deposit
The above chart presents the Share money deposit, Statutory Reserve & Retained Earning from 2001-2006. It is seen that the all things are positive indication for the bank to compete in the competitive banking business in Bangladesh. Total equity
250.35 276.32 236.16
2001 2002 2003 2004 2005 2006
The above chart presents the total Equity from 2001-2006. It is seen that the all things are positive indication for the bank to compete in the competitive banking business in Bangladesh.
Loans and Advances
10000 8000 6000 4000 2000 0 Loans and Advances
525.74 1603.95 1897.63 4358.31 6804.45 9250.59
The above chart presents the condition of Loans & Advances of TBL from 2001-2006. It is seen that the all things are positive indication for the bank to compete in the competitive banking business in Bangladesh. Import 10000 8000 Value in Million
6000 4000 2000 0 1
The above chart presents the total Import from 2001-2006. It is seen that the all things are positive indication for the bank to compete in the competitive banking business in Bangladesh.
Export 100% 80% Value in Million
2002 2003 2004 2005 Year respectively
The above chart presents the total Export from 2001-2006. It is seen that the all things are positive indication for the bank to compete in the competitive banking business in Bangladesh. Foreign Remittance 2000, 10.4, 2% 2001, 22, 3% 2002, 46, 7%
2005, 244.5, 36%
2003, 151.3, 23%
2004, 197.9, 29%
The above chart presents the Foreign Remittance from 2001-2006. It is seen that the all things are positive indication for the bank to compete in the competitive banking business in Bangladesh.
Investment 2000, 202 2001, 363.11 2001 2002 2003 2004 2005 2006
2002, 493.19 2003, 1896.92
The above chart presents the Investment from 2001-2006. It is seen that the all things are positive indication for the bank to compete in the competitive banking business in Bangladesh. Total Asset 20000 15000 Value in Million 10000 5000 0
2001 Total Asset 1427.9
2003 2004 2005 3424.3 7858.8 12086 Year respectively
The above chart presents the Total Assets from 2001-2006. It is seen that the all things are positive indication for the bank to compete in the competitive banking business in Bangladesh.
Valu e in Milli on
1800 1600 1400 1200 1000 800 600 400 200 0
2003 2004 2005 Year respectively
The above chart presents the Total Income from 2001-2006. It is seen that the all things are positive indication for the bank to compete in the competitive banking business in Bangladesh. Total Expanse 1200 1000 800 600 400 200 0 Total Expanse
The above chart presents the Total Expenses from 2001-2006. It is seen that the all things are positive indication for the bank to compete in the competitive banking business in Bangladesh.
Value in Million
100% 80% 60% 40% 20% 0% -20% -40% -60% -80% -100%
2003 2004 Year respectively
The above chart presents the Operating Income from 2001-2006. It is seen that the all things are positive indication for the bank to compete in the competitive banking business in Bangladesh. Net Profit 0.37 25.96 -140.16 364.62
2001 2002 2003 2004 2005 2006
The above chart presents the Net Profit from 2001-2006. It is seen that the all things are positive indication for the bank to compete in the competitive banking business in Bangladesh. Profit & Operating Results Total operating income of the bank in FY 2006 was Tk. 514.20 million against a total operating expenditure Tk. 222.91 million. Total profit before provision stood at Tk. 288.54 million during FY 2006. After keeping Tk. 16.70 million as provision against classified loans & advances, Tk.50.77 million as provision against unclassified loans (I%) And Tk. 2.5 million as SMA, the net profit stood at Tk. 216.40 million.
During the FY. Net profit after income tax in the year 2006 posted by the bank was Tk. 102.81 million. The earning per share was Tk. 44.16 in FY 2005 and 22.71 in FY 2006. Branch Expansion The TBL has taken up a program to expand its branches. The bank has already 26 branches in many different places in Bangladesh; most of them are inside the different cantonments. The management is filling that they need more branches all over the Bangladesh. So very recent they will open a branch in different areas over the country, specially developed and commercial areas. As per Bangladesh Bank circular that if any bank opens a branch in Dhaka then they have to open a branch in out side Dhaka. Information Technology (IT) & Automation All the branches of the TBL are fully computerized. New software is now in use to provide faster, accurate and efficient service to the clients. The bank is continuously striving for better services through extensive automation of its branches. We are soon going to launch "One Branch Banking" through on-line connectivity. The bank has set up a full-fledged IT division to keep abreast of the latest development of IT for better service in the days to come. Foreign Correspondents Foreign correspondent relationship facilities foreign trade operation of the bank, mainly in respect of export, import and foreign remittance. The number of foreign correspondents and agents of the bank in the year 2006 stood at 244, which covers important business and trade centers of the world. The bank maintains excellent relationship with the leading international banks, for handling all foreign correspondent and maintaining all foreign business them is an International Division, which is called ID. Product of the Bank Presently The Trust Bank Limited has following products for their clients: Deposit Products: •
Current Deposit Account
Savings Deposit Account (daily product basis)
Fixed Deposit (3 months to 3 years term)
Trust Smart Savers Scheme(TSS)
Trust Digoon Laav Scheme(TDLS)
Trust Money Making Scheme(TMMS)
Trust Education Scheme(TES) Investment Products: • •
Trust Consumer Durable Scheme (TCDS)
Trust Marriage Loan Scheme (TMLS)
Trust Car Loan Scheme (TCLS)
Trust House Building Loan Scheme (THLS)
Trust Micro Credit for Renovation & Reconstruction of Dwelling Houses
International Trade: •
Private Foreign Currency Accounts
Non Resident Foreign Currency Deposit Account
Resident Foreign Currency Deposit Account
Travelers' Endorsement (Cash and Travelers Cheque)
Remittance of Foreign Currency
Import and Export Transaction
Foreign Exchange Dealing
Purchase of Foreign Currency Drafts, Cheques, Travelers Cheques
Wage Earner's Development Bond
Trust Locker Service (TLS)
Trust Tele Banking \
Organogram of Trust Bank Limited
Deputy Managing Director Senior Executive Vice president Executive Vice President Senior Vice President
Senior Assistant Vice President Assistant Vice President
Senior Executive Officer
Principal Officer Senior Officer
Managerial Excellency. Company Reputation. Sponsor.
Limitation of Information System (PC Bank). Turnover problem. Advertisement problem.
Diversification Business Banking. Modern facilities & Computer. Stirring Branches. Interactive Corporate Culture
External Factors Threat
Severe internal rivalry in Banking Industry. Multinational Bank. Default Culture. SWOT Analysis is an important tool for evaluating the companies Strengths, Weaknesses, Opportunities and Threats. It helps the organization to identify how to evaluate its performance and can scan the macro environment which is turn would help the organization to navigate in the Turbulence Ocean of competition. Following is given the SWOT analysis of The Trust Bank: Strength 1. Managerial Excellency: The top management of the bank, the key strength for The Trust Bank has contributed heavily towards the growth and development of the bank. The top management officials are highly qualified professionals, so they have a good idea about the current situation. 2. Company Reputation: The Trust Bank has created a good reputation in the banking industry of the country. Their main customers are army persons. The popularity of this bank is increase day by day also in the general public area. 3. Sponsors: The Trust Bank has founded by The Army Welfare Trust. The main sponsor for the bank is â€œSena kalyan Sangsthaâ€? (SKS). The chairperson of this bank is Chief of army Staff and directors are appointed by the sangstha that is why the sponsor does not have any- problem for the fund. Weakness 1. Limitation of Information System (PC Bank): PC bank is not comprehensive banking software. It is desirable that a more comprehensive banking system should replace PC bank system.
2. Turnover Problem: The turnover problem treated as a weakness for The Trust Bank because the employees do not stay far a long. So there will be a chance of brain drain from this bank to other bank and as a result the bank may suffer from managerial in competency. 3. Advertisement Problem: There is another weakness for The Trust Bank is advertisement. Their media coverage is so poor that people do not know the bank thoroughly. Opportunity 1. Diversification : The Trust Bank can pursue diversification strategy in expanding its current line of business. They do not serve not only the army but also the general people. 2.Business Banking : The investment potential of Bangladesh is foreign investors. So TBL has opportunity to expand in business banking. 3. Modern Facilities and Computer: From the very beginning, The Trust Bank tries to furnish their work surroundings with modern equipment and facilities. For speedy service to the customer, The Trust Bank had installed money-counting machine in the teller counter. The bank has computerized banking operation under software called PC banking. More over computer printed statements are available to internal use and occasionally for the customers. The Trust Bank is equipped with telex and fax facilities. 4. Stirring Branches: From the formative stage of The Trust Bank tried to furnish their branches by the impressive style. Their well-decorated branches gets attention of the potential customer, this is one kind of positioning strategy. The Sena Kalyan Bhaban Branch and Gulshan branch are also impressive and is comparable of foreign banks. 5. Interactive Corporate Culture: The corporate culture of The Trust Bank is very much interactive compare to other local organization. This interactive environment encourages the employee to work attentively. Since the banking jobs is very much routine work oriented and lovely environment boots up the work capability of the employees. Threat 1. Severe Internal rivalry in Banking Industry: The contemporary banks of The Trust Bank like, Dhaka Bank, Dutch Bangla Bank, National Bank, Mutual Trust Bank, Mercantile Bank are its major rivals. They are carrying out aggressive campaign to attract lucrative clients as well as major depositors. The Trust Bank should remain vigilant about the steps taken by these banks, as these will in turn affect The Trust Bank strategies.
2. Multinational Bank: The Rapid expansion of multinational bank poses a potential threat to new PCB's. Due to the booming energy sector, more foreign banks are expected to operate in Bangladesh. Moreover, the existing foreign banks such as HSBC, Citi N.A, and Standard Chattered are now pursing an aggressive branch expansion strategy. Since the foreign banks have tremendous financial strength, it will pose a threat to local bank to a certain extant in terms of grabbing the lucrative clients. 3. Default Culture: Default culture is very much familiar, in our country. For a bank, it is very harmful. As The Trust Bank is new, it has not faced it seriously yet. However, as the bank grows older. TBL, Agrabad Branch at a glance : Address of the Branch The Trust Bank Limited Bangladesh Shilpa Bank Bhaban 106 Agrabad C/A, Chittagong.
Date of operation: 27th Julyâ€™2002 on Saturday. No of clients: Particulars
Trust Double Benefit
No of total Deposit A/C
02. No of Loans A/C
03. No of Banks A/C
No of Employee: Designation
Senior Vice President
Assistant Vice President
Senior Executive Officer
Total number of Employees
Activities of Agrabad Branch
Customer Care Centre
Organgram of Agrabad Branch Cash Receipt
Executive Vice President Financial Control Department (FCD) Senior Vice President
President Foreign Vice Exchange Department
Senior Assistant Vice President Import & Remittance (Foreign) Export
Loans & Advance Department Assistant Vice President
Demand Term Loan Time Loan Senior Executive Officer
a.CC (Hypothecation) b.Overdraft c.SOD d.Cash Collateral e.Loan Againts Trust Receipt (LTR)
PAD Inland Bill Purchase (IBP) Executive Officer Foreign Documentary Bill Purchase (FDBP)
Export Operation Practically by the term “Export” we mean carrying anything from one country to another. Banker defines “Export” as sending of visible things outside the country for sale. Export Trade plays a vital role in the development process of an economy. With the earning the economy meet out import bills, through export trade is always encouraged, anybody cannot export anything to may place. Like importer the exporters are also required to get them registered before entering in to export trade. Export Registration Certificate (ERC) given by Chief Controller of Import & Export (CCI&E) is required for this purpose. The required documents to obtain ERC are also same as documents to obtain IRC. Documents required to obtain IRC have been enumerated earlier in import section. When a bank (Authorized Dealer) sent by an foreign importer, it ascertains the correctness of the test number and the authorized signature and then sends the original copy of the L/C to the beneficiary, the exporter. The exporter, on being satisfied on terms of L/C takes necessary steps to marked shipment and presents the relative documents to the negotiating bank after the shipment of goods. The L/C issuing bank undertakes to honor the obligation only if the beneficiary, the exporter, fulfils the conditions stipulated in the L/C. The conditions may include the submission of stipulated documents within the stipulated time. Even a slide deviation of the documents from those specified in the L/C may given an excuse to negotiating bank. So the negotiating bank must be careful, systematic and bias free while scrutinizing the tender documents. After careful and through examination of the documents, the banker has to lost out the discrepancies, while may be classified as major or minor, irremovable or removable. The removable discrepancies can be corrected by proper mechanism stated in the L/C.Documents, with major discrepancies, which could not be negotiated, should be sent on collection basis with the permission of the exporter. Incentive for the Exporter o o o o
Cash Incentives. Duty Drawback. Export Credit Guarantee Scheme (ECGS). Export Development Fund (EDF).
o o o o o o
Exporter Retention Quota Account Facilities (ERQAF). Commercially important person. Tax Exemption. Bonded Warehouse Facilities. Low Rate Credit Facilities. (Packing Credit) Trade Fair arranged by Chamber of Commerce.
We are going to diversify our export market such as Medical, Vegetables, Health Care, Informational Technology & other non-traditional items to boost-up our export performance and reduce Balance of Payment. Political & Social Commitment Encouraging Tax & Tariff policy Monetary policy. Stability of unrest political situation. Salient Features of Export Policy 2003-2006 Export Policy 2003-2006 has been liberalized by the Government of People’s Republic of Bangladesh in order to keep pace with the present globalization system under WTO rules. The Objectives of the Export Policy • • • • • • • • • • • •
Capacity building of export related institutions like EPB (through its reorganization to enhance institutional efficiency), Customs department, Land and Seaports, Fisheries department, BSTI, Tea board and Trade bodies. Product diversification Develop product quality and design and production Adopt new strategies for expanding export products; ensure good use of IT or computer technology, E-commerce and other technologies. Develop necessary infrastructures and in required cases backward and forward linkage industries to ensure production of maximum volume of exportable items. Create new exporters and provide all assistance to existing exporters and develop a business friendly environment. Develop expert manpower on trade and Equip trade bodes, businessmen and concerned people with necessary knowledge on systems of world trading. The export targets for 2004-2005 & 2005-2006 have been fixed a US$ 8565.78 million and 9599.20 million respectively The number of precuts included in the list of export prohibited items has been reduced in the present export policy 2003-2006 compared to the preceding Export Policy 1997-2002. List of items exportable under condition has also been reduced in the Export Policy 2003-2006 compared to the preceding Export Policy 1997-2002. Government has declared the following package of incentives/facilities:-
Income tax exemption for export earning, under the income tax law other than the owners of factories not registered in Bangladesh, all exporters will get 50% exemptions in their insurance premium. a) b) c) d)
Exemption in insurance premium. Bond facilities for export oriented industries. Facilities for duty free import of capital machinery for export-oriented industries. The export-oriented industries will get the advantage of importing10 percent spare parts of their capital machinery without duty in every two years. e) Providing alternative facilities to export-oriented local textiles and RMG other than duty-bond or duty-draw-bank. f) Tax holiday g) Duty-draw-back scheme. Export Incentives The rate of cash incentive as provided by the Government for export of different commodities is as follows: Sl.No. 01
FE Circular No. & date % of Cash of Bangladesh Bank Incentive th Frozen Shrimp & other FE No. 23, 12 10% fish December,2002 Name of commodities
Product Made of Hogla, Straw, Coir of Sugar Cane a) If local raw FE No.26 material is used 12th December,2002 more than 80% b) If local raw material is used more than 50%
FE No.27, December,2002
FE No.25, 12th December 15% 2002.
Agro and Agro Products (Vegetables/Fruits/Agro Fe No.05,25th July,2004 Processing)
Local Fabrics Handloom Fabrics) -For 2002-2003 -For 2003-2004 -For 2004-2005
(l/C FE No. 10, 5th June,2002
10% 15% 05%
FE No.19, August,2002 FE December,2002
FE No.01,28th 10% December,2002
FE No.01,28th 15% December,2002
Provide assistance through developing necessary numbers of product development councils for increased product of export items.
Provide market intelligence to producers and exporters on product demands and prices in markets abroad.
Offer increased institutional facilities through trading and export houses to encourage export.
Offer assistance in establishing seal of quality organizations to ensure to ensure quality of export items in required cases.
Offer assistance in establishing “Bangladesh International Arbitration Centre” or similar organizations for prompt settlement and disposal of Trade disputes.
Offer assistance to producers for development of product designs and use of modern technology.
Offer assistance to enable exporters getting acquainted with the strategies and methods of countries which attained remarkable success in export trading and highlight the exporters and
Organize single country export fair for Bangladeshi products abroad and offer assistance to exporters in participating trade fair in different countries.
Financial Facilities Use of foreign currency: The exporters can deposit a certain amount of their export earning in foreign currency under a retention quota in their foreign currency account in the form of US dollar, Pound Sterling, Japanese yen or Euro. The amount of the retention (in terms of percentage) will be fixed by the government/Bangladesh Bank. This foreign currency can be used to fulfill real business needs like business trips abroad, participation in export fair or seminars in foreign countries, import of raw materials and spare parts and setting up office abroad. Presently 10% has been fixed for lower value added products (like RMG, petroleum by products, Naphtha, furnace oil etc) and 50% for high value added products (like Computer software and data entry/processing service etc.) Export Promotion Fund (EPF):
Offer venture capital with less interest rate and easy term for production Assist in getting foreign technical assistance, service and technology in product development and diversification. Export credit is given from Export Promotion Fund (EPF) at 4.50% interest and 2% service charge that is 6.50% to the handling sector as working capital against L/C contract purchase order for increasing export of handicraft products. Maximum limit of loan in handicraft sector is TK.5.00 lakh only at a time in favour of one firm. Export credit is also given to the exporters of computer software sector at 7% interest. Facilities in other activities for product and market development. Providing fund for export: • • • •
Interest free loans will be provided under duty-draw-back credit scheme for 180 days and 100 percent of the loan amount will be provided in advance. Import process of raw materials and related products will be made easier under the export promotion fund (EPF). Facilities will be provided to open back to back LC for all exportable and The proposals for importing capital machineries with soft term loan with lesser interest rate can be considered for export promotion.
General facilities: The enterprises that export 80 percent of their products will get the facilities given to exportoriented industries. Reduced plane fare for priority products including vegetables and fruits, Biman will consider measures for reduced plane fare exporting fruits, vegetables and ornamental plants by air. Withdrawal of royalty for expansion of cargo services of foreign airlines for export promotion. Fixing of limit for sending sample of export products annually. Arrangement and participation in international and single country trade fairs and other market development programmes abroad. Incentives will be given for organizing and participating in international trade fairs, single exhibition and other market development programmes and arranging single country trade fairs jointly by government and non-government organization. Every year product-wise Commercially Important persons (CIPs) will be selected on the basis of the exporters extra ordinary contributions to export promotion. National Export Trophy (NET) will be give in recognition of extra ordinary contribution to export. The Export Credit Guarantee Scheme (ECGS) will be restructured, activated and made efficiency. Export Target & Performance from 2002-2003 to 2005-2006
Product Woven garments Knitwear Frozen Food Leather Jute Products Raw Jute Chemical Products Tea Agro Products Handicrafts Electronic goods Engineering products
Target 2004-2005 3850.00 2500.00 430.00 230.00 270.00 82.00 140.00 18.00 50.00 4.00 18.50 85.00
2005-2006 4600.00 2350.00 510.00 380.00 375.00 82.00 99.22 22.00 47.61 8.12 11.50 6.00
Foreign Exchange Division Foreign Exchange is one of the key areas for development of the working business. Any branch of a bank can deal with Foreign Exchange business having an authorized dealership license in our country. Foreign Exchange Business is conducting on the strength of Foreign Exchange regulation act 1947 has amended up to date in Bangladesh. And all the procedures and transaction relating to the Foreign Exchange Business is conducted as per Uniform Customs and Practices for Documentary Credit (UCPDC), ICC publication on –500 1993 and uniform rules for collections UCR-522. Every bank in Bangladesh is conducting their Foreign Exchange Business as guidelines of Foreign Exchange transactions vol-1982-1986. The foreign exchange manual has been segregated in to two parts. First part deals with the policy framework & guidelines and the second part contains of USPDC (ICC Brochure) no-500 uniform rules and for collections accounting procedures and reporting of transactions. In addition to the foreign exchange department of a bank maintains various types of foreign currency and convertible TK A/C such as:
Private Foreign Currency A/C. FC account of overseas Bangladesh Nations. FC A/C of joint venture contracting firms. FC A/C of Bangladesh working in foreign organization. Non-resident FC deposit A/C (NFCD) Resident foreign currency deposit A/C (RFCD). Converting taka A/C.
Necessity of Foreign Exchange No country is self-sufficient in this world. Everyone is more or less, dependent on another, for goods or services. Say Bangladesh has cheap manpower whereas Saudia Arabia has cheap petroleum. So Bangladesh is dependent on Saudia Arabia for petroleum and Saudia Arabia is
dependent on Bangladesh for cheap manpower. People of one country are going to abroad for Education, Medical Service etc. Thus there is exchange of foreign currency. Activities of Foreign Exchange Division
Activities of Foreign Exchange Division
Regulation for Foreign Exchange Division Foreign Exchange transactions are being controlled by the following rules & regulation. Local Regulation: o Foreign Exchange Act 1947. o Bangladesh Bank issues Foreign Exchange circular from time to time to control the export, import and remittance business. o Ministries of Commerce issues export & import policy giving basic formalities for import & export business. o Sometimes CCI & E issues public notice for any kind of change in foreign exchange transaction. o Bangladesh Bank published two volumes in 1996. This is compilation of the instructions to be followed by the authorized dealers in transactions related to foreign exchange. International Regulation for Foreign Exchange:
There are some international organization influencing our foreign exchange transactions. There are-
International chamber of commerce (ICC) is a world wide non-governmental organization of thousands of companies. It was founded in 1919. ICC has issued some publication like UCPDC, URC and URR etc, which are being followed by all the member countries. There is also an international court of arbitration to solve the international business disputes.
World trade organization (WTO) is another international trade organization established in 1995. General Agreement on Tariff & Trade (GATT) was established in 1948, after completion of its 8th round the origination has been abolished and replaced by WTO. This organization has role in international trade, through its 124 member countries.
Flow Chart: Export Procedures Exporter: Obtaining Export Registration Certificate (ERC) from Chief Controller of Import & Export (CCI&E).
Exporter: Securing export order from foreign buyer directly or through Agent. Exporter: Procure goods for shipment Exporter: Receiving Letter of Credit (L/C) from Buyer’s bank through an advising Bank in Bangladesh. Bank: Certification of EXP (Export) from by authorized dealer (Bank) Yes Will the Exporter be allowed any preshipment credit facility?
Mark Bank’s Lien on the Face of the Original L/C
No Obtain necessary securities DR. P/C (Exporter) CR. Exporter Allow Exporter Packing Credit as pre-shipment credit
Shipment of goods by Exporter
Preparation of export documents by exporter for submission to negotiating Bank Scrutinizing Export documents by negotiating Bank
Arrange shipment of goods through Bank’s approval C&F agent & interest them to send the original bill of lading etc. to the Bank directly.
Are the documents in order?
Ask Exporter to remove discrepancies
Are the discrepancies Removed? mail
Inform opening Bank about discrepancies & Seeking Cable Authority
Negotiate the Document
Send on Collection Basis
The export trade of the country is regulated by the Import & Export (Control) Act, 1950. There are a number of formalities that an exporter has to fulfill before and after shipment of goods. These procedures are given below: Obtaining Export Registration Certificate (ERC) Under the export policy of Bangladesh, the Exporter has to get valid export registration certificate (ERC) from the Chief Controller of Import and Export (CCI&E). The Export
Registration Certificate (ERC) is required to renew every year. The ERC number is to be incorporated and EXP forms and other documents connected with exports. For obtaining ERC, intending Bangladeshi Exporter are required to apply to the controller/Joint controller/Deputy Controller/Assistant Controller of Imports & Exports, Dhaka/Chittagong/Rajshahi/Khulna/Mymenshing/Shylet/Comilla/Barisal/Pabna/Bogra/Rang pur/Dinajpur, as the case may be, in the prescribed form along with the following documents. 1. Nationality & Assets certificate of the Proprietor/Directors. 2. Registered Partnership Deed in the case of Partnership concerns. 3. Memorandum & Articles of Association & Incorporation Certificate in case of limited company. 4. Bank Certificate. 5. Income Tax Certificate. 6. Copy of Valid Trade License. 7. Copy of Rent Receipt of the Business Premises. 8. Membership Certificate of a Trade Association. 9. Affidavit from 1st class magistrate. 10. Any other certificate as required in the Policy etc. Registration / Renewal of ERC On receipt of necessary advice from the office of the control/Joint controller/Deputy Controller/Assistant Controller of Imports & Exports, applicants for Export Registration Certificate are required to deposit requisite registration fee to the Government Head of Accountâ€? 42 Trade and Commerce- Fees realized under the imports & Exports control Act 1950â€? through Bangladesh Bank/Government Treasury/Sonali Bank. Copies of Treasury Chalans showing payment of fees should be sent to the concerned offices of the chief controller of Imports & Exporters for enabling them to issue ERC. Once registered, exporters are to make annual payments for having their export Registration Certificate renewed. Securing the Export Order Upon registration, the exporter may proceed to secure the export order. He can do this by contracting the buyer directly through correspondence. Some buyers of goods like jute & jute goods maintain liaison office, representatives or local agents who can be contracted to secure a deal. Sometimes, TCB BJBC and BJEC secure bulk contracts and pass or allocate the contracts the local chamber of commerce of potential buyers. The Export Promotion Bureau and the Bangladeshi missions abroad are also good sources for securing information on the prospective foreign buyers. Receiving the Letter of Credit After getting the contact for sale the exporter should ask the buyer for L/C clearly stating terms and conditions of export and payment. The followings are the main points to be looked into : 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 a reasonable time for negotiation. 4. If the exporter wants the letter of credit to be transferable, divisible & advisable, he should ensure that these stipulations are specifically mentioned in the l/c. Letter of Credit (L/C) Letter of Credit (L/C) is a credit contract whereby the buyer’s bank is committed (on behalf of the buyer) to place an agreed amount of money at the seller’s disposal under some agreed conditions. Since the agreed conditions include amongst other things, the presentations of some specified documents, the letter of credit is called Documentary Letter of credit. The Uniforms & practices for Documentary Credit published by International Chamber of Commerce (1993) Revision, publication No 500 defines Documentary credit: Any arrangement, however named or described, whereby a bank (the issuing bank) acting at the request and on the instructions of a customer (the applicant) or its own behalf, 1) Is to make a payment to or to the order of a third party (the beneficiary) or is to accept and pay bills of Exchange drawn by the beneficiary. 2) Authorizes another bank to effect such payment. 3) Authorizes another bank to negotiate against stipulated documents provided that the terms and conditions are compiled with. Types of L/C
Revocable L/C is a credit which can be amended/ cancelled by issuing bank, without prior notice to the seller.
Irrevocable L/C is a credit, which cannot be amended or cancelled without the agreement of all parties.
Other L/C a. b. c. d. e. f. g. h.
Confirmed L/C Transferable L/C Divisible L/C Revolving L/C Restricted L/C Red Clause L/C Green Clause L/C Back-to-Back L/C
Letter of Credit-Operational Mechanism In simple terms, a documentary credit is a conditional bank undertaking of payment. Expressed more fully, it is a conditional undertaking given by a bank (Issuing Bank) at the request of a customer (Applicant) or on its own behalf to pay a seller (Beneficiary) against stipulated documents provided all the terms & conditions of the credit is complied with.
These stipulated documents are likely to include those required for commercial line, regulatory, insurance or transport purposes, such as commercial invoice certificate of origin, insurance policy or certificate and a transport document of a type appropriate to the mode(s) of transport used. Documentary credits offer both parties to a transaction a degree of security, combined with possibility, for creditworthy party of securing financial assistance more easily. Opening Letter of Credit Opening of Letter of Credit (L/C) means, at the request of the applicant (Importer) issuance of a L/C in favor of the Beneficiary (Exporter) by a bank. The bank, which open or issue L/C is called L/C opening bank or Issuing bank. On receipt of the Importer’s L/C Applicant supported by the form contract (Indent/Proforma Invoice) & Insurance Cover Note, the bank scrutinize the same thoroughly and fix up a margin on the basis of banker-customer relationship. Before opening a L/C, the issuing bank must check the following. 1. L/C application properly stamped, signature verified & margin approved & properly retained. 2. Indent/Proforma Invoice signed by the Importer & Indenter/Supplier. 3. Ensure that the relevant particulars of L/C application correspond with those stipulated in Indent/Proforma Invoice. 4. Validity of LCA entitlement of goods, amount etc. confirm with the L/C application. 5. Conversion & rate of exchange correctly applied. 6. Charges like commission, F.C.C, postage, telex charge, if any received. 7. Insurance Cover Note In the name of Issuing Bank A/C Importer covering required risk & voyage route. 8. Incorporation of instructions for Negotiating Bank as per bank’s existing arrangement. 9. Reimbursement instructions for Reimbursing Bank. 10. If foreign bank’s confirmation is required, necessary permission should be obtained and accordingly advising bank is advised as per bank’s existing arrangement. 11. If add confirmation is required on account of the applicant charges should be recovered from the applicant. 12. Incase of usance L/C, mention rate of interest clearly in the L/C.
Parties to Documentary Letter of Credit
Sale/Purchase Contract Importer
4. Submits Documents
5. Effects 1. Applies in writing to issue L/C
3. Advises &/or confirms L/C
payment by Negotiating
2. Issue L/C
6. Forward Documents
Advising/Confirming/ Negotiating Bank
7. Effects payments
Instructs to Pay or Reimburse
Paying/ Reimbursing Bank
Pay or Reimburse
Letter of Credit â€“ Settlement Settlement means fulfilling the commitment of issuing bank in regard to effecting payment subject to satisfying the credit terms. Settlement may be done under 3 (three) separate arrangements as stipulated in the credit. Settlement by Payment: Here the seller presents the documents to nominated bank & bank scrutinizes the documents. If satisfied, the nominated bank makes payments to beneficiary and incase this bank is other than the issuing bank, then sends the documents to issuing bank and claim reimbursement as per arrangement. Settlement by Acceptance: Under this arrangement the seller submits the documents evidencing the shipment to accepting bank (nominated by the issuing bank for acceptance) accompanied by a draft drawn and bank at the specified tenor. After being satisfied with the documents, the bank accepts the documents and the draft and if it is a bank other than issuing bank, then sends the documents to the issuing bank stating that it has accepted the draft and at maturity the reimbursement will be obtained in the pre-agreed manner. Settlement by Negotiation: This settlement precedes starts with the submission of documents by the seller to the negotiating bank. In a freely negotiable credit any bank can negotiate documents and if negotiation restricted by the issuing bank, only nominated bank can negotiate the documents. After scrutinizing that the documents meet the credit requirements, the bank may negotiate the documents and give value to beneficiary. The negotiation bank then sends the documents to issuing bank. As usual, reimbursement will be obtained in the pre-agreed manner. Obtaining EXP (Export) Form After having ERC, the exporter applies to bank with the trade license, ERC and the necessary certificates to get the EXP (Export form). If bank is satisfied the ERC is issued to the exporter. Signing the Contract
The following are the points, which need to be borne in mind while making a contract. a. Description of the commodity. b. Quantity of the commodity. c. Price of the commodity. d. Shipment e. Insurance & marks. f. Inspection g. Arbitration. Procuring the Materials After knowing that the exporter has opened in his favor, the next step for the exporter is to set about the procuring or manufacturing the contracted materials. After making the deal & 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 merchandises. Registration of Sale This is needed when the items proposed to be exported are raw jutes and jute goods. Shipments of Goods The exporter should take the preparation for export and it involves the following documents at the stage of shipment: 1. EXP form (it must be certified by the bank first & then by the custom authority) 2. Photocopy of Registration Certificate 3. Photocopy of contract 4. Photocopy of L/C 5. Customs copy of ERF from for shipment of jute goods and EPC form for raw jute. 6. Foreign certificate from the bank in case of payment of freight at the part of lading is involved. 7. Railway receipt or Berg receipt or truck receipt 8. Shipments instructions 9. Insurance policy Preparation of Export Documents by Exporter The following documents is needed for Export : 1. 2. 3. 4. 5. 6. 7. 8.
Bill of Exchange Commercial Invoice Packaging list Bill of lading Inception Certificate Country of Origin EXP form Beneficiaries Certificate
Optional : 1. 2. 3. 4. 5. 6. 7. 8.
Child labor Multiple Country Declaration Compliance Certificate S.S Certificate CM Breakdown Purchase Order Sheet Test Report P. Liability Certificate
Importance of Export Documentation properly Preparation of export documents strictly in terms Letter of Credit is very important for repatriation of export bill proceeds. Discrepancies in export documents may put the exporter in an embarrassing position & even chance of realization of value became uncertain even may lead to the denial of the buyer to pay bill. Therefore due emphasis must be given while preparing export documents so as to ensure that all relevant export documents are prepared strictly as per terms of letter of credit or contract. If any condition as stipulated in the credit or contract cannot be complied with the exporter must arrange amendment before shipment. Details Export Documents Different types of documents are called for in the credit and full set must be furnished in conformity with credit terms. Export documents can be divide in to 2 (two) group : 1. Compulsory Documents 2. Auxiliary Documents Compulsory documents are usually the following: 1. Bill of Exchange/Draft. 2. Commercial Invoice. 3. Bill of Lading/Air bill. 4. Marine Insurance. Auxiliary documents are mainly the following documents: a. Paking list. b. Consular Invoice. c. Inspection Certificate. d. Certificate of Origin. e. Opening control certificate. f. Pre-shipments Certificate. g. Special Canadian Invoice. h. Beneficiary Certificate. i. Multiple Country Declaration. Commercial Invoice The following points should be considered: The invoice is issued by the beneficiary named in the credit and, if an address is shown, it is the same as that called for in the credit.
The invoice is issued in the name of the applicant and, if an address is shown, it is the same as that called for in the credit. The description of the merchandise must correspondent with the description in the credit. Invoice value of the goods, unit prices and quantities agree with the letter of credit specifications. States the term specified (e.g, fob or cif, etc), if such term are called for in the credit, and does not include charges that are beyond such term. The invoice amount is at least equal to the amount for which the draft(s) is/are drawn or demand is made. The invoice is signed or otherwise authenticated, if required by the credit. The invoice is notarized, legalized, or visaed, if required by the credit. The invoice is required on the commercial invoice: 1. Where a signed invoice is required by the credit, the certification need not be separately signed. 2. Where a signed invoice is not required by the credit, the certification or invoice must be signed and dated. Shipping marks and numbers on the invoice, if shown, are consistent with those appearing on any other stipulated documents. The quantity of merchandise, and measurements shown on the invoice are consistent with those appearing on any other stipulated documents. The invoice does not include: 1. Over-shipment, or 2. Merchandise (e.g., free samples) not included in the letter of credit, and 3. Merchandise covered by another credit, unless specifically authorized. When the credit prohibits partial shipments and the invoice is not for the full letter of credit balance, that the invoice amount covers a complete shipment of merchandise, or is within the tolerance of 5% See UCP500, Article 39c. The required number of originals and copies are presented, and is consistent with UCP500, Article 20 b,c. Shows all discounts or deductions as required in the credit. If the credit calls for installment shipments, the previous installment(s) were shipped as required by the credit and the current installment (this drawing) is not inconsistent with the credit requirement for this installment. Is not marked “provisional”, “pro-forma” or similar expressions, unless specifically authorized in the credit. Bill of Lading
The following should be considered: 1. A full of original bills of lading has been presented or otherwise accounted for in accordance with the credit terms. 2.
The name of the carrier, identified as the carrier, appears on the face of the bill of lading.
The signature line reads, “carrier” “master” or a named “agent for”, or a named “agent on behalf of” the “carrier” or “master”.
If the carrier is otherwise identified as the “carrier” on the face of the bill of lading, the word “carrier” need not appear at the signature line if signed by the carrier, e.g., if the carrier is “ABC Line”, the following examples, which are illustrative only and not exhaustive, are acceptable: “Agent for ABC,” “Agent for the carrier,” “Agent for ABC the carrier,” if the carrier has not been previously identified, the signature line must identify the carrier. If the document is signed by the master, the name of the master is not required to be quoted. If the signature line reads “agent for” or “agent on behalf of” the carrier, then the signature line must also show the name of the agent and name and capacity of the party on whose behalf the agent is signing, e.g., if the carrier is “ABC Line.” The following examples, which are illustrative only and not exhaustive, are acceptable:” Smith Forwarders as agent for ABC line, the carrier”; if the carrier is otherwise identified as the “carrier” on the face of the bill of lading, the word “carrier” need not appear at the signature line if signed by the “agent for,” or “agent on behalf of” the carrier. If the signature line reads “agent for” or “agent on behalf of” the master, the name of the master is required to be stated. The bill of lading indicates the goods have been loaded on board or shipped on a named vessel either by: Preprinted wording on the bill of lading, or By means of an “on board” notation which must be dated. If the bill of lading contains an indication “intended vessel” or similar qualification, that the name of the vessel on which the goods have been loaded appears in the “on board” notation, even where the actual vessel name and the intended vessel name are one and the same. The bill of lading indicates the port of loading and port of discharge stipulated in the credit. If the bill of lading contains an “intended” or similar qualification in relation to the port of loading, the “on board” notation includes the port of loading stipulated in the credit and is dated. If the bill of lading indicates a place of taking in charge, or receipt of goods different from the port of loading, that the “on board” notation includes: The port of loading stipulated in the credit, and The name of the vessel on which the goods have been loaded, and The date.
Even where the port of loading and/or the name of the vessel indicated elsewhere on the bill of lading are the same, or if loading on board the vessel is indicated by pre-printed wording on the bill of lading. The port of loading indicated in the on board endorsement supersedes the port of loading stated elsewhere on the bill of lading (if any). The bill of lading appears to contain all the terms and conditions of carriage, or some terms and conditions by reference to a source, or document other that the bill of lading. That the bill of lading does not indicate it is subject to a charter party. It is consigned as stipulated in the credit. The bill of lading is endorsed, if necessary, by the party entitled on the face of the bill of lading to do so, and the endorsement is as stipulated in the credit. Transshipment. See UCP500, Article 23b,c. Check: 1. If the credit permits transshipment, transshipment will be permitted provided that the entire ocean carriage is covered by one and the same bill of lading. 2. If the credit prohibits transshipment the transshipment occurred between the port of loading and port of discharge stipulated in the credit. If it does not occur between these two ports, this is not transshipment. 3. If the credit prohibits transshipment the goods are shipped in containers, trailers, LASH barges. This is not a discrepancy if the entire ocean carriage is covered by on and the same bill of lading. No clause(s) appears on the bill of lading expressly declaring a defective condition of the goods, and/ or packaging. The merchandise description is not inconsistent with that stipulated in the invoice. The bill of lading covers only merchandise called for in the credit. In the case of…………. a) Shipped on board bill of lading, the date of the bill of lading or b) Received for shipment bill of lading, the date of the “on board” notation …………is on or before the latest date allowed for shipment in the credit. • • • • •
The documents are presented within the period required. See UCP500, Article 43. Evident changes, alterations and/or corrections bear an initial or stamp of the issuer. The name and address of the notify party are as stipulated in the credit. There is an indication of the status of the freight charges on the face of the document in accordance with the stipulations of the credit. See UCP500, Article 33. The name of the shipper is as stipulated in the credit. If not stipulated in the credit, a party other than the beneficiary may be shown as shipper.
Charter Party Bill of Lading The following points should be considered: A full set of original bills of lading has been presented or otherwise accounted for in accordance with the credit.
The signature line reads, “owner”, “master”, or a named “agent for,” or a named” agent on behalf of” the owner or the master. a) If the owner is otherwise identified as the “owner” on the face of the charter party bill of lading, the word “owner” need not appear at the signature line if signed by the owner, e.g., if the owner is “ABC Line,” the following examples, which are illustrative only and not exhaustive, are acceptable: “Agent for ABC,” “Agent for the owner,” “Agent for ABC the owner”. b) If the document is signed by the master, the name of the master is not required to be quoted. c) If the signature line reads “agent for” or “agent on behalf of” the owner, then the signature line must also show the name of the agent and name and capacity of the party on whose behalf the agent is signing, e.g., if the owner is “ABC Line”, the following example, which are illustrative only and not exhaustive, are acceptable: “Smith Forwarder as agent for ABC line, the owner”, if the owner is otherwise identified as the “owner” on the face of the bill of lading, the word “owner” need not appear at the signature line if signed by the “agent for”, or “agent on behalf” the owner. d) If the signature line reads” agent for” or “agent on behalf of” the master, the name of the master is required to be stated. The bill of lading indicates the goods have been loaded on board or shipped on a named vessel either by: a) Preprinted wording on the bill of lading b) By means of an “on board” notation, which must be dated. The bill of lading indicates the “port of loading” and ‘port of discharge” stipulated in the credit. The bill of lading is consigned as stipulated in the credit. No clause(s) appear on the bill of lading expressly declaring a defective condition of the goods, and/or packaging. The merchandise description is not inconsistent with that stipulated in the invoice In the case of……………….. A shipped on board bill of lading, the date of the bill of lading, Received for shipment bill of lading the date of the “on board” notation, …………………..is on or before the latest date allowed for shipment in the credit. The documents are presented within the period required. See UCP500, Article 43. Evident changes, alterations and/or corrections bear an initial or stamp of the issuer. The name and address of the notify party is as stipulated in the credit. The bill of lading is endorsed, if necessary, by the party entitled on the face of the bill of lading to do so, and the endorsement is as stipulated in the credit.
There is an indication of the status of the freight charges on the face of the document in accordance with the stipulated of the credit. See UCP 500 Article 33. Certificate of Origin The following points should be considered: It is signed, dated and properly titled. It certifies the country(s) of origin. If the credit stipulates the country (ie) of origin, the certificate indicates. It is issued by the party stipulated in the credit. If the credit does not stipulate, then a document issued by the beneficiary is acceptable. The document appears to relate to the invoice goods. Packing List The following points should be considered:
It is title as packing list. Banks are not responsible for checking mathematical calculations of extensions or additions on the packing list. The document appears to relate to the invoiced goods/packages.
Inspection Certificate The following points should be considered: It is properly titled, signed and dated. It complies with the inspection requirements contained in the credit, if any. Statements referring to the condition of the merchandise will be discharges will be disregarded unless otherwise stipulated in the credit. The document appears to relate to the invoiced goods. If the credit requires Mechanism of Export Repatriation . Mechanism of Export Repatriation Methods
Timing of Payment
Timing of Delivery of Goods Payment in Prior to delivery of After payment when Advance goods goods arrive in importer’s country Open Account Accounting to credit When goods arrived in terms offered by importer’s country exporter Documentary At delivery if sight Upon payment if sight collection draft is used; at draft is used; upon specified later time if acceptance if time draft is time draft is used. used. Letter of After terms of letter are According to terms of Credit fulfilled sales contract and letter
Risk (s) Exporter None
Importer may fall to pay account balance. Importer may default or fail to accept draft. Issuing bank may default; documents
Credit card Countertrade
may not be prepared correctly. According to normal When goods arrive in None credit card company importer’s country. procedures. When exporter sells When goods arrive in Exporter may not countertraded goods. importer’s country. be able to sell countertraded goods.
In International Trade, one may come across a number of modes of payment which are being used for receiving trade proceeds. These are cash in advance. Open account documentary collection and documentary credit. Among these, documentary credit has been observed to be used mostly in our country. The procedures and pros and cons of each of the payment methods have been discussed in the sections that follow: Cash in Advance / Payment in Advance In this method of payment, the buyer places the funds at the disposal of seller(exporter) prior to shipment of goods in accordance with the sales/purchase contract, which is certainly to be concluded between exporter and importer before the trade transactions. If the exporter is not sure about the buyer’s credit or there are other circumstances, which cast doubt on the certainty of getting paid, a last resort is to ask for cash in advance. This may be acceptable to a first-time buyer who trusts seller to deliver the goods. In the long run, however, it may not be competitive and buyers will not want to continue importing goods if they can turn to other suppliers offering better terms. Since this method of payment is expensive and contains a lot of risks on the part of buyer (because they have no assurance that what they contracted for will be supplied and received in appropriate manner), they may not be willing to accept such terms of payments. Thus it is rarely used in Bangladesh. Opening Account System At the other end of the range of payment methods is the open account system. This is an arrangement between the buyer and seller (sales/purchase contract) whereby the goods are manufactured and delivered before payment is required. Open account provides for payment at some stated specific future date and without requiring the buyer to issue any negotiable instrument evidencing his legal commitment. The seller most have absolute trust that he will be paid at the agreed date. Though the seller can avoid a lot of banking charges and other costs. But he will be receiving payment in due course. For this reason, the exporter may not be willing to accept this sort of mode of payment. This system is also uncommon in Bangladesh. Documentary Collection [ This is an arrangement (sales/purchase contract) whereby the goods are shipped and the relevant bill of exchange (B/E) draft is drawn by the seller on the buyer and documents are sent to the seller’s the buyer and documents are sent to the seller’s bank with clear instructions for collection through one of its correspondent banks located in the buyer’s
domicile. In this method, the exporter will hand over the shipping documents to his bank and ask it to forward the documents to the buyer’s bank, with instructions to release them to the buyer on payment of his invoice. This is called cash against documents (CAD). The exporter can also give the buyer trade credit by drawing a bill of exchange on him and requiring him to accept the bill when he collects the documents. This is called documentary collection against acceptance or documents against acceptance (DAA) because the buyer accept the bill of exchange. Through documentary collection is inexpensive and simple to arrange, exporter is required to ship the goods without an unconditional guarantee or promise of payment by the buyer. However, as compared to cash in advance and open account, documentary collection is a much more common means of payment. Documentary Credit The documentary credit or letter of credit is an undertaking issued by a bank on behalf of to the buyer (or for its own account), to pay the beneficiary exporter) the value of the draft and/or documents provided that the terms and conditions of the credit are complied with. This is most frequently used method of payment in International Trade. Although one of the costliest, it is often considered the most secure because the buyer is assured that the seller will be paid only when the documents representing goods have been delivered conversely. The seller is assured that the buyer will receive the documents for ultimate delivery of the goods only when payment has been made. The security of the transaction is assured by one or more third parties. This is normally the buyer’s bank (issuing bank), which issues the letter of credit (L/C) and the seller’s bank (advising/confirming bank), which inform the seller that the L/C has been issued and perhaps adds its confirmation to the L/C in other words, guarantees the payment if the seller wants to be sure the issuing bank will not default. In addition to commitment of making payment by a bank to the exporter, the documentary credit provides legal security to the involved parties as it may operate within the teamwork of ICC’s and International Chamber of Commerce) Uniform Customs and Practice for Documentary Credits (UCP-500), UCP-500 is an international codification of actual business practices, based on the experience of banker’s, exporters and importers. It should be emphasizes that the UCP rules apply when the parties in the documentary credit forms have incorporated them. Because of the above-mentioned advantages, documentary credit is the most popular mode of payment in International Trade. In Bangladesh also, the documentary credit is the most acceptable mode of payment in export and import trade. Credit Card For small international transactions, particularly those between international merchants and foreign retail customers, credit card. A firm may tap into the well-established credit card network to facilitate international transactions, subject to the normal limitations of these cards. The credit card company collects transaction fees (usually 2 to 4 percent) from the merchant and in return assumes the costs of collecting the funds from the customer and any risks of nonpayment. Because credit card companies buy foreign currency in large quantities at whole sale rates, they typically charge only a 1 percent fee for converting currencies. However, they offer exporters and importers none of the help banks do in dealing with the paperwork and documentation requirements of international trade.
Counter trade An additional method used for payment in international transactions is counter trade. Counter trade occur when a firm accepts something other than money as payment for its goods or services. Forms of counter trade include barter, counter purchases, buy-back and offset purchase. Barter: The simplest form of counter trade is barter, in which each party simultaneously swaps its products for the products of the others. Counter purchase: A more sophisticated form of counter trade is counter purchase, whereby one firm sells its products to another at one point in time and is compensated in the form of the othersâ€™ products at some future time. Counter purchase is the most common form of counter purchase. It is sometimes called parallel barter as it disconnects the timing of contract performance by the participating parties. Buy-back: Another variant of counter trade involves buy-back or compensation arrangements whereby one firm sells capital goods to a second firm and is compensated in the form of output generated as a result of their use. Offset purchase: Another important type of counter trade involves offset purchases, whereby part of an exported good is produced in the importing country. Offset arrangements are particularly important in sales to foreign governments of expensive military. Problems, Recommendations & Conclusion Export Repatriation Process
Reputed Clients Bank A/C & Transaction
Clients have to submit the following ERC/IRC , TIN, VAT, Insurance Cover Note.
Proposal sends to the Head Office for Approval
Opening L/C Back-to-Back L/C 80% or as directed by import policy under lien of Master L/C / Export L/C.
BB L/C always should be in usance, but sight L/C may be opened under special circumstances.
Documents derived against acceptance due to usance L/C
Exporter/Importer comes to Bank after sending the Goods/Product according to the term & condition of the Master L/C for collection of payment from the buyer.
Before sending the documents for collection, Exporter Bank/Collecting Bank must be checked/scrutinized the documents, whether all term & condition complied.
Foreign Documentary Bill Collection (FDBC) (Comparatively Less Risk)
Foreign Documentary Bill Purchase (FDBP) High Risk ultimately that has to be covered by the Exporter/Party.
If the Export Proceed realized then that have to be informed to the Bangladesh Bank in their format. If the Party deny to accepting the documents and to give the payment simultaneously due to discrepancies, then the following steps to settle the Export Proceeds. The Common Discrepancies are as follows: o o o o o o o o o o o
Late Presentation. Export License not presented. Unit price differ from L/C. Invoice not showing actual on Board date. Inspection report-showing measurements differ from B/L. Courier Receipt-showing additional GSP No & C/O no. B/L Discrepancies. Photocopy of B/L not presented. Invoice for original presented instead of Quintuplicate. All Beneficiariesâ€™ certificate are not presented. AWB -Not showing carrier agents not as per L/C stipulated -Not showing L/C no, date & name issuing bank
For the repayment at least 21 days & at best 3 months is considered & it notify as over due Export Bill
Informed Head Office & Bangladesh Bank Overdue Export Bill outstanding
Create Forced Loan taking proper approval from the authority & informed to Bangladesh Bank It is to be found that the Negotiation between the Exporter & Importer is settling by the discount of the total export bill due to discrepancies.
Continuous correspondence with the Beneficiary to get the payment
If the payment comes then the Export Repatriation will be finished.
Negotiation of Export Documents
For Negotiation Export Documents checked whether the documents are being prepared a export L/C contract terms such as :
o Whether the export L/C contract expired. o Whether the shipment is made within shipment schedule date. o Whether the documents are presented to the bankâ€™s counter within prescribed date & the must be within L/C validity date. o Whether the B/L is state or claused o Whether the consignee & other parties as per L/C terms are being notified. o Whether description of goods as per L/C terms are made on invoice. o Whether packing list are being submitted. o Whether copy of cable/Fax/courier receipt are submitted. o Whether ERC is submitted. o Whether sample approval is submitted. o Whether export license is submitted. o Whether inspection certificate is submitted. o Whether amount shown on documents (B/E) are the same with that of EXP form after certification & invoice value certification. o Whether certificate of origin (C/O) is submitted. o Whether short shipment certificate (if the invoice value is less than the custom certified value or form is submitted). o Whether non negotiable documents are sent to buyer. Problems of Foreign Exchange: 1)
Fluctuation in Exchange Rate:
It is often found that the rate of Foreign currency is changed at the time of lodgement of import bill which increase import cost from the end of L/C opener. Anomaly between theory & practice: While handling the Foreign Exchange transaction we always follow the rules and regulations laid down in UCPDC-500, but practically we face many problems which are not integrated by UCPDC-500.
Absence of correspondent relationship: it is observed that we may have to open L/C in any country/territory where there is no correspondent relationship of our bank. In such cases L/C will have to be advised /negotiated by the suppliers bank in another territory. This creates dislocation in forex transaction.
Image problem of the country: It is found that some banks in European / American countries do not accept the L/C. of Trust Bank Ltd, rather they look for add confirmation clause which increases the cost of the importer. The banks have got adverse opinion regarding the standing / financial position of ABBL which is not correct.
Unlogical imposition of charges:
Some items the overseas banks impose different charges on the importer for various services rendered by them like credit report charge, negotiation charge etc. which appears to be at higher side which is detrimental to the importer L/C opening bank. There is no fixed schedule of charges. 6)
Implementation of policy matters: The financial authority of Bangladesh strictly implements various policy matters which are very difficult to comply with. These restrictions create negative impact on the L/C performance of our bank.
Over invoicing of the importable commodities: Sometimes the values of the importable commodities are overstated in the indent / proforma invoice. The bankers do not find any way to verify the genuineness of the quoted price. A good volume of foreign currency is drained out from the country in the above manner.
Scarcity of foreign currency: Sometimes foreign currency become scarce in the market and Bangladesh Bank do; not release foreign currency to maintain the reserve position. Therefore our bank is put in a backward position in settlement of import bills.
Difference in foreign rate among the banks: In the present open market situation different banks quote different rates for lodgement of import bills which creates an unhealthy competition among the banks.
Discrepancy in shipping document: It is often found that discrepant document arrive at the counter of L/C opening bank in the negotiated form. In this case, the importer may not accept the documents due to the discrepancies. For that reason, the L/C opening bank may have to face serious difficulties in settlement of the payment.
Recommendations of these problems: 1) 2) 3) 4)
Necessary undertaking may be obtained from the importer to cover the fluctuation in foreign exchange rate. The financial authority of Bangladesh may pursue ICC (International Chamber of Commerce) to update and modernize UCPDC-500. In addition, necessary compromising points to be explored to solve the problems practically. The international division of the bank may set up additional correspondent relationship in the potential territories on merit basis. The authority of Bangladesh should maintain necessary lobby to mitigate the image problem of the country. In addition, sound financial management of the country may solve the problem to a great extent.
The ICC & SWIFT may frame some common guidelines to nationalize the charges in international level so that no single country becomes the victim of willful increase in charges.
The Bankers may pursue the financial authorities like Bangladesh Bank, Ministry of Finance, National Board of Revenue (NBR) etc. to liberalize the policy matters so that genuine / bonafide importers do not suffer due to any adverse policy matter. Discrimination may also be put regarding the potentials / size of the importers.
The government may fix up tariff rates to prevent over invoicing. In addition, necessary data banks may be established at Govt. level to equip the bankers with the actual price of the importable commodities.
Necessary incentives may be allowed to the exporters to upgrade the reserve position. In addition, foreign currency may be allowed to come in without any hindrance. If the price can be made stable within the country, it will also mitigate the scarcity of foreign currency.
9) This is a burning issue which cannot be easily resolved. We should gain competitiveness in price management of foreign currency. 10)
The L/C opening bank may insert the clause "without the permission of L/C opening bank, discrepant documents cannot be negotiated". In addition, the L/C opening bank can refrain from giving reimbursement authority to the reimbursing bank, while opening the L/C.
Conclusion Reputed clients of the bank with a satisfactory Account transaction can apply to open L/C. for this purpose clients have to submit Clients have to submit the following Export/Import Registration Certificate (ERC/IRC) from the Chief Controller of Import & Export (CCI&E), Tax Identification Number (TIN), VAT, Insurance Cover Note. If all the necessary documents are provided to the bank will send proposal to the Head Office for approval. Back-to-Back L/Câ€™s opened of 80% value of the Master/Export l/C as directed by import policy. Exporter/Importer comes to Bank after sending the Goods/Product according to the term & condition of the Master L/C for collection of payment from the buyer. On the basis of the clients reputation regarding to get the payment from the buyer for export repatriation smoothly, bank will consider their past performance. Before sending the documents for collection, Exporter Bank/Collecting Bank must be checked/scrutinized the documents, whether all term & condition complied. The following Foreign Documentary Bill Collection (FDBC) (Comparatively Less Risk)
Foreign Documentary Bill Purchase (FDBP) High Risk ultimately that has to be covered by the Exporter/Party. If the Export Proceed realized then that have to be informed to the Bangladesh Bank in their format. If the Party deny to accepting the documents and to give the payment simultaneously due to discrepancies, then the following steps to settle the Export Proceeds. The Common Discrepancies are as follows: o o o o o o o o o o o o
Late Presentation. Export License not presented. Unit price differ from L/C. Invoice not showing actual on Board date. Inspection report-showing measurements differ from B/L. Courier Receipt-showing additional GSP No & C/O no. B/L Discrepancies. Photocopy of B/L not presented. Invoice for original presented instead of Quintuplicate. All Beneficiariesâ€™ certificate are not presented. AWB -Not showing carrier agents not as per L/C stipulated Not showing L/C no, date & name issuing bank
For the repayment at least 21 days & at best 3 months is considered & it notify as over due Export Bill Informed Head Office & Bangladesh Bank Overdue Export Bill outstanding Create Forced Loan taking proper approval from the authority & informed to Bangladesh Bank Continuous correspondence with the Beneficiary to get the payment It is to be found that the Negotiation between the Exporter & Importer is settling by the discount of the total export bill due to discrepancies. If the payment comes then the Export Repatriation will be finished.