Import Trade (LC) Full Procedure (Chapter III)

Import Trade  (LC) Full Procedure

Introduction

Import Trade of Bangladesh is controlled under the Import & Export control Act 1950. Authorized Dealer Banks will import the goods into Bangladesh following import policy, public notice, F.E circular & other instructions from competent authorities from time to time.

Classifications of importers

Goods are being imported for personal use, commercial purpose or industrial use. So, there are three kinds of importers such as:

1.      Personal importer.     2.      Commercial importer.   3.      Industrial importer.

 Registration of importer

In terms of the importers, Exporters and Indenters (Registration) order, 1981 no person can import goods into Bangladesh^: unless he is registered with the Chief Copmtroller of Import & Export or exempted from the provisions of the said order. So if some one wants to import some gd_s for his personal use  he needs no registration to import the goods but commercial & industrial importer must have registration from CCI & E.

Procedure for Registration

To obtain Import Registration Certificate (IRC), the applicant will submit the following paper/documents to the CCI & E through his nominated Bank.

I. Questionnaire duly filled in & signed by the applicant.

2.      Trade license.

3.      Members from chamber of commerce or any other trade Association.

4.      Nationality certificate.

5.      Income tax registration certificate.'

6.      Partnership deed/Certificate of registration with the register of joint stock companies where applicable.

On being satisfied, the CCI & E issues  IRC obtaining original copy of treasury Challan for payment of registration  fee.

Pass Book

CCI & E also issues pass books to the registered importers. When it is issued to an industrial consumer, it gives the items of import, as raw and packing materials and spare parts, the value of entitlement and HS code classification. When issued to a commercial importer, gives the category held by him with EIS code classification or open to any item, as per import policy.

Preparatory Steps for opening L/C

Before opening the L/C Bank will takes the following Steps:

(1)   Applicant to be Bank's A/C Holder: Bank will open the L/C on behalf of a person who has a account with the Bank. Unknown person will not be allowed to open L/C.

(2)   Registered importer: Before opening the L/C Bank must confirm that the L/C applicant is a registered importer or personal user, and the IRC of the importer has been renewed for the current year.

(3)   Permissible item: The item to be imported must be permissible and not banned item. If the item is from conditional list, the condition must be fulfilled to import the same.

(4)   Market Report: Bank will verify the marketability of the item & market price of the goods. Sometimes the importer may misappropriate the Bank's money through over invoicing.

(5)   Sufficient Security or margin: Price of some items fluctuates frequently. In case of those items Bank will be more careful to take sufficient cash margin or other security. Bank will also follow Ban^gladesh Bank's Instructions from time to time.

(6)   Business Establishment: Bank should not open an L/C on behalf of a floating business man. The importer must have business establishment, particularly he must have business net work for marketing the item to be imported.

(7)   Restricted Country: Goods not to be imported from Israil.

 (8) Credit report of the beneficiary: Suppliers credit report is mandatory if the amount of Lc exceeds---USD 10,000 PI and above, Indenter  for USD   20,000.  Any reputed  credit Rating Agency may give credit report.

 (is mandatory. The report will remain valid for one year.

 (9) Application of the client to open the L/C: The client will approach to open the L/C in Bank's prescribed form, duly stamped & signed, along with the following papers & documents.

             I) Indent/proforma invoice

              II) Insurance cover note with money  receipt.

             III) LCAF duly filled in & signed.

                  IV) Membership certificate from chamber of commerce/Trade Association.

               V) Tax payment certificate/declaration.

            VI) IMP & TM form signed by the importer

             VII) Charge documents.

            VIII) IRC, Pass book, Trade license, Membership certificate & VAT registration certificate in case of        

            new client.

           XI) Export L/C in case of Back to Back L/C.

I0. Permission from Ministry of Commerce: If the goods to (imported under CIF (cost insurance & freight), then permission from ministry of commerce to be obtained.

11. Creditability of the Client: In consideration of all the above points, if Bank becomes satisfied regarding the client then L/C may be opened on behalf of the client. Before opening the L/C Bank will issue & authenticate a set of LCAF in the name of the importer.

 Authentication/Registration of LCA form:

 When the importer submits LCAF (letter of credit Authorization form) with other paper to the Bank and approach to open an L/C, Bank will authenticate the LCAF. Confirming the following:

1. IRC renewal fees paid by the importer.

 2. Item to be imported is eligible as per import policy/pass book of the importer.

3. LCAF is duly filled in and Signed by the importer.

If Issuing Bank required to purchase Foreign Currency from Bangladesh Bank for making payment of the concerned import, the Bank will send the LCAF to Bangladesh Bank Registration unit for registration. If the Bank needs no fund from Bangladesh Bank, registration is not required.

On obtaining full set of LCAF from Issuing Bank, Bangladesh Bank will:

a) Insert Registration number.

b) Emboss with security seal &

 c) Put authorized signature on the LCAF.

Distribution of LCAF Original:

This is Exchange monitoring copy to be sent to Bangladesh Bank, while reporting payment of the import or to be preserved at the branch for Bangladesh Bank auditing. Duplicate: This is the custom purpose copy, to be used for clearance of the consignment.

Triplicate & Quadruplicate: These two copies to be sent to CCI & E's office.

Quintuplicate: Registration unit of Bangladesh Bank will obtain this copy, other copies will retain with the branch.

 LCAF remains valid for remittance for one year. However, in case of capital machineries & spare parts it remains valid for remittance for 18 months.

Important points  to prepare an L/C:

The ADs should take care on the following points:

(1) L/C Number: ADs will put a number for each L/C, which is the serial number of the L/C for a particular year. The number to be of 12 Digits. 1st 4 Digits for AD's Code, 2nd 2 Digits for the respective year, 3rd 2 Digits for Nature of the LC and last 4 Digits for Serial Number of the L/C. First Foreign Cash L/C of Islami Bank Bangladesh Ltd., Paltan Branch, in 2020 may be numbered like "0885 20 01 0001.

(2) Place & Date of Issue: L/C must indicate the place and date of issue.

(3) Date & Place of Expiry: L/C must have an expiry date. This is the last date of presentation of document under   the L/C. Place of presentation is the place of Bank with  which the credit is available in addition to the place of issuing Bank

.

(4) Shipment date: There should be a last shipment date after which shipment is not allowed. Bank may also fix-up a first shi ment date before which shipment will not be allowed.

5. Presentation period: Issuing Bank will allow a period within which exporter must present the export documents to the negotiating Bank or to any other nominated Bank. Presentation must not be made later than 21 days from the date of Shipment and not later than the expiry date.

(6) Applicant: Name of the applicant with business address to be put in the L/C.

(7) Beneficiary: Name of the beneficiary with address also to the indicated in the L/C.

(8) Advising Bank: Name of the advising Bank with address to be mentioned in the L/C.

(9) Amount: Every L/C must show the amount of the L/C. The word "About” may be used with amount, which means 10% more or less of the said amount.

 (10) Part-shipment & Transshipment: Issuing Bank also clearly indicate in the L/C, whether part-shipment & Transshipment is allowed or not.

(11) Availability: L/C must indicate whether the credit is available by sight payment, deferred payment, acceptance or negotiation.

(12) Port of shipment & port of destination: L/ will also indicate from where shipment to be made & where  goods to be delivered.

13) Tenure of the Draft: Whether the draft to drawn at sight or usance, also to be cleared in the L/C.

(14) Documents required: Bank will give the list of required documents & data content there in. Each &  every term must be supported by documents. Because any term without asking document is valueless.

(15) Payment: When & where, by whom payment to be made, also to be indicated in the L/C.

(16) UCP: Bank will incorporate the reference of UCP 600 in the L/C, for its application in all the operation of the L/C.

 (17) Bill of lading: B/L must be issued or endorsed to the order of the Issuing Bank. It should be 'clean' and "freight prepaid" if L/C is on CFR  basis. Short form & charter party B/L to be avoided. All these terms to be incorporated in the B/L clause of the L/C.

(18) Bill of exchange: Bill of Exchange to be drawn on the issuing Bank.

(19) Pre-shipment Inspection: Pre-shipment inspection certificate is compulsory for both govt and private importt except in few cases.

 (20) Data content: Invoice & other documents if required should indicate the H.S code number, LCAF NO. with description of the item & country of origin.

(21) Special conditions: Special conditions, such as in case of food, machineries, vehicles and any other items should be incorporated in the L/C, where required.

(22) Authenticity of the credit: L/C to be authenticated by putting a test number or signing by two authorized officers or Auto authenticated by SWIFT.

Issuance/ Transmission of LC

Authorised dealer will scrutinize the LC application with all related papers. If it becomes satisfied, it will put a number for the L/C and will entry the L/C in the L/C opening register with particulars of the L/C. Non AD branch will forward and open the L/C through an AD branch.

Particulars of the L/C should be noted on the back of LCA as under "Opened L/C No…..   dated  …. for F.0     equv to Tk. …  balance is Tk.  

Realization of Bank charges: Every Bank has its own L/C opening Commission, fixed by the Head office. Normally there is a particular percentage of commission for the I.st, quarter (90 days from the date of opening to the date of expiry and for the subsequent quarter of the L/C. Telex, SWIFT, and Foreign Correspondence charges, where required, are to be realized from the applicant.

L/C Amendment:  Irrevocable letter of credit may be amended against applicant's written application, with the joint consent of all the parties involved in the documentary credit operation. L/C to be amended before it's expiry date only. Dispatch or transmission of the amendment is not sufficient to become the amendment effective. Amendment becomes effective, upon beneficiary’s acceptance of amendment or upon his tender of complying documents under the amended credit to the Nominated Bank. Shipment date & expiry date of the L/Cs may be amended if relevant LCA, permit, remain valid up to that period. L/C amount may be decreased with the consent of the beneficiary. Numbering of amendments may be done but it is not mandatory.

 Accounting Procedure for Opening L/C

 At the time of opening L/C bank will pass contingent liability voucher and will realize cash security and bank charges from the client.

In case of amending the L/C to increase the value or extending validity of the L/C for subsequent quarter following procedure to be maintained.

a. Contingent Liability Voucher: Original contingent (liability voucher to be reversed & fresh contingent liability voucher, including the increased amount to be passed.

b. Charges Realization Voucher: Commission for increased amount & for subsequent quarter along with telex & other charges to be realized from party's account.

Debit: Asset as per contra Import LC

Credit: Liability as per Contra Import LC

For Charges and commission:

Debit: Party Account

Credit: Income Account( LC commission Charges)