How to import and export under Mudaraba

Import and export under Mudaraba

Mudaraba: Mudaraba is a deed on the basis of which an agreement is signed between a bank and a person (real person or a legal entity) in order to enter into a commercial (purchase and/or sale of goods) investment and jobbing transaction. In this kind of agreement and bank, as the owner, acts a the supplier of the necessary cash and the other party as the Modareb or Amel. The capital owner is the Saheb E-Mal and the capital user is called Mudareb.

All profits, earned through the relevant transactions, shall be divided between the bank and the Amel. On the winding-up of the Job, the ratios for this dividend shall be those initially agreed upon.

Terms of Operation Mudaraba :

Mudaraba transactions are allowed only where the purchase of sale of goods does not involve physical or chemical changes.

Mudaraba for purchases and sales within the country is known as “Domestic Trading Mudaraba”, for import of goods from abroad for sale in the country, “Import Mudaraba, and for export of goods out of the country “Export Mudaraba”.

The Bank may make insurance one of the conditions for the grant of facilities.

• The import Modharaba, Letter of Credit are opened by the Bank, and in the name of the Amel, in conformity with all the exchange control regulations of the country and the UCPDC issued by the ICC.
• The duration of the Modharaba shall be the date of signing of the agreement. In the case of Import Modharaba on the basis of the credits, or sight/time drafts it should not be later than the date of opening of the Letter of Credit and it should be noted that the date of drawing on the funds of the documents from the bank accounts by the correspondent is not be considered the basis for the duration of the Modaraba.
• In Modaraba transactions, the bank shall supervise the utilization of the capital, its return as well as the operational processes involved. In this respect the Amel is under obligation to maintain all documentation and sale purchase of the goods.

The amel has no right, without the agreement of the bank, to sell goods, relating to the Modaraba, on credit.

If any loss incurred in the project, in that case, the loss will be shared in full by the capital ownership of the project.

Negotiation of Export documents:

On receipt of documents, it must be checked properly and a proposal sheet would be prepared as per banks fo9rmat indicating the full particulars of shipment and discrepancies under the signature of the authorized person and should be placed to the manager/appropriate authority for disposal instruction or sanction.

While checking the following items must be taken in consideration:

L/C Terms:

 Each and every clause in the L/C must be complied with meticulously and ensure the following:

1. That the documents are not stale.
2. That the documents are negotiated within the L/C validity. If a credit expires on a recognized bank holiday its life automatically becomes valid up to the next working day. This is to be stipulated in the documentary schedule quoting the relevant article of UCPDC.
3. That the document value does not exceed the L/C value.

 Draft:

The draft is to be examined as under:

1. The draft must be dated.
2. It must be made us in the name of the beneficiary’s bank or to be endorsed to the order of the bank.
3. it must be drawn by the opening bank instead of the beneficiary of the credit as per UCPDC 500.
4. The signature of the drawer must be verified by the bank.
5. In the case of the usance bill, the requisite foreign bill stamp has been affixed as per the stamp act in force in the country.
6. Amount must be tallied with the invoice amount.
7. It must be marked as drawn under L/C No. …………… dated ……………….. issued by ……………………. bank.

Invoice :

 It is to be scrutinized to ensure the following:

1. The invoice is addressed to the importer.
2. The full description of merchandise must be given in the invoice strictly as per L/C.
3. The price, quality, quantity, etc must be as per L/C terms.
4. The invoice must be Languaged in the language of L/C.
5. No other charges are permissible in the invoice beyond the stipulation on the L/C.
6. The amount of draft and invoice must be the same and within the L/C value.
7. If L/C calls for the consular invoice, then the beneficiary’s invoice is not sufficient.
8. The required number of invoice is submitted.
9. The shipping mark and number of the packing list shown in the B/L. must be identical with those given in the invoice and other documents.
10. The invoice value must not be less than the value declared in the EXP form.
11. The invoice amount must be correct on the basis of price, quantity as per L/C.
12. Invoice amount indicates sale terms viz-FOB, CFR, CIF, etc.
13. The consular invoice must be stamped by the local consulate/embassy of the country to which the goods are imported.

Other documents:

Certificate of origin, Weight Certificate, Phytosanitary Certificate, Packing List, Inspection Certificate, Certificate of analysis and Quality certificate, etc. each of these certificates must confirm to the goods invoiced and are relevant to L/C.

Recording in the register:

After checking and disposal instruction/sanction of the competent authority the full details of the shipment and all the relevant documents are recorded in the prescribed FBP/FBN register the following particulars are to be noted:

• Date and FBP number.
• Name of the shipper/exporter.
• Name of the export goods.
• Name of the vessel.
• Name and address of the importer.
• Master L/C number and the name of issuing bank.
• EXP No. date of report, disposal of EXP-Duplicate and Triplicate, and disposal date of EPC (Export price committee) export or raw jute/ERF (Registration form for export of jute goods).
• Discrepancy if any (reference of indemnity/reserve if any).
• Amount in F.C. and taka, rate, exchange earned, etc.
• Date of reminder issued.
• Date of realization and P.R.C. (Proceeds Realization Certificate) whether issued or not.
• Date of reporting of the transaction of Bangladesh Bank (Vides- 1,2,3, etc.).

Vouchers and accounting procedure for FBP/FBN.

Dr. FBN/FBP A/C @ OD sight export.

Cr. F.C. held against BB L/C.

Cr. Marginal deposit A/c.

Cr. Pre-shipment A/c.

Cr. Investment income A/c (P.C.)

Cr. BAIM WES Bills A/c.

Cr. Hire purchase Ind. A/c.

Cr. P&T Recovery A/C.

Cr. Telex recovery A/c.

Cr. Local agent commission (issued pay order)

Cr. FCAD/FC A/c.

Cr. Govt. Tax A/c.

Cr. Party’s CA A/c (Rest amount).

Example: Document value USD 10,000/- @ OD sight export.

NB: F.C A/C maintained as per Bangladesh Bank Circular for 100% export-oriented industry @ 10% for Travel, overseas office establishment or Export fare in abroad, etc.

Disposal of FBN/FBP documents:-

Before despatch:

 Rubber stamp must be affixed on all the documents mentioning the FBN number

• Endorse the draft, B/L, Insurance policy in favor of foreign correspondent as per L/C terms.
• Prepare the forwarding schedule in five copies in the printed format. In this schedule the detailed of discrepancy if any must be mentioned.
• The documents are to be despatched as under:-

1. 1st mail original documents under the original bank forwarding schedule by courier service.
2. ii) 2nd mail duplicate set of documents under the duplicate bank forwarding schedule by courier service as per L/C terms.

iii)      3rd copy of the schedule is forwarded to the Head Office International Division.

1. iv) 4th copy is for record in the FBN file.
2. v) 5th copy is used if necessary as a tracer or reminder.

Payment:

 Payment if not done as per tenor of the draft, the matter must be brought to the notice of the foreign correspondent to ascertain the fate and or the reason for non-payment. The exporter should also be informed in the matter to pursue the buyer for early payment. If payment is delayed beyond the tenor period the foreign correspondent may claim penal interest form the issuing bank for the delayed period. If a sight bill is not paid within 21 days from the date of purchase/negotiation the negotiating bank realizes overdue interest from the beneficiary of the draft for the delayed period after 21 days at the prescribed rate. In the case of usance bill overdue interest is claimed for the period of delay for payment from the maturity date.

The credit of export proceeds in the Nostro A/C (With AEBL, NY)

After negotiation of the documents, reimbursement must be claimed to the designated bank of the issuing bank as per L/C terms for crediting the export proceeds to the Nostra A/C of the negotiating bank with a specified bank mentioned in the documentary schedule. When credit advice is received by the bank the entry is to be passed as under:-

Dr. SIBL General A/C H.O. ID (by Mid rate)

Cr. FBN A/c.

Cr. Exchange A/c.

When bill negotiated under reserve:

Dr. FBN A/C.

Cr. F.C. held A/C.

Cr. Marginal Deposit A/C.

When realized the proceeds then the following vouchers should be passed:

Dr. Marginal Deposit A/C.

Cr. Pre-shipment A/C.

Cr. Income A/C (PC).

Cr. Baim Wes Bills A/C.

Cr. Hire purchase Ind. A/C.

Cr. P&T Recovery A/C.

Cr. Telex Recovery A/C.

Cr. Payment order A/c (local agent commission).

Cr. Party’s A/C (Rest amount).

Cr. Govt. Tax A/c.

Dr. EXIM BANK, General A/C HO, ID.

Cr. FBN A/C.

Cr. Exchange A/C.

When the export document sent on a collection basis. In that case, the following voucher should be passed:

Dr. Foreign bill lodged A/C.

Cr. Foreign Bill collection A/c.

 When FBC realized, the vouchers as under:

Dr. IB General A/C, HO, ID.

Cr. Marginal Deposit A/c.

Cr. F.C. held A/c against B/B L/C.

Cr. Pre-shipment A/c.

Cr. Investment Income A/c.

Cr. BAIM WES Bill A/c.

Cr. Hire purchase Ind. A/c.

Cr. P&T A/c.

Cr. Telex recovery A/c.

Cr. Pay order A/c (Local agent commission).

Cr. Govt. Tax A/c.

Cr. Exchange A/c.

Cr. F.C A/c.

Cr. CA A/c (Rest amount if any).

Checking of credit advice:

It must be checked to see the date of credit or the value date of the credit to the amount and the amount of credit. If there is any shortfall then the amount of draft claimed, it is to be referred to the Bangladesh Bank at the time of reporting the triplicate copy of the EXP form.

Reporting of transaction:

The EXP form is reported as under to the Bangladesh Bank:

1. The original copy is to be forwarded by the customs authority to the Bangladesh Bank.
2. Duplicate EXP duly certified by the bank must be submitted to Bangladesh Bank along with one copy of the invoice by the negotiating Bank.
3. The triplicate copy will be reported to the B. Bank along with monthly returns after the realization of proceeds.
4. A quadruplicate copy is retained by the Bank in the FBP file for their record.

Issuance of PRC:

Sometimes exporters are required to submit to the various Govt. Agencies evidence of goods and realization of their proceeds. In such cases proceeds realization certificate (PRC) may be issued.

Negotiation/purchase of bill without L/C:

In our country exports are also made on the basis of the contract between the buyer and the seller without the cover of L/C. In such a case, documents are delivered to the buyer through the intermediary of the foreign correspondent of the A.D. against payment. Limit (post-shipment finance) is usually sanctioned from Head Office to such exporters to boost up the export of the country.

The document sent on a collection basis:

When the bank refuses to negotiate the document due to major discrepancies, the bill is sent by the bank on a collection basis under written instruction from the beneficiary. To handle such transactions as per ICC Publication No. 522 named “Uniform Rules for Collection”.

Consignment basis exports:

This is an agreement between the buyer and seller under which goods are exported consigning the importer who also acts as an overseas agent of the exporter. The actual sale takes place only in the country of the importer. The overseas importer receives shipping documents without payment and takes delivery of goods from the port of destination. After the sale of goods, the proceeds are sent to the beneficiary through the bank. On consignment basis shipment the importer is acting as an:

1. i) Agent of the seller.
2. ii) Remitter of proceeds.

In the non-traditional goods exported on a consignment basis such as vegetables, fish, wood bamboo products, etc., and other items of perishable nature.

All the necessary documents are sent to the foreign bank as per the instruction of the exporter on a collection basis.

EXP requirement:

All export from Bangladesh must be declared by the shipper on EXP forms to the bank enabling them to submit the duplicate within 14 days from the date of shipment.

The shipper is required to repatriate the export proceeds within 4 months from the date of shipment otherwise penalty is imposed upon them. A careful watch is to be kept to ensure that the sale proceeds are received on the due date. A due date diary must be maintained to pursue the individual case.

Export Document Purchased:

Dr. FDBP (Foreign Documentary bill for Purchase) @ OD sight Export (Purchased only 20% of the total bill).

Cr. Party’s A/C Tk.

Cr. F.C. or other A/C Tk.

After realization of the export proceeds, the following vouchers are to be passed:

100% Dr. ETDA- HO @ TT Clean rate F.C.- Tk.

(Exchange Transaction Debit advice).

20%   Cr. FDBP (Foreign Documentary Bill for payment)

Reversal of origination entry.

80%   Cr. Sundry Deposit A/C- FCBPAR @ TT clean rate.

For BTB Bill portion.

Cr.     Income A/C- Exchange.

(for value added portion) i.e. 20%.

Cr.     Other A/C if any.

NB:    If TT clean buying rate is changed during the period from the date of purchase to the date of realization, 2 (Two) ETDA should be sent to HO.

• ETDA at TT clean rate as on the date of FDBP for the purchased amount 20% and
• ETDA at prevailing TT clean rate as on the date of realization for the balance amount 80%.
• If not changed the TT clean rate one ETDA shall be sent to HO for full amount.
• Separate Ledger for FC & Tk. and party’s wise FC only should be maintained.

For collection Export Documents:

Liability voucher should be passed i.e.

Dr.     Foreign Documentary Bill Lodgement A/C (FDBL) Tk.

Cr.     Foreign Documentary Bills for Collection (FDBC) Tk.

(@ TT Documentary buying rate)

The branch shall send the document to the L/C opening Bank.

 At the time of realization of the collection Export Proceeds:

Dr.     FDBC Tk. (Reversal of Originating entry).

Cr.     FDBL Tk.

Dr.     ETDA Ho A/C FC Tk.

@ TT clean rate.

Cr.     Sundry Deposit A/C – FCBPAR (80%)

@ TT clean rates FC-Tk.

(For BTB payment purpose)

Cr.     Party’s A/C (TT Documentary rate)

PC/Project/CC etc.

Cr.     Income A/C (Exchange)

(Difference between TT clean and TT Documentary for a value-added portion).

Cr.     Other A/C if any.

Export Document Purchased:

Dr.     FDBP (Foreign Documentary Bill for Purchased) @ OD sight Export.

(Purchased only 20% of the total bill)

Cr.     Party’s A/C Tk.

Cr.     F.C. or other A/C Tk.

After realization of the export proceeds, the following vouchers are to be passed:

100% Dr. ETDA-HO @ TT Clean rate F.C.- Tk.

(Exchange Transaction Debit Advice).

20%   Cr. FDBP (Foreign Documentary Bill payment)

Reversal of originating entry.

80%   Cr. Sundry Deposit A/C- FCBPAR @ TT clean rate.

For BTB Bill portion.

Cr.     Income A/C- Exchange.

(for value added portion) i.e. 20%

Cr.     Other A/C if any.

NB: If TT clean buying rate is changed during the period from the date of purchase to the date of realization, 2(Two) ETDA should be sent to HO.

• ETDA at TT clean rate as on the date of FDBP for the purchase amount 20%.
• ETDA at prevailing TT clean rate as on the date of realization for the balance amount-80%.
• If not changed the TT clean rate one ETDA shall be sent to HO for the full amount.
• Separate Ledger for FC & Tk. and party’s wise FC only should be maintained.

For Collection Export Documents:

Liability voucher should be passed i.e.

Dr.     Foreign Documentary Bill Lodgement A/C (FDBL) Tk.

Cr.     Foreign Documentary Bills for Collection (FDBC). Tk.

(@ TT Documentary buying rate)

The branch shall send the document to the L/C opening Bank.

At the time of realization of the collection Export Proceeds:

Dr.     FDBC Tk. (Reversal of Originating entry).

Cr.     FDBL Tk.

Dr.     ETDA HO A/C FC Tk.

@ TT Clean rate.

Cr.     Sundry Deposit A/C- FCBPAR (80%).

@ TT Clean rates FC- Tk.

(For BTB payment purpose).

Cr.     Party’s A/C (TT Documentary rate)

P/C/Project/CC etc.

Cr.     Income A/C (Exchange)

(Difference between TT clean and TT documentary for a value-added portion).

Cr.     Other A/C if any.