Import-and-export-finance-under-Islamic-mode

Import and export finance under islamic mode

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Import and export finance under Islamic mode

Foreign Exchange deals with Foreign Trade & Foreign Remittance. Foreign Trade as well as Import & Export. Foreign Remittance as well as Inward Remittance & Outward Remittance.

Foreign currency instruments such as Foreign draft, Traveler’s Cheque, Bill of Exchange, MT, TT and P.O. etc.

Currency Exchange means the conversion of one currency into another currency. Islamic Bank also deals in all sorts of Foreign Exchange Business/Transactions including sale/purchase of currency notes T.C. and dealing room operation etc.

An Islamic Bank maintaining different F.C. A/Cs as usual as per Bangladesh Bank Circular such as:-

  1. Non Resident F.C. Deposit A/C
  2. Education F.C. A/C
  3. Convertible & non convertible Taka A/C
  4. Private Non Resident Taka A/C
  5. F.C. (Private Foreign Currency) A/C
  6. RFCD A/C
  7. FCAD Retention Quota (Export) A/C
  8. Normal F.C. A/C

An Islamic bank is giving some profit to the F.C. A/C holder. Islamic Bank is also maintaining credit card & debit card/ATM etc. Islamic Bank is a financial institution to implement and materialize the economic and financial principles of Islam in the banking arena. Islamic bank is committed to conduct all banking and investment activities on the basis of Islamic Shariah, profit loss sharing system.

An Islamic Bank is committed to do away with disparity and establish justice in the economy, trade, commerce and industry, build socio-economic infrastructure and create employment opportunities.

  1. Import Financing by Islami Bank:
  2. Murabaha L/C.
  3. Murabaha Bill of Exchange (MBE)
  4. Murabaha Post Import (MPI).
  5. Baimuazzal (P.C.).
  6. Hire Purchase.
  9. LTR (Letter of Trust Receipt) (MTR)
  10. Bai-Salam.
  11. Quard-E-Hasana (Interest-free-loans).
  13. Wazirat Bill Wakala (ECC)
  14. Izara Bil Baia (Term Loan)
  15. MIB (Mudaraba Import Bills)

 

IMPORTANT FEATURES

–    Cost of the goods sold and the amount of profit added herewith should be made known to the client.

  • Bank procures and stores the goods, in its own or hired godown.
  • Delivery of the goods to the client is made only against payment of cost plus profit either at a time or in installments as agreed upon.
  • On expiry of the stipulated period, Bank can charge compensation and dispose of the goods at its own discretion.
  • Examine Shariah permissibility of the items. Reject proposal outright if not permitted by Shariah.

 

  1. Murabaha Letter of Credit

A letter of Credit is a conditional bank undertaking of payment. In other words Letter of Credit is a Letter from the importer banker to the exporter that the bills if drawn as per terms and conditions are compiled with will be honoured on presentation.

Following papers/documents to be submitted by the importer before opening of the L/C:

  • Trade Licence.
  • Import Registration Certificate (IRC).
  • Income Tax Declaration with TIN.
  • Membership Certificate.
  • Memorandum of Articles and Association (Incase of Ltd. Co.).
  • Registered deed (Incase of Partnership Firm).
  • VAT Registration.
  • Insurance cover note with money receipt.
  • Indent/Proforma Invoice.
  • Fire Insurance of the factory.

Bank will supply the following papers/documents before opening of the L/C:

  1. L/C application form.
  3. IMP Form.
  4. TM Form.
  5. Murabaha Agreement.
  6. Charges Documents.
  7. Letter of Guarantee (in case of need)

The above papers must be completed duly filled and signed by the party and to be verified the signature.

Accounting procedure for opening L/C:

Dr. Assets as per contra (L/C Cash).
Cr. Liability as per contra (L/C Cash).

Dr. F.C. Deposit (WES Fund held A/C).
Cr. F.C. Deposit (WES L/C cover A/C) If the fund is purchased at the time of opening L/C.

Dr. Party’s A/C.
Cr. Sundry Deposit (Security Deposit L/C WES) A/C.
Cr. SWIFT Charge  A/C.
Cr. Commission A/C.
Cr. P & T A/C.

Dr. Murabaha Import L/C (Including Receivable profit) (If fund purchased at the  time of opening L/C.
Cr. WES Fund purchased A/C.
Cr. Profit receivable A/C.
Dr. Profit Receivable A/C (Monthly daily product basis).
Cr. Investment Income A/C.
Lodgement/Retirement

When the documents are received from the Foreign correspondent and checked with L/C file by two persons to ascertain the correctness, if it is found in order at that time make entry in the bill register and pass the necessary voucher (Reverse the liability entry). This process is known as Lodgement. Documents must be lodged within 72 hours (as per UCPDC-5 working days.

When the party retires the documents by cash payment or by MPI (Murabaha Post Import), Mudaraba, Musharaka, Baimuazzal or T.R. Arrangement is known as retirement.

Checking of Document

Before lodgment, documents must be checked with the L/C file as under:

  • Bill of Lading.
  • Bank Forwarding Date.
  • Packing List.
  • Inspection Certificate.
  • Radiation Free Certificate (In-case of food items) etc.

Maintenance of Register

Give serial number of the documents according to the entry in the relevant bill register. Full particulars of all the documents are recorded including the details of shipment, merchandise and amount etc. The import Bill Register must be marked of with the notation “PAID” showing the date of payment when the documents are retired by the importer against payment.

Application of rate: B.C. Selling rate.
Exchange control from: IMP & TM Form.
Endorsement of LCAF:
Document must be kept under lock & key of the Bank with under the custody of a responsible officer. Bank issues a letter to the party for retirement of the documents.
Accounting procedure of lodgment:

Dr. Liability as per contra A/C.
Cr. Assets as per Contra.
Dr. Bill of Exchange A/C.
Dr. F.C.C. A/C.
Cr. S.I.B. General A/C (H.O, ID.)

Reporting:

After completion of the above procedure the relevant exchange control forms (for bill value IMP & for F.C.C, TM from) prescribed by the Bangladesh Bank Exchange Control Department vide Schedule No. S-1,  S-3.

Retirement:

The importer must retire all the import bills immediately after receipt against payment.
Dr. F.C. Deposit (WES L/C cover)
Cr. Bill of Exchange A/c.
Cr. F.C.C. A/c
Tk. Voucher: Dr. Party’s A/c.

Dr. Security Deposit A/c.                                             Dr. Party A/c
Cr. Murabaha Import Bills.                                            Dr. Security Deposit A/c
Cr. Income A/c.                                                       Cr. IBCA (ID, H.O)
Cr. Commission A/c.

Cr. P&T, Recovery A/c.

Documents must be not handed over to the importer without payment or without making any arrangement for disposal.

  1. Murabaha post Import Finance:

After shipment of goods the importer requests the Bank in the respective Banks printed format for clearance of goods from the port. Before clearance bank charges further margin to cover the duty/sale tax etc. A definite repayment schedule is given to the importer for retirement of documents or to take delivery of goods from the banks custody against payment.

  1. LTR (Letter of Trust Receipt)

Like MPI, while applying for LTR facilities the importer is to offer sufficient tangible securities as acceptable to the bank eqv. to loan amount.

Dr. LTR A/c                                                          Dr. LTR A/c (Profit Mark-up)
Cr. W.F. Purchase A/c (Profit .                               Cr. Profit Receivable A/c
Cr. Income A/c.                                                      Dr. LTR A/c (Murabaha)
Cr. P & T A/c.                                                   Cr. IBCA (ID, HO)

Dr. Profit Receivable A/c.
Cr. Income A/c. (monthly, daily product basis).
If Rebate:

Dr. Income A/c (If realized excess from profit Receivable).
Dr. Profit Receivable A/c.
Cr. Murabaha Import (MPI, Bill, TR, L/C) or party’s A/c.
To purchase fund the following entry should be passed:

Dr. Murabaha Import (MPI) A/c, Bills L/C/MIB
Cr. WES fund purchase (CFR amount + FCC @ B.C. selling Rate)/IBCA (ID) Taka  voucher.
Cr. Other  charges (if any).
Dr. F.C. Deposit (WES fund held) A/c. (Bills/ L/C)
Cr. F.C. Deposit (WES L/C cover) A/c

Following vouchers to be passed during lodgement:
Dr. Bill of Exchange A/c.                                   Dr. MPI/MIB A/c
Dr. F.C.C A/c.                                                   or
Cr. S.I.B. General A/C, HO, ID                            Cr. IBCA (ID, Tk, US$
F.C. Voucher:                                       (Authority will give to Nostro Bank)
Dr. F.C. Deposit (WES L/C Cover) A/c.
Cr. Bill of  Exchange A/c.
Cr. F.C.C. A/c.
Dr. Liability as per contra (L/C WES).
Cr. Assets as per contra (L/C WES).

L/C opening time, the following voucher to be passed:

Dr. Assets as per contra (L/C WES).
Cr. Liability as per contra (L/C WES).

If the party purchase fund at the time of opening L/C then the profit marked-up must be calculated on total landed cost from the date of opening of L/C. Fund will be purchased by debiting Murabaha Import (MPI) A/C.

If the party does not agree to purchase the fund at the time of opening of L/C, in that case fund will not be purchased. Security money may be realized @ 10% or 20% as per agreed rate on CFR value.

If the party has agreed to allow MPI in bills stage, then the rest amount at 30% cash security must be realized on total landed cost including duty and sale tax etc.
If the party purchases the fund at the time of opening L/C, then the security money will be realized on total landed cost.

File Should be maintained in separate way:
Murabaha MPI application other charges documents, sanctioned advice kept in this file. File number must be same as per L/C number.
Sanctioned advice may be issued when the duty figure will receive from the port branch.

All other expenditure will be debited from Murabaha import (MPI) A/C. Profit must be calculated on total landed cost after deducting cash security money.

Dr. Murabaha Import (MPI) A/c/Bills/L.C.
Cr. Profit receivable A/c.
Now Monthly realized the profit as per daily product basis i.e.
Dr. Profit receivable A/c.
Cr. Income A/c.
If the importer retire the documents on payment of banks dues. Before due date. In that case rebate may be allowed.

If the importer take delivery of the goods on payment of banks dues before due date, In that case rebate bay be allowed.

  1. Baimuazzal (P.C.):

It is a contract in which a client wishing to purchase raw materials, finished goods, commodities, Spares, Machineries, equipments or any other goods request the Bank to procure the items and sell them to him at a price payable at a future date in lumsum or in installments.

  • It is a credit sale. Ownership and possession of the goods is transferred by the Bank to the client before receipt of sale price.
  • Sale price of the goods is payable by the client at a specified future date.

Documentation:

  • P. Note.
  • P. Note Delivery letter.
  • Baimuazzal Agreement.
  • Letter of Hypothecation.

Accounting:

Dr. BAIM Investment A/c.
Cr. Payment order A/c favouring seller of the goods.
Cr. Profit Receivable A/c.
Dr. Party’s A/c.
Cr. BAIM Investment A/c.
Cr. Investment Income A/c.

Dr. Profit Receivable A/c.
Cr. Income A/c. Monthly product basis.

Insurance must be made by the party.

  1. Hire Purchase (Machinery/Bus/Car):

It is a contract under which the Bank invests in equipment, Machinery, Transport or other durable article for the client against an agreed rental together with on `undertaking from the client to make full payment of price to the Bank of periodical installment for the purpose of essential purchase of the concerned rented article.

Bank retains ownership of the asset and is entitled to receive agreed rental until full payment of purchase price thereof by the client is meant up.

Possession of the asset is passed on to the client for his exclusive use. Bank as the owner and the client as the hirer.

In case of Hire purchase, the hirer acquires ownership of the asset on full payment of agreed value but in case of leasing operations, ownership of asset is not transferred to the lessee.

  1. Musharaka:

It is a contract under which the Bank invests in partnership basis i.e. “partnership business”. Share of the partner may be equal or share may involve any amount.

Profit will be distributed among the partners as per agreed ratio and loss will be shared as per capital ratio.

Both the party may be involved in the business but it is not mandatory.

  1. 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, the bank, as the owner, acts as the suppler of the necessary cash and the other party as the modhareb or amel. Capital owner is the Saheb E Mal and capital user is called Mudareb.

All profits, earned through the relevant transactions, shall be devided 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 transaction are allowed only where the purchase or sale of goods does not involve any physical or chemical changes.

Mudharaba for purchases and sales within the country, is known as “Domestic Trading Mudharaba”, for import of goods form 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 Mudharaba, Letters 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.

Duration of the Mudharaba shall be the date of signing of the agreement. In the case of Import Mudharaba 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 are not be considered the basis for the duration of the Mudharaba.

In Mudharaba transaction, the bank shall supervise the utilization of the capital, its return as well as the operation processes involved. In this respect, the amel is under obligation to maintain all documentation and sale or purchase of the goods.

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

If any loss incures in the project. In that case loss will be shared in full by the capital owner of the project.

  1. Bai-Salam:

This is a deferred delivery transaction under which banks may finance for purchases on a client’s behalf. There is a distinction drawn between such purchases and future trading which is regarded as speculative and therefore, prohibited. Under a forward purchase the bank pays for the commodity being traded on behalf of the import agent or whole seller who will repay the bank when resells the merchandise to the retailer or final customer. The banks can pre-purchase the future output of the firms at agreed price with specifications of the goods and stipulated time/date of delivery. They, however, cannot sell the product until they have taken physical possession by many other banks.

  1. Quard -e -Hasana (Profit Free-Loans)

Most Islamic banks also provide profit-fee loans (quard Ehasana) to their customers. However, practice differs in this respect. Some banks provide the privilege of profit-free loans to the holder of investment accounts at the bank. Other banks provide profit-free loans to needy students and the economically weaker sections of society. Yet others provide profit-free loans to small producers, farmers and entrepreneurs who are not qualified to receive financing from other sources. The purpose of these profit-free loans is to help them to become independent or to raise their incomes and standard of living.

Second-Helping to increase production with due emphasis on agricultural, levestock, and industrial production.

  1. “Ijtishna” Mode of Investment

The word “Ijthishna” has derived from SANA-AA.

Which means manufacturing and construction.

*Value/Price is to be paid before delivery of goods.

*Both delivery and price may be deferred as per HANAFI School of thought.

Risk and conversion both are permitted.

Goods may be fungible or non-fungible.

  1. IZARA BIL BIA

MEANING:

Izara Bil Bia is a mode of investment under which the Bank as per contract shall invest for purchasing durable assets like Machineries, Equipment, Transport, Land and Building etc. along with the client with the stipulation that the client shall pay off the rent at the agreed rate on the outstanding equity of the Bank together with the installments of principal amount of equity of the Bank for the purpose of eventual ownership of the concerned asset.

FEATURES:

  • The Islami Shariah principle of investment under Izara Bil Bia is Musharaka Mutanakasha which means the rent shall be devisable as per equity involved, unpaid rent if any shall not be treated as equity and the asset shall be acquired on participation ownership.
  • Possession of the asset shall be passed on to the client for use as per practicability.
  • Bank shall retain the ownership till payment of equity portion of the Bank along with rental.
  • The ownership of the asset shall gradually pass on to the client upon payment of Bank’s equity involved and on the reverse upon increase of client’s equity.
  • Rent shall not be compounded in any case i.e. no rent shall be charged on unpaid/outstanding rent. Incidence of rent shall be reduced proportionately with the reduction of equity of the Bank on payment of installment by the client.
  • Since it is a kind of Musharaka, cash can be paid to the credit of clients account. However, the purpose for which cash is disbursed must be ensured from the point of Banking.
  • In case of need the equity portion may be increased or decreased by making lump sum payment by either side. Very often the client may require funds to run the equipments/machineries for short period as working capital which may be paid to the debit of respective Izara Bil Bia Account if found feasible and covered by the value of assets.
  1. WAZIRAT BIL WAKALA (WBW)

Role                             :           Bank as Agent (Al Wakalah Basis)

Meaning                        :           A Bank under Islamic Shariah can act as an agent of the customer and can carry out the transaction on their behalf. Moreover it can charge agency fee for the services.

The Agency fees can be charged in the following cases:

  • Payment/receiving of cash on behalf of the customer.
  • Inward bill of collection
  • Outward bill of collection
  • L/C opening and acceptance
  • Collection of export bills/bills of exchange.

In this case the undertaking or guarantee commission and take up commission can be realized.  Bank will charge an agency fee for accepting of the bills, which is bought at face value.

  • Underwriting & IPO services; Role of the Bank as Guarantor.

The bank or financial institute gives a guarantee on behalf of its customer but according to Shariah, guarantee fee can not be charged. Normally conventional banks charge fee on Letter of Guarantee, Shipping Guarantee, Admissions Services etc.

Most of the advisory services provided by the financial institutes can be carried out easily in compliance with Shariah as long as the nature of business is halal.

  • Financial Advisory Services
  • Privatization Advisory Services
  • Equity Placement
  • Merger and acquisition advice
  • Venture capital
  • Trading (capital market operations)
  • Cash and portfolio management advice.
  • Brokerage services (Purchase and buying of share of companies involved in halal business, a fee could be charge for it)
  • Other allowed Islamic financial services and products
  • Remittance
  • Zakat deduction
  • Sale and purchase of foreign currency and travelers cheques.
  • ATM Service
  • Electronic Online Transfer
  • Telegraphic Transfer
  • Demand Draft
  • Pay Order
  • Lockers & custodial services
  • Syndicate fund arrangement service
  • Opening of Bank account
  • Clearing facility
  • Sales and purchase of shares (of companies involved in halal activities).
  • Collection of dividends
  • Electronic Banking Window
  • Telephone Banking

Bank can be charged fees under the mode of Wazarat Bil Wakala (WBW).

Securities:

  • Charge documents
  • Export/Import documents
  • Acceptance from other Bank/Party.

Disbursement:

Disbursement will be made against ECC and Cash Assistance under the lien of Export Letter of Credit (ELC) and other legal documents as per sanctioned by Head Office.

Dr. WBW
Cr. Party’s A/C.
Dr. Party’s A/C
Cr. WBW
Cr. Service Charge @ 13% – 14%.
EDF Applying voucher:

Procedure/guidelines as per Bangladesh Bank EDF Circular.

EDF Lodgement:
Dr. Suspense A/C O EDF Loan Receivable Tk. from Bangladesh Bank.
Cr. IBCA – HO At TT clean rate Tk.
Control Ledger both in F.C & Tk. should be maintained.

Procedure:

  1. Branch shall apply for EDF loan to Bangladesh Bank immediately on receipt of documents.
  2. Not later than 3 days from the date of the import documents.
  3. Upon receipt of EDF loan from Bangladesh Bank, Head Office ID Shall send a credit advise to the Branch.
  4. This should be adjusted of suspense A/c EDF Loan receivable from Bangladesh Bank by passing the following voucher.

Dr. IBCA – HO (Responding Credit advice) Tk.
Cr. Suspense A/C EDF loan receivable from Bangladesh Bank Tk. @ TT Clean rate.

Refund of EDF loan to Bangladesh Bank:

Upon receipt of export proceeds, the EDF loan along with interest shall be paid to Bangladesh Bank by passing the following vouchers:

Dr. Sundry Deposit A/C FCBPAR at TT clean rate
(Credited earlier from –FC- & TT- export proceeds)
Cr. IBCA (Exchange Transaction credit advice)  HO A/C- FC- Tk.

Along with this advise a copy of Telex sent to Banks NOSTRO A/C transferring the fund to Bangladesh Bank. In this case party wise FC and Taka ledger should be maintained.

Accounting Procedure for Retirement of Import Bills (At sight):
Foreign Currency Voucher:

Dr. F.C Deposit (WES L/C cover) A/C @ Notional rate.
Cr. Bill of Exchange A/C. (at notional rate)
Cr. F.C.C. A/c.
Tk. Voucher:
Dr. Party’s A/C.
Dr. Sundry Deposit (Security L/C WES).
Cr. Murabaha Import Bills.
Cr. Income A/C.
Dr. Profit receivable A/C.
Cr. Income A/C.
Cr. Commission A/C.
Cr. P&T Recovery A/C.

L/C amendment:

Amendment of irrevocable L/C is not permissible without the joint consent of all the parties involved in documentary credit operation.

Each and every clause of the L/C can be amended provided the parties involved in the L/C consents to it. Each and every amendment of L/C must be noted in the L/C file and copies of each amendment be kept in the L/C file chronologically (date wise).

Amendment commission is to be realized from the party as per instruction of Bank’s circular issued time to time.

Accounting procedure for Back to Back L/C opening:

Dr. Assets as per contra (Back to Back L/C).
Cr. Liability as per contra (Back to Back L/C).
Dr. Party’s A/C.
Cr. Commission A/C.
Cr. Commission (adding confirmation if any as per banks circular.
Cr. F.C.C. Tk.
Cr. P & T Tk.
Cr. Telex Recovery A/C.

Upon receipt of documents the following entry may be passed:

Dr. Liability as per contra (BB L/C).
Cr. Assets as per contra (BB L/C).
Dr. Assets as per contra (B/B Bills).
Cr. Liability as per contra (B/B Bills).

Retirement Procedure for D.P. Bills & B/B Bills:

When the draft is returned by the drawee (importer) after duly accepted by him, the following procedure to be maintained:

  1. The maturity date is to be worked out and noted in the Bill Register and also in due date diary. The due date diary may be maintained by the dealing Officer and the Manager or In-charge of Foreign Exchange Department.
  2. The Foreign Correspondent should be advised the due date of maturity and be authorized to debit the nostro account or to claim reimbursement on due date as per L/C terms.
  • All the documents delivered to the importer except accepted bill of exchange/draft.

For liability of usance bill reversed the following vouchers are to be passed by the bank.

When the documents are retired, the voucher is as under:

Dr. Liability as per contra,
Cr. Assets as per contra
Cr. H.O. ID A/c.

Dr. Party’s A/c.
Cr. P & T A/c.
Cr. F.C.C. A/c.
Cr. Commission A/c.

For retirement of Back to Back Bills:

Dr. Liability as per contra (B/B Bills).
Cr. Assets as per contra (B/B Bills).

Dr. F.C. held against B/B L/C. (Authority should be given).
Cr. IB General A/C H.O. I.D.

Dr. Sundry Deposit A/C (Security deposit against FBP).
Cr. F.C.C. A/C.
Cr. Acceptance commission.
Cr. Commission (Handling).
Cr. Books & Papers stationery.
Cr. P&T/SWIFT charges.

The LCA form is endorsed.

The draft is endorsed “Received Payment”.

Unpaid Bills not retired by the Importer (Forced Clearance):

Although the documents were found correct in all respect, it is observed that the importers some times do not come forward to retire the bills.

  • If the bills is not paid within 3 days of receipt written notice is to be sent. The item is to be diarised in the diary of the dealing officer & manager within 7(Seven) days a reminder is sent to the importer and to the guarantor if any. Final written notice is to be issued to the importer to retire the bill within 21 days.
  • The competent authority of the bank would be appraised of the matter.
  • Information is to be taken from the port branch regarding arrival of goods & ship.
  • Ensure that the insurance policy is kept alive. Fresh insurance will be required if the policy expired.
  • Clearance of goods is done through bank’s approved C&F agent and instruct them to ensure and store the goods in trust for the bank.

After clearance of Goods:

Dr. Murabaha Post Import A/C.
Cr. Murabaha Import L/C or Bills A/C.

When the bill is paid, the following vouchers is to be passed:

Dr. Party’s A/C.
Cr. MPI A/C.
Cr. Income A/C.

Consequences if Goods are not cleared:

Consignment not cleared within 45 days from the date of arrival of the vessel are liable to be confiscated/auctioned by the custom authority under section 167(8) and amended section 82 of the custom Act 1969 without further intimation cargoes.

Post Import Finance:

After shipment of goods the importer requests the bank in respective banks printed format for clearance of goods from the port. Before clearance bank charges further margin to cover the duty/sale tax etc. A definite repayment schedule is given to the importer for retirement of documents or to take delivery of goods from the banks custody against payment.

After clearance, C&F agent is to send the following papers to the bank:

  1. R/Truck Receipt or S.R.
  2. Bill of the clearing agent showing the details of charges incurred and paid alongwith supporting vouchers/papers.
  • Bill of Entry.
  1. Custom purposes copy of licence LCA.

Procedure for Single Deal of Murabaha Import

Heads:

  1. Murabaha Import (L/C)
  2. Murabaha Import (Bills)
  3. Murabaha Import (MPI)

All relevant papers, documents etc. must be taken from the party at the time of opening L/C.

To purchase fund the following entry should be passed:

Dr. Murabaha Import (MPI) A/C. Bills/LC.
Cr. WES fund purchase (CFR amount + FCC @ B.C. Rate)
Cr. Other charges (if any).

F.C. Voucher:

Dr. WES fund held A/C.
Cr. WES L/C cover A/C.

Following vouchers to be passed during lodgment time:

Dr. Bill of Exchange A/C/ Dr. MIB
Dr. F.C.C. A/C.
Cr. SIBG A/C. HO. ID.
F.C. voucher: Dr. WES L/C Cover A/C.
Cr. Bill of Exchange A/C.
Cr. F.C.C. A/C.
Dr. Liability as per contra (L/C WES).
Cr. Assets as per contra (L/C WES).
L/C opening time, the following voucher to be passed:
Dr. Assets as per contra (L/C WES).
Cr. Liability as per contra (L/C WES).

If the party purchases fund at the time of opening L/C then the profit marked-up must be calculated on total landed cost from the date of opening of L/C. Fund will be purchased by debiting Murabaha Import (MPI) A/C/BILLS/LC.

If the party does not agree to purchase the fund at the time of opening of L/C, in that case fund will not be purchased. Security money may be realized @ 10% or 20% as per agreed rate on CFR, value @ WES Rate.
If the party has agreed to allow MPI in Bills stage, then the rest amount at 30% cash security must be realized on total landed cost including duty and sale tax etc.
If the party purchases the fund at the time of opening L/C, then the security money will be realized on total landed cost.
MPI File may be maintained separately:

Murabaha MPI application other charges documents, sanctioned advice to be kept in this file.

File number should be same as per L/C number.
Sanction advice may be issued when the duty figure will be received from the port branch.

All other expenditure will be debited from Murabaha Import (MPI) A/c. Profit must be calculated on total landed cost after deducting cash security money.

Dr. Murabaha Import (MPI) A/c/BILLS/LC.
Cr. Profit receivable A/c.
Now monthly profit will be realized as per daily product basis i.e.

Dr. Profit receivable A/c.
Cr. Income A/C.

If the importer retires the documents on payment of banks dues, in that case rebate may be allowed.

If the importer takes delivery of consignments on payment of banks dues before due date, in that case rebate may be allowed.

  1. EXPORT FINANCING BY ISLAMI BANK

Exporter means any person lawfully exporting goods from Bangladesh to any other country. After shipment the exporter has to tender the document to the bank within the stipulated period for the negotiation of the documents are drawn under a Letter of Credit. If require, finance the duty drawback and cash compensatory support claims of the exporter.

Export credit means any credit provided by an institution to an exporter in the form of packing credit or post-shipment credit.

Packing credit means any loan or advance granted or any other credit provided by an institution to an exporter for financing the purchase, processing or packing of goods on the basis of L/C.

Post-shipment credit means any loan or advance granted or any other credit provided by an institution to an exporter of goods from Bangladesh from the date of extending the credit after shipment of the goods to the date of realization of the export proceeds and includes any loan or advance granted to an exporter, in consideration of, or on the security of, any duty drawback or any cash payment by way of incentive.

Export Formalities:

  1. Procedure for Registration of Exporter.
  2. Books and Register/Ledger required for export.
  3. Export L/C Checking and Advising.
  4. Formalities of Back to Back L/C opening.
  5. Accounting of B/B L/C.
  6. B. Bill checking/lodgment
  7. Mechanism of acceptance.
  8. Pre-shipment financing.
  9. Export document checking and negotiation/negotiation under reserve/collection basis.
  10. Calculation of offering sheet for fund disbursement system.
  11. Proceeds realization correspondence.
  12. Formalities of back to back payment system.
  13. Payment from Bai-Muajjal Inv. Bill A/c (if export fails).
  14. Substitute benefit realization/collection system.
  15. EXP form reporting to Bangladesh Bank.
  16. Disposal of EXP forms.
  17. Export incentives.
  18. Disputes and settlement of export claim.

Preparation of Export Licence:

Procedure for obtaining Export Registration certificate (ERC).

For obtaining export registration certificate (ERC) from CCI & E, the following documents are required.

  • Application form.
  • Nationality certificate.
  • Partnership deed (registered).
  • Memorandum & Articles of Association and Incorporation Certificate.
  • Bank Certificate.
  • Income Tax Certificate.
  • Valid Trade Licence.
  • Copy of rent receipt of the business firm.
  • Fees paid through treasury challans.

Checking & Advising of Export L/C:

On receipt of Export L/C it is to be recorded in the bank’s inward register and then the signature on the L/C or test number for telex L/C is to be verified by an authorized officer of a bank and finally it is to be forwarded to the beneficiary under forwarding schedule.

Processing for Composite Limit Proposal:

An exporter desired to have an import L/C limit under Back to Back arrangement. In that case the following papers & documents are required:-

  1. Full particulars of bank account.
  2. Balance sheet.
  3. Statement of Assets & liabilities.
  4. Trade Licence.
  5. Valid Bonded Warehouse Licence.
  6. Membership Certificate.
  7. Income tax Declaration.
  8. Memorandum of Articles.
  9. Partnership Deed.
  10. Resolution.
    11. Photographs (all Directors).
  11. Factory Insurance.

On receipt of above documents and papers the back to back L/C opening section will prepare a credit report. Branch must obtain sanction from Head office for opening of BB L/C.

Exporters prepare the documents and submit the same to the bank for negotiation.

Preparation of Export Documents:

  1. Bill of Exchange or Draft.
  2. Commercial Invoice.
  3. Bill of Landing.
  4. Inspection Certificate.
  5. Packing list.
  6. Export Licence.
  7. Shipment Advice.
  8. Certificate of Origin.
  9. Weight Certificate.
  10. Photosanitary Certificate.
  11. Certificate of Analysis.
  12. Quality Certificate.
  13. EXP Form.
  14. DHL/ Courier Receipt.

Export Documents Checking:

  1. General Verification:
  2. L/C restricted or not.
  3. Exporter us to submit documents before expiry date of the credit.
  4. Shortage of documents etc.
  5. Particular Examination:
  6. Each and every document should be verified with the L/C.
  7. Cross examination:
  8. Verified one document to another.

On receipt of documents it must be checked properly and then a proposal sheet would be prepared as per bank’s format indicating the full particulars of shipment and discrepancies under the signature of authorized person and should be placed to the manager for disposal instruction or sanction.

Disposal of FBN Documents:

Before despatch :-

  • Rubber stamp must be affixed on all the documents mentioning the FBN Number.
  • Endorse the draft, B/L, Insurance policy in favour of foreign correspondent as per L/C terms.
  • Prepare the forwarding schedule in five copies.

The documents are to be despatched as under:

  1. 1st mail original documents under the original bank forwarding schedule by courier service.
  2. 2nd mail Duplicate sheet of document under the duplicate bank forwarding schedule by courier service as per L/C terms.
  • 3rd copy of schedule is forwarded to the Head Office, I.D.,
  1. 4th copy is for record in the FBN file.
  2. 5th copy is used if necessary as a tracer or reminder.

Flow Chart for Export:

  1. Goods ready for shipment:
  2. Inspection of the goods from the competent authority as per L/C.
  3. Prepared invoice and packing list and vessel booking particulars.
  4. Papers to be sent to C&F agent for shipment.
  5. C&F agent will do the customs formalities i.e. nation/entry. Checking the goods as per invoice & packing list inspection report etc.
  6. C&F agent will take permission for shipment/hand over the goods to shipping co.
  7. After completion of all customs formalities, the nominating shipping company. received the goods for sail/load in the ship and issued a receipt which is known as mates receipt.
  8. C&F Agent hand over the shipping receipt to the exporter or they can take the original B/L in payment of freight and other expenditure etc.
  9. Exporter may despatch the shipment advice to the importer directly as per L/C.
  10. C&F Agent receives the original B/L from the relative shipping co. and despatches the same to the bank for negotiation or receives (the exporter) from the shipping co. directly.
  11. Exporter submits the all original and duplicate sets of document to the bank for negotiation.
  12. After negotiation bank should despatch the documents to the opening bank for deliver of the goods from the port.
  13. Opening bank lodged the documents and make payment to the negotiation bank A/C as per L/C terms.

Export Financing:

  1. Musharaka Pre-shipment Finance.
  2. BAI Muazzal Investment (Forced Loan).
  3. Mudaraba Pre-shipment Finance.
  4. BAI Salam.
  5. Quard Hasana (Interest Free Loans)
  1. Musharaka Pre-shipment Finance:

Pre-shipment finance is an advance granted by a bank to an exporter to meet the cost upto the packing of goods for export to overseas buyer. This is done in pre-shipment stage. So it is also called pre-shipment advance. The purpose of the investment is for purchase of raw materials for finished goods or manufacturing, processing, packing transporting upto warehousing/port of shipment etc. for export. Pre-shipment is an advance for procurement of finished goods.

SANCTION OF PRE-SHIPMENT:

The party is to apply the bank. On receipt of the application for pre-shipment facility, section will start scrutiny of the application.

  • Types of pre-shipment: Whether clean/pledge/hypothecation of goods.
  • Whether the investment is within Bangladesh Bank credit restriction.
  • Whether the security offered is acceptable.
  • What is the purpose of the investment.
  • Whether the goods specified for finance is eligible for export under export control rule.
  • How the PSI A/C will be adjusted.
  • Whether the item is traditional or non-traditional.

Disbursement:

Execution of documents:

  • Execution of the charge documents.
  • Musharaka agreement.
  • Lien Mark on the Master L/C.

Inspection of Goods:

On receipt of the goods in the godown or warehouse banker should inspect the goods and process the proposal for making payment @ 9% on FOB value of Master L/C for 180 days.

Accounting:

Dr. Musharaka pre-shipment A/C.
Cr. Party’s A/C.
Cr. Commission A/C.
Cr. P&T A/C.
Dr. Party’s A/C.
Cr. Income A/C (Estimated profit after realization of the proceeds.
Quota Financing:

Quota financed by Musharaka pre-shipment investment for purchase of garments quota allocation under the following terms & conditions:-

  1. Bank finance at the rate of 75% of cost price.
  2. Profit sharing ratio.
  3. Party 60% But be ensured minimum R/R as prescribed by H.O.
  4. Bank 40%.
  5. Mode of Disbursement:-

On completion of negotiation with the seller regarding price, quantity etc., the party will deposit their equity amount at the rate of 25% of the cost price to the bank with request to make payment of the price to the seller.

Disbursement of the amount by creating investment under the Head Musharaka pre-shipment (Quota) after verifying the market price and observing documentation formalities under Musharaka Agreement.

  1. Security:

Before disbursement, the Quota allocation duly transferred by Quota Holder and duly authenticated by Export Promotion Bureau in favour of the buyer will be placed under bank’s lien alongwith the party’s letter of undertaking to the effect that they will make necessary agreement for adjustment of the bank’s investment by export proceeds and in the event of their failure to make export they will pay back above special pre-shipment investment (Quota) from their other sources within the due date.

  • Additional charge to be created on the value of collateral security already held if covered by value thereof. If the value of Existing collateral security does not cover additional collateral security to be obtained.
  1. Additional Charge:

Charge to be created on present and future assets of the company in bank’s favour with the registrar of joint stock companies against the liabilities of the party with the bank if not done earlier.

  1. Interim Adjustment:

At the time of allowing pre-shipment investment, if any, on arrival of the raw-materials proportionate amount of special pre-shipment investment (Quota) will be transferred to normal pre-shipment investment account. Pre-shipment finance for manufacturing the garments will be allowed to such extent as the total liability of an account of quota purchase, import payment and normal pre-shipment together will not exceed 90 percent of FOB value of the Export L/C.

  1. Final Adjustment:

At the close of individual i.e. on negotiation of an export bill or receipt of export proceeds in case of collection bill proportionate amount of Bank’s investment together with profit as per agreed ration will be recovered after obtaining a final account from the party.

  1. Expiry date:

As per sanctioned terms.

  1. Caution:

It is a Musharaka Investment which needs round the close supervision. Bank will exercise the utmost care to supervise utilization of the quota allocation as early as possible invariable within the quota year. Bank will participate in the party’s business negotiation both in respect of the import of the raw materials and the export of the ready made garments. Bank will also inspect the party’s books of account in connection with the deals so as to ensure actualization of the estimated profit or maximization thereof.

  1. Other Conditions:
  2. An unconditional and irrevocable undertaking to be obtained from the party to the effect that they shall arrange obtention of necessary export order through acceptable export L/C failing they shall arrange disposal of the quota under bank’s supervision and adjust the proceeds towards the financing to be allowed and in the even of shortfall, if any, the same shall be adjusted on or before due date(s) from party’s own sources.
  3. Branch must verify market of the Quota & Quota be purchased at competitive price and market price verification certificate duly signed by Branch Incumbent/2nd Officer, Foreign Exchange In-charge & the Dealing Desk Officer should be retained for record.
  • An affidavit in appropriate manner be obtained from the party to the effect that entire quota presently held by the party & will be performed & be purchased in future irrespective of bank/own finance will be kept lien with the branch and will be utilized by exporting ready made garments through the branch.
  1. Salient features of the existing provision of export credit:
  2. Bank may allow export credit to the extent of 90% of the value of confirmed irrevocable export L/C or firm sale contract.
  3. Export Credit Quarantee Scheme:

The guarantee covers 85% of loss caused by commercial risk and 95% of the loss caused by political risks.

  1. Accounting:

Dr. Musharaka pre-shipment (Quota).
Cr. Party’s A/C.

Estimated profit for 90 days must be calculated and marked in the Ledger. When deal will close in that time bank will realize the profit in full from their A/C.

Baimuazzal (Export):

It is a contract in which a client wishing to purchase raw materials, finished goods, commodities, spares, machinery, equipment’s or any other goods for request of the bank to procure the items and sell them to him at a price payable at a future date in lumpsum or in installments.

  • It is a credit sale. Ownership and possession of the goods is transferred by the bank to the client before receipt of sale price.
  • Sale price of the goods is payable by the client at a specified future date.

Documentation:

  1. P. Note.
  2. P. Note Delivery Letter.
  3. Baimuazzal Agreement.
  4. Letter of Hypothecation.

Accounting:

Dr. BAIM Investment A/C.
Cr. Payment order A/C favouring seller of the goods.
Cr. Profit Receivable A/C.
Dr. Party’s A/C.
Cr. BAIM Investment A/C.
Cr. Profit Receivable A/C Monthly product basis.
Cr. Income A/C.

Insurance:

Ask the client to obtain insurance policy equal to the sale price of the goods.

On behalf of the Readymade Garments Industries client, open deferred payment L/C for import of fabrics and other accessories under Back to Back arrangement on the understanding that the importers will arrange payment on or before the due date by  repatriation of proceeds of exports of their products. In some case they cannot execute exports in time resulting in their failure to repatriate export proceeds to make import payment of its maturity. But the bank in order to keep its commitments has to pay on due date irrespective of relative export proceeds realized or not. Such overdue import payment is to be made by purchase of foreign currency from WES/SEM and the importers will have to arrange for the same.

On failure of the party to arrange import payment on or before the maturity date, the branch will effect the remittance by purchasing the required foreign currency at SEM rate by debit to Bai-Muazzal WES Bills A/c giving effect to the relevant agreement under intimation to the clients of the equivalent taka and due date for the repayment.

Then the branch will approach the Bangladesh Bank for their post facto approval along with the following documents/papers:

  1. Party’s letter addressed to NBR.
  2. Bill of Entry (exchange control copy).
  3. Export L/C copy.
  4. Back to Back L/C copy.
  5. Proforma Invoice.
  6. Position of the goods.

The branches will need vigorous follow-up for recovery of the bank’s dues within due date of the agreement positively. In case of the party’s failure to repay the bank dues as per agreement the branch will arrange for disposal of the stock after obtaining necessary clearance from the competent Govt. Agencies and Head Office also.

The branch will submit a monthly statement of outstanding Ba-Muazzal WES bills as per Head Office proforma.

Accounting procedure of the Bai-Muazzal WES Bill Investment (Export).

Dr. FC. Deposit (WES Fund held) A/C. F.C. Voucher.
Cr. GB General A/C Head Office. ID.
Dr. Bai-Muazzal WES (Bills) A/c  Tk. Voucher
Cr. WES Fund Purchase A/C                                                                              ..
Cr. F.C.C. A/C                                                                                                   ..
Cr. Telex Recovery A/C                                                                                      ..
Cr. Commission A/C                                                                                          ..
Cr. P & T A/C                                                                                                     ..
Cr. Investment Income A/C.                                                                                ..

Documents Requirement

  1. Charge document.
  2. Undertaking to arrange foreign currency for payment.
  3. Agreement for sale of goods under Bai-Muazzal.

 

Post-shipment Export Financing under L/C

(a)Export credit means any credit provided by an institution to an exporter in the form of packing credit or post-shipment credit.

(b)Packing credit means any loan or advance granted or any other credit provided by an institution to an exporter for financing the purchase, processing or packing of goods on the basis of L/C.

(c)Post-shipment credit means any loan or advance granted or any other credit provided by an institution to an exporter of goods from Bangladesh from the date of extending the credit after shipment of the goods to the date of realization of the export proceeds and includes any loan or advance granted to an exporter, in consideration of, or on the security of, any duty draw-back or any cash payment by way of incentive.

The following incentives are provided to the exporters:

  1. Export Finance:
  2. Interest rate: The concessional interest rate of export credit for traditional & non traditional items.

 

  1. Extent of Export Credit:

Commercial banks provide export credit to the extent of 90% of the value of confirmed and irrevocable L/C or of the firm’s sales contract.

  1. Credit to first time applicants:

Commercial bank will not refuse any application for export credit received for the first time.

  1. Back to Back L/C:

All authorized dealers (Commercial Banks) can establish L/C on a back to back basis against lien valid export L/C for the importation of raw materials and other accessories from abroad or from inland for readymade garments, specialized textiles and hosiery products etc.

  1. Substitute Benefit:

From 31st March 1990, the arrangement for cash premium to the exporters under substitute benefit scheme has been replaced by export performance benefit (XPB), a system under which Bangladesh Bank shall reimburse a premium in cash to the exporter’s bank in favour of the party.

This scheme has been introduced against customs duty or duty drawback, exporters will get this benefit only for export oriented local waving/knitting manufacturer. The rate of cash premium is 5% on for value.

The following manufacturers will get the benefit against export as prescribed by Bangladesh Bank:

  1. Waving cloth, Knit cloth, Hosiery fabrics, Gray cloth, Printed cloth, Drying cloth, Gramin cheeck, Handloom fabrics and Reshmi silk cloth and exported readymade garments which have been made local fabrics (Fabrics producer and garment exporter are to be same).
  2. Local Manufacturing Towel, Bed sheet, Bed Cover, other related items, Screen cloth, Terrybag and Shocks etc.
  3. Fabrics producer and garments exporter must be same industry, and export the garments by the use of own produced fabrics. This type of composite unit shall be entitled to get this benefit.
  4. Duty Draw Back:

An exporter of manufactured products is entitled to draw back the value of the customs duties, sales tax etc,; already paid on the importation of raw materials used in the production or manufacture of the export products.

There are three methods:-

  1. Draw back at actual
  2. national payment of duty
  • Draw back at flat rate for realizing draw backs.
  1. Export Credit Guarantee Scheme (E.C.G):

The export credit guarantee wing of the Sadharan Bima Corporation (SBC) provides guarantee to importers and exporters the overseas commercial and political risks respectively, currently three types of guarantee e.g.

  1. The Export Finance Guarantee (Pre-shipment).
  2. The Export Finance Guarantee (Post-shipment).
  3. The Comprehensive Guarantee.

While the first two types of guarantee are expended to the bankers. The extend of guarantee covers 75% of this loss. The third one is extended directly to the exporters.

Comprehensive Guarantee:

The Guarantee is extended to protect the exporters against overseas risk such as:

  1. Commercial Risks
  2. Political Risks

The Guarantee covers 85% of loss caused by commercial risks and 95% of the loss caused by political risks.

  1. Concessional Rate of Import Duty:
  2. Capital Machinery: Capital Machinery for export oriented industries is allowed to the imported at a concessional rate of 2 ½% import duty.
  3. Spare parts: Draw back of import duties and sales tax paid in excess of 2 1/2% on the importation export oriented industries, provided that such part are not produced within the country.
  4. Income Tax Rebate:

Exporters of various categories are entitled to an income tax rebate, varying in percentage, depending on their export performance, as fixed by the NBR from time to time.

  1. Rebate on Insurance Premium:

Special rates are allowed to export oriented industries (Non traditional items) in respect of their premium payments for fire and marine insurance.

  1. Freight Rebate:

Special inducement and promotional freight rates are provided to exporters by  Bangladesh Biman Airlines and Bangladesh Shipping Corporation.

  1. Export Incentives for “Deemed Exports”:

Locally produced materials are used as direct import for the manufacture of export products or for products supplied against international tender for local project procurement in foreign currency, are regarded as “Deemed Exports” and qualify for all the export incentives and facilities, such as duty draw back, substitute benefit etc. that are extended to direct exporters.

  1. Retention Quota:

Retention Quota for merchandise exporters readymade garments is 10% of repatriate FOB value of their exports in F.C. A/C. Fund from their can be used to meet bonafide business expenditure such as business visit abroad participation in export fair, seminars, import of raw materials, machinery and spares and set up offices abroad without prior permission from Bangladesh Bank.

  1. Monitoring of Export Credit:

A special credit all has been created in the Bangladesh Bank to monitor and supervise the operation of financing. A special (Credit) team has also been set up in each commercial bank to deal with export credit needs.

  1. 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. Capital owner is the Saheb E-Mal and 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 transaction are allowed only where the purchase of sale of goods does not involve an 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 Mudaraba, 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.
  • Duration of the Mudaraba shall be the date of signing of the agreement. In the case of Import Mudaraba 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 are 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 operation processes involved. In this respect the Amel in 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 Mudaraba, on credit.

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

  1. Bai Salam Or Bai Salaf:
  2. Quard-E-Hasana (Interest Free Loans):
  3. Istishna:

Discussed earlier.

Negotiation of Export documents:

On receipt of documents it must be checked properly and a proposal sheet would be prepared as per banks format indicating the full particulars of shipment and discrepancies under the signature of 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 is automatically become valid upto 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:

Draft is to be examined as under:

  1. Draft must be dated.
  2. It must be made our 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 beneficiary of the crdit as per UCPDC 600.
  4. The signature of the drawer must be verified by the bank.
  5. In case of ussance bill the requisite foreign bill stamp has been affixed as per 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 is permissible in the invoice beyond the stipulation on the L/C.
  6. The amount of draft and invoice must be same and within the L/C value.
  7. If L/C calls for consular invoice, then the beneficiary’s invoice is not sufficient.
  8. Required number of invoice is submitted.
  9. The shipping mark and number of 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 EXP form.
  11. Invoice amount must be correct on the basis of price, quantity as per L/C.
  12. Invoice amount indicate sale terms viz-FOB, CFR, CIF etc.
  13. 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 certificate  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 transaction of Bangladesh Bank (Vide s- 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. SWIFT 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).

 

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 favour 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 document under the duplicate bank forwarding schedule by courier service as per L/C terms.

iii)         3rd copy of 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 persue 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 realise overdue interest from the beneficiary of the draft for the delayed period after 21 days at prescribed rate. In case of usance bill overdue interest is claimed for the period of delay for payment from the maturity date.

Credit of export proceeds in the Nostro A/C

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 a credit advice is received by the bank the entry is to be passed as under:-

Dr.SIB 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. SWIFT  Recovery A/C.
Cr. Payment order A/c (local agent commission).
Cr. Party’s A/C (Rest amount).
Cr. Govt. Tax A/c.
Dr. SIB, General A/C HO, ID.
Cr. FBN A/C.
Cr. Exchange A/C.

When the export document sent on 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. SIB 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. SWIFT charge 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 short fall then the amount of draft claimed, it is to be referred to the Bangladesh Bank at the time of reporting the triplicate copy of 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 custom authority to the Bangladesh Bank.
  2. Duplicate EXP duly certified by the bank must be submitted to Bangladesh Bank alongwith one copy of invoice by the negotiating Bank.
  3. The triplicate copy will be reported to the B. Bank alongwith monthly return after realization of proceeds.
  4. Quadruplicate copy is retained by the Bank is 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 contract between the buyer and the seller without the cover of L/C. In such 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 export of the country.

Document sent on collection basis:

When the bank refuse to negotiate the document due to major discrepancies, the bill is sent by bank on 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 at the country of importer. The overseas importer receives shipping documents without payment and take 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 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 instruction of the exporter on 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 due date. A due date diary must be maintained to persue 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. IBDA- 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) IBDA should be sent to HO.

  • IBDA at TT clean rate as on the date of FDBP for the purchased amount 20% and
  • IBDA at prevailing TT clean rate as on the date of realization for the balance amount 80%.
  • If not changed the TT clean rate one IBDA 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)
Branch shall sent 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.        IBDA 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 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. IBDA-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) IBDA should be sent to HO.

  • IBDA at TT clean rate as on the date of FDBP for the purchase amount 20%.
  • IBDA 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 Lodgment A/C (FDBL) Tk.
Cr.        Foreign Documentary Bills for Collection (FDBC). Tk.
(@ TT Documentary buying rate)

Branch shall sent 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.        IBDA 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 value added portion).
Cr.        Other A/C if any.