HOW TO OPEN LC

LC Opening Procedure ( BTB LC) Adnan Zaber Mahmud Lecturer Southeast University BTB FLOWCHART Legal Framework:  Import – Export (Control) Act – 1950 (sub section 1 of section 3)  Import Policy Order  Export Policy Order  Foreign Exchange Regulation Act (FERA)-1947  Guidelines for Foreign Exchange Transactions (GFET): Vol – I & Vol - II  Directives of NBR  Customs Act – 1969  Pre-shipment Inspection (PSI) Act - 1999  International Rules of ICC  UCPDC–600  eUCP–Version 1.1  URC-522  URR-725  ISBP-681  Incoterms 2000 Main Features of Import Policy:  Who can import-  •Any Person having Import Registration Certificate (IRC)  •Any Person exempted from having IRC  How IRC is obtained-  How IRC is renewed-  List of banned, restricted & permissible items-  How import can be done:  •With LC & LCA  •Without LC but against LCA  •Without LC & LCA (Import permit or Clearance permit) Main contents of Import Policy Order (IPO):  Banned items  Restricted items  Permissible items  Restriction of shipment -Prior to opening of LC -Expiry of the LC  Country of Origin (‘CO’ should be mentioned in package/goods)  Harmonized commodity description & coding system (H.S. code)  Carrying of goods by Bangladesh Flag Vessels  Pre-shipment inspection  Special conditions for food items  CFR/FOB/CIF  Insurance cover note. FEATURES of BTB  Back to Back LCs to be opened against export LCs received by export orient industries under the bonded warehouse system.  Required value addition should be observed (value addition is prescribed in IPO)  For Quota & Non-quota woven garments : 20%  Knitted/others (Qouta - price $60/Dozen) : 15%  Knitted/others (Non- qouta - price $60/Dozen) : 10%  Sweater : 20%  Kids’ garments : 15% FEATURES (BTB LC)  BTB LCs may be opened upto 180 days usance.  Sight LCs may be opened under EDF.  Inland BTB LCs denominated in FC may be opened in favour of local manufacturer-cum-suppliers.  BTB LCs may be opened for import of necessary inputs against inland BTB LCs.  Accepted (Usance) bills against BTB LCs should be settled at maturity.  Cases of failure of export against related LCs should be reported to NBR & Commissioner of Customs. REQUIRED PAPERS 1. Valid IRC, ERC. 2. Valid Trade License from recognized Trade Body. 3. TIN & Income Tax payment certificate. 4. VAT registration certificate. 5. Valid Bonded Ware House license (foreign import). 6. Other formalities with concern regulatory bodies. PROCEDURES 1.Receiving Export/Master LC duly advised/ transferred. 2.Scrutiny of Master LC to find out if there is any adverse clause in the LC, shipment & expiry date, reimbursement clause etc. 3.Receiving application from the client in LC Application Form along with PI duly accepted by the importer. 4.Obtaining credit report of exporter ( upto Tk. 700,000 in case of PI and upto Tk. 1000,000 in case of indent) 5.Approval of proposal / office note for opening BTB LC. Contd……. Procedures Contd……. 6. Issuance of IMP, LCAF 7. Giving entries in LC Opening Register. 8. Vouching:Commissions, charges & Liability. 9. Transmission of LC. 10. Passing liability voucher. 11. Receiving of Shipping documents. 12. Lodgment of import bill, intimating discrepancy. 13. Intimation of maturity date in case of deferred LC. 13. Making payment at sight for sight LC (EDF), payment on due date for deferred LC. 14. IMP reporting to Bangladesh Bank. 15. Matching Bill of Entries. [...]...ACCOUNTING Liability Voucher:  Dr Customer’s liability on BTB L/C  Cr Banker’s liability on BTB L/C (Applicable rate: B.C Selling rate) Commission & others charges:      Dr Customers A/c: Commission + FCC + Postal/ Telex + Misc Cr Income A/c: Commission on L/C foreign Cr Income A/c Postal/ Telex Recoveries... Clean & rest portion-OD Sight ) Cr FC Held ( @ OD Sight Export)  Cr FBP A/C  Cr I/A Exchange Earning Payment of BTB:    (i) Reversal of acceptance liability: Dr Banker’s liability on BTB bills Cr Customer’s liability on BTB bills     (ii) Out of export proceeds settlement in FC: Dr Exporters F.C held A/c: Bill value with usance interest (O.D sight export) Cr General A/c: On Nostro A/c( OD sight . LC)  BTB LCs may be opened upto 180 days usance.  Sight LCs may be opened under EDF.  Inland BTB LCs denominated in FC may be opened in favour of local manufacturer-cum-suppliers.  BTB LCs. IRC  How IRC is obtained-  How IRC is renewed-  List of banned, restricted & permissible items-  How import can be done:  •With LC & LCA  •Without LC but against LCA  •Without. for opening BTB LC. Contd……. Procedures Contd……. 6. Issuance of IMP, LCAF 7. Giving entries in LC Opening Register. 8. Vouching:Commissions, charges & Liability. 9. Transmission of LC. 10.