BACK TO BACK LC
Legal Framework:
i. Import &
Export (Control) Act –1950
(sub section 1 of section 3)
·
Import Policy Order
·
Export Policy
ii. Foreign Exchange Regulation Act (FERA)-1947
iii. Guidelines for Foreign Exchange Transactions (GFET):
Vol – I & Vol - II
iv. Directives of NBR
·
Customs Act- 1969
·
Pre-shipment Inspection (PSI) Act-1999
v. International Rules of ICC
- UCPDC–600
- eUCP–Version 1.1
- URC-522
- URR-725
- ISBP-681
- Incoterms-2010
Features:
- Back to Back LCs to be opened against export LCs received by export oriented 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%
- BTB LCs may be opened on 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.
- Usance bills against BTB LCs should be settled at maturity even where for some reason export has not taken place or proceeds have not been realised.
- Cases of failure of export against related LCs should be reported to NBR and the concerned Commissioner of Customs for monitoring stock of imported goods under bonded warehouse.
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 concerned regulatory bodies.
Procedures:
- Receiving Export/Master LC duly advised/transferred.
- Scrutinizing Master LC to find out if there is any adverse clause in the LC, shipment & expiry date, reimbursement clause, BL clause etc.
- Receiving application from the client in LC Application Form along with PI duly accepted by the importer.
- Obtaining credit report of exporter ( upto Tk. 700,000 in case of PI and upto Tk. 10,00,000 in case of indent)
- Approval of proposal / office note for opening BTB LC.
- Issuance of IMP, LCAF
- Giving entries in different columns of LC Opening Register.
- Passing liability vouchers.
- Realization of commissions & charges.
- Transmission of LC.
- Receiving of shipping documents.
- Lodgment of documents, intimation of maturity date in case of LCs under usance tenor.
- Making payment at sight for sight LC (EDF), payment on due date for usance LC.
- IMP reporting to Bangladesh Bank.
- Matching Bill of Entries.
Accounting:
Vouching Procedure:
(A) Creation
of L/C liability:
Dr. Customer’s liability on BTB
L/C
Cr. Banker’s liability on BTB L/C
(Applicable rate: B.C Selling rate)
(B) 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
Cr. Income A/c: Miscellaneous
earnings (Handling charges, stationery, etc.)
Cr. Sundry Deposit A/c: FCC.
(C) Export
documents purchase:
(Only CM portion is purchased)
Dr. FDBP/FBP Account (@ OD sight
export)
Cr. CD A/C
Cr. Packing Credit/ Others Loan
A/C
Cr. Income A/C Com
Cr. S/D Tax
After realization of Export Proceeds:
Dr. General A/C ID, HO (CM portion- TT Clean &
rest portion-OD Sight ) Cr. FC
Held ( @ OD Sight Export)
Cr. FBP A/C
Cr. I/A Exchange Earning
(D) 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 export)
BTB FLOWCHART
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