FOREIGN EXCHANGE 1

1. What is ICC and what are the functions of ICC? Write the name of publications (rules) of ICC.
ICC is stands for ‘The International Chamber of Commerce’. ICC is the world business organization, a
representative body that speaks with authority on behalf of enterprises from all sectors in every part of
the world. ICC was founded in 1919. Today it groups hundred of thousands of member companies and
associations from over 130 countries. National committees work with their members to address the
concerns of business in their countries and convey their governments the business views formulated by
ICC. The headquarters of the International Chamber of Commerce is in Paris of France. The ICC
Bangladesh was established in 1994.
Functions of ICC: The fundamental mission of ICC is to promote trade and investment across frontiers and
help business corporations meet the challenges and opportunities of globalization. ICC has main three
activities: rules setting, dispute resolution and policy.
ICC also provides essential services, foremost among them the ICC International Court of Arbitration, the
world’s leading arbitral institution. Another service is the words chambers federation, ICC’s worldwide
network of chambers of commerce, fostering interaction and exchange of chamber best practice.
ICC enjoys a close working relationship with the United Nations and other intergovernmental
organisations, including the World Trade Organisation and G8.
Publications of ICC: 1. UCP – 600, 2. ISBP – 681, 3. URC – 522 , 4. ISP – 98 5. URDG – 758
6. URR – 725 7. INCOTERMS 2010 – 715E

2. (a) What is UCPDC?

UCPDC means “Uniform Customs and Practice for Documentary Credits”.
The International Chamber of Commerce (ICC) in 1933 first published UCPDC. The latest revised edition of
UCPDC-600 came into force from 01.7.07. The rules of UCPDC-600 are applicable to any documentary
credit including Standby Letter of Credit, when the text of the credit expressly indicates that it is subject to
these rules.

(b) What are the objects of UCPDC?

One of the core task of the ICC is to make it easier for companies in different countries to trade with each
other, thus contributing to the expansion of International Commerce. The publication of UCP 600 is a
major event for bankers, lawyers and business people all over the world who are directly or indirectly
involved in International trade. This is the uniform rules compulsorily to be accepted by the member
countries of ICC. But if any law of a country contradicts any rule(s) of UCP, the law of that country will get
priority.
(c) Write the number of articles of UCPDC, ICC Publication -600.
There are 39 (thirty nine) articles in the UCPDC, ICC-600. These are:
Article 1 Application of UCP
" 2 Definitions
" 3 Interpretations
" 4 Credits V Contracts
" 5 Documents V Goods, Services or Performance
" 6 Availability, Expiry date and Place for Presentation
" 7 Issuing Bank Undertaking
" 8 Confirming Bank Undertaking
" 9 Advising of Credits and Amendments
" 10 Amendments
" 11 Teletransmitted and Pre-Advised Credits and Amendments
" 12 Nomination
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" 13 Bank-to-Bank Reimbursement Arrangements

" 14 Standard for Examination of Documents
" 15 Complying Presentation
" 16 Discrement Documents, Waiver and Notice
" 17 Original Documents and Copies
" 18 Commercial Invoice
" 19 Transport Document Covering atleast Two different Modes of Transport.
" 20 Bill of Lading
" 21 Non-Negatiable Sea Way Bill
" 22 Charter Party Bill of Lading
" 23 Air Transport Document
" 24 Road, Rail or Inland Waterway Transport Documents
" 25 Courier Receipt, Post Receipt or Certificate of Posting
" 26 “On Deck”, “Shipper’s Load and Count”, “Said by Shipper to Contain” and Charges Additional to Freight.
" 27 Clean Transport Documents
" 28 Insurance Document and Coverage
" 29 Extension of Expiry Last Date or Day of Presentation
" 30 Tolerance in Credit Amount, Quantity and Unit Price
" 31 Partial Drawing or Shipment
" 32 Installment Drawings or Shipments
" 33 Hours of Presentation
" 34 Disclaimer on Effectiveness of Documents
" 35 Disclaimer on Transmission and Translation
" 36 Force Majure
" 37 Disclaimer for Acts of an Instructed Party
" 38 Transferable Credits
" 39 Assignment of Proceeds

3. (a) What do you understand by INCOTERMS?

INCOTERMS are a set of standard terms used in contracts for international sales and utilized to determine
the obligation of the parties – buyers and sellers. INCOTERMS rules are a basic requirement for sales
contract, popular language even for courts of law. These rules describe DELIVERY – RISKS and COSTS
involved in the delivery of goods from sellers to buyers. INCOTERMS were created in the framework of the
International Chamber of Commerce (ICC) whose validity is recognized internationally. The word
INCOTERMS is an abbreviation of International Commercial Terms, first version of which was published in
1936. There were 13 INCOTERMS in the version of 2000. The latest version of INCOTERMS 2010 (ICC
publication no. 715E) consists of 11 rules, each rule is represented by 3 letters, that clearly set out the
duties, costs and transfer of risks involved in the delivery of goods from sellers to buyers. These rules
(terminology) provide a wide choice to sellers and buyers as to how they wish to share these duties, costs
and risks in the contract of sale (Indent or Proforma invoice) by express incorporation. INCOTERMS 2010
came into effect from 1st January 2011.
(b) What are the differences between INCOTERM 2000 and 2010?
Four INCOTERMS - DDU (Delivered Duty Unpaid), DAF (Delivered At Frontier), DES (Delivered Ex Ship) and
DEQ (Delivered Ex Quay) are eliminated from the version of 2000. Two new terms/rules DAT (Delivered At
Terminal) and DAP (Delivered At Place) are created in the version of 2010.
(C) Devide the INCOTERMS according to transport mode.
Any mode of transport Maritime and inland waterways (Both the
point of origin and destination are ports)
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(i) EXW EX Works

(ii) FCA Free Carrier
(iii) CIP Carriage and Insurance Paid to
(iv) CPT Carriage paid to
(v) DAT Delivered AT Terminal
(vi) DAP Delivered At Place
(vii) DDP Delivered Duty Paid
(viii) FOB Free on Board
(ix) FAS Free Alongside Ship
(x) CFR Cost & Freight
(xi) CIF Cost, Insurance & Freight

(d) Show the extent of obligations from the standpoint of the seller.

 Place the goods to the buyer in warehouse and unloaded - EXW

 Deliver the goods to the carrier chosen by the buyer - FCA, FAS, FOB
 Deliver the goods to the carrier selected by seller - CFR, CPT
 Deliver the goods to the carrier chosen by seller, dealing and
Paying the insurance - CIF, CIP
 Maximum obligation. Delivering the goods at destination - DAT, DAP, DDP.

4. (a) What is URC?

URC means Uniform Rules for Collection.
Firstly the International Chamber of Commerce (ICC) published URC in 1956 and latestly revised
URC, ICC publication No. 522 came into force from 01.1.1996.
(b) Write the number of articles of URC.
(There are 26 (twenty six) articles of URC. The head of the articles are mentioned below:
GENERAL PROVISIONS & DEFINITIONS:
Article No. 1 : Application of URC – 522
” ” 2 : Definition of Collection
” ” 3 : Parties to a Collection
” ” 4 : Collection Instruction
” ” 5 : Presentation
” ” 6 : Sight/Acceptance
” ” 7 : Release of Commercial documents
” ” 8 : Creation of documents
LIABILITIES & RESPONSIBILITIES:
” ” 9 : Good faith and Reasonable Care
” ” 10 : Documents Vs. Goods/Services/Performances
” ” 11 : Disclaimer for Acts of an Instructed party
” ” 12 : Disclaimer on Documents received
” ” 13 : Disclaimer on Effectiveness of documents
” ” 14 : Disclaimer on delays, Loss in transit and translation
” ” 15 : Force Majeure
PAYMENT:
” ” 16 : Payment without delay
” ” 17 : Payment in Local Currency
” ” 18 : Payment in Foreign Currency
” ” 19 : Partial payments
INTEREST, CHARGES & EXPENSES:
” ” 20 : Interest
” ” 21 : Charges and Expenses
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OTHER PROVISIONS:
” ” 22 : Acceptance
” ” 23 : Promissory Notes and other instruments
” ” 24 : Protest
” ” 25 : Case of need
” ” 26 : Advices

5. (a) What is URR?

Uniform Rules for Reimbursements. In a broader sense URR means Uniform Rules for Bank to Bank
Reimbursements under Documentary Credit.
The International Chamber of Commerce (ICC) published Uniform Rules for Bank to Bank Reimbursement
under Documentary Credit as ICC publication no. 725 in 2008 and came into force on 01.10.2008.

(b) Write the number of articles & names of URR.

There are 17 (seventeen) articles in URR, ICC publication-125. The name of the articles are:
GENERAL PROVISIONS AND DEFINITIONS:

Article (i) Application of URR

" (ii) Definition
" (iii) Reimbursement Authorisations Versus Credits
LIABILITIES AND RESPONSIBILITIES
" (iv) Honour of a Reimbursement Claim
" (v) Responsibilities of the Issuing Bank
FORM AND NOTIFICATION OF AUTHORISATIONS, AMENDMENTS AND
CLAIMS
Issuance and Receipt of a Reimbursement Authorisation or Reimbursement
" (vi)
Amendment
" (vii) Expiry of a Reimbursement Authorisation
" (viii) Amendment or Cancellation of Reimbursement Authorisations
" (ix) Reimbursement Undertakings
" (x) Standards for Reimbursement Claims
" (xi) Processing a Reimbursement Claims
" (xii) Duplications of a Reimbursement Authorisations
MISCELLENEOUS PROVISIONS
" (xiii) Foreign Laws and Usages
" (xiv) Disclaimer on the Transmission of Messages
" (xv) Force Majeure
" (xvi) Charges
" (xvii) Interest Claims/Loss of Value.

6. (a) What is ACU?

ACU means Asian Clearing Union. It was established at the initiative of United Nations ‘Economic and Social
Commission for Asia and the Pacific (ESCAP). The Draft agreement, establishing the ACU, was finalized at a
meeting at Bangkok in 1973 with the senior Gov’t Officials and Officials of Central Banks and agreement for
formulation of ACU was signed on 09.12.74. The ACU started its function/operation in November, 1975.
ACU is the simplest form of payments arrangement whereby the members settle payments for inter
regional transactions among the participating Central Banks on a multilateral basis.
(b) Who are the members?
There are 09 (nine) member countries setting their respective import & export payments through ACU
currencies:
(i) India, (ii) Iran, (iii) Mayanmar (Burma), (iv) Sree Lanka, (v) Nepal, (vi) Pakistan, (vii) Bangladesh, (viii)
Bhutan and (ix) Maldives.
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ACU was formed on 09.12.1974. The head quarter of Asian Clearing Union situated at Tehran, Iran.
(e) What are the objectives & functions of ACU?
(i) To facilitate settlement, on a multilateral basis, of payments for current international transactions;
(ii) To promote the use of participants’ currencies in current transactions;
(iii) To promote monetary co-operation among the participants and closer relations among the banking
systems so as to expand trade and economic activity among the countries of the ESCAP region;
(iv) To provide for currency swap arrangement among the participants.

(f) What is the name of the ACU curreny?

The name of the ACU currency is Asian Monetary Unit (AMU). The Asian Monetary Unit (AMU) shall be
denominated as ‘ACU Dollar’ and ‘ACU Euro’ which shall be equivalent in value to one US Dollar and one
Euro respectively. Euro as AMU has introduced from 01.1.2009.

7. What is Foreign Exchange & Foreign Trade?

As per Foreign Exchange Regulation Act, 1947 ‘Foreign Exchange’ means foreign currency and includes any
instrument drawn, accepted, made or issued under clause (13) of article 16 of the Bangladesh Bank order,
1972. All deposits, credits and balances payable in any foreign currency and any draft, traveler’s cheque,
letter of credit and bill of exchange expressed or drawn in Bangladesh currency but payable in any foreign
currency. Simply, Foreign exchange means the exchange or convertibility of one currency into another
currency. Foreign Trade means imports of merchandises of a country from other countries and also exports
of merchandises to other countries under contract.
(b) Why foreign trade has been introduced in the world?
No country in the world is self sufficient by all goods & services due to natural, economic, educational or
some other reasons. Production cost of a commodity may be higher than another country. Technologically
one country may be more advance than other country to produce a commodity. Natural resources are also
scattered all over the world. Necessity for the people, comparative production cost, scarcity of natural
resources and to increase the life standard of the people of the world developed international trade for
common interest of the countries.
(c) What are the Foreign Exchange Regulations?
(i) Foreign Exchange Regulation Act-1947
(ii) Exchange Control Manual “Guide line for foreign exchange transactions”
issued by Bangladesh Bank. Vol- 1 & 2.
(iii) Foreign Exchange Circulars issued by Bangladesh Bank.
(iv) Public notices issued by Bangladesh Bank and concerned Ministries.
(v) Export & Import policy issued by the Controller of Import & Export (CCIE)
(vi) Circulars issued by the Ministry of Commerce.
(vii) Uniform Customs & Practice for Documentary Credit (UCPDC) – 600
(viii) Uniform Rules for Collection (URC) – ICC publication 522
(ix) Uniform Rules for Reimbursement (URR) – ICC publication 725
(x) International Commercial Terms (INCOTERMS) – ICC publication 2000.

(d) What is Export/Import policy and what are the objectives of Export Import policy? (VVI)
The Government of Bangladesh is committed to fostering a gradual development of free market economy
in the light of WTO (World Trade Organization) agreement. In the interest of export promotion and
investment in the country it is necessary to have a long term, stable, facilitative & liberal import policy.
With this end in view, the Government has taken steps to extend the duration of Import policy from two
years to five years. Provision has been made to allow import of capital machinery and industrial raw
materials without the cover of Letter of Credit (L/C). Government has taken steps for quality control of all
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imported materials including consumer goods. In the Import policy order second hand & reconditioned
machinery are importable subject to fulfillment of certain conditions.
The main objectives of the Import policy are:
(i) To make the Import policy compatible with the changes in the world market that
have occurred as a result of the introduction of market economy and signing of the GATT
agreement.
(ii) To simplify the procedures of import of capital machinery and industrial raw
materials with a view to promoting exports.
(iii) To ensure growth of the indigenous industry and availability of high quality goods to
the consumers at a reasonable price.
The main objectives of Export policy are:
(i) To achieve maximum national growth through increase of exports.
(ii) To narrow down the gap between the country’s export earning and import payment.
(iii) To undertake timely steps for production of exportable goods at a competitive price with a view to
expand the existing markets.
(iv) To take the highest advantage of entering in to the post Uruguay liberalized and globalized
international market.
(v) To make our exportable items more attractive to the market through product diversification and
quality improvement.
(vi) To establish backward linkage industries.
(vii) To simplify export procedures.
(viii)To develop trained human resources in the export sector.

(e) What are the strategies to increase our export to a maximum level?
The main strategies to increase our export are:
(i) Simplifying export procedures.
(ii) Providing facilities for technological development.
(iii) Ensuring maximum use of local raw materials in the production of export items.
(iv) Encouraging establishment of backward linkage industries.
(v) Participation in international trade fair.
(vi) Encouraging export of new categories of high value added readymade garments.
(vii) For promotion of high value added leather goods export.
(viii) For promotion of export of shrimp.
(ix) For promotion of export of jute & jute goods.
(x) For promotion of export of tea.
(xi) For promotion of export of agrobased products.
(xii) For promotion of export of electrical products.
(xiii) For promotion of export of electronic goods including computer software & data
entry.
(xiv) For promotion of export of engineering consultancy and other services.
(xv) For promotion of export of our skilled and unskilled manpower.

9. (a) What are the requirements of a new importer for getting Import Registration Certificate
(IRC)?

(i) Application in a prescribed form.

(ii) Valid Trade license.
(iii) Membership certificate of the respective trade organization or Membership
from the Chamber of Commerce & Industry.
(iv) Registered partnership deed/Memorandum and Articles of Association
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alongwith Certificate of Incorporation.

(v) Two copies attested photograph of the applicant(s).
(vi) Affidavit from 1st class Magistrate.
(vii) Asset Certificate of the applicant(s).
(viii) Ownership deed or Lease deed of the office premises alongwith rent receipt.
(ix) Bank solvency certificate.
(x) Tax Identification Number (TIN) Certificate.
(xi) Money receipt of requisite fee.
(xii) Any other document as required.

(b) Who issued the Import Registration Certificate (IRC)?

After submission of the application by the intending importers for IRC alongwith the papers in mentioned
above (a) and deposit of requisite fees, on being satisfied the Chief Controller of Import & Export (CCI&E)
issue IRC to the Industrial Consumers or Commercial importers with their half yearly/yearly entitlement
mentioning item of commodities.
(c) What are the contents of an IRC?
(i) Validity period & issue date mentioned
(ii) Name of the importer mentioned
(iii) Sometimes amount limited
(iv) Sometimes item limited.
(d) Who are the exempted persons from Registration as an Importer?

In terms of the Importers, Exporters and Indentors (Registration order 1981), no person can import goods
into Bangladesh unless registered with the CCI &E or exempted from the provision of the said order.
Personal user needs no registration. They may import beyond USD5,000/- with the permission from
CCI&E.
Persons exempted for registration:
(i) Government departments
(ii) Local authorities or Statutory bodies
(iii) Recognized Educational institutions
(iv) Hospitals
(v) Imports of goods which does not involve remittance of foreign exchange
(vi) Reading materials or medicine imported for personal use within permissible limit.
(vii) Capital machineries & spare parts for new industry.

10. Write stepwise the procedures/formalities for Import.

(I) Procurement for Import Registration Certificate (IRC): VVI
To carry on the business of import, the first thing needs is registration. An application to be
submitted by the intending importer for IRC alongwith the undernoted papers/documents to the
Chief Controller of Import & Export (CCI&E).
(i) Application in the prescribed form.
(ii) Valid Trade license.
(iii) Membership certificate of the respective trade body or Membership from the local Chamber
of Commerce & Industry.
(iv) Registered partnership deed/Memorandum & Articles of Association alongwith Certificate
of Incorporation with Registrar of Joint Stock Company.
(v) Two copies attested photographs of applicant(s).
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(vi) Affidavit from 1st class Magistrate.

(vii) Asset certificate of the applicant(s)
(viii) Ownership deed or Lease deed of the office premises alongwith rent receipt.
(ix) Bank solvency certificate.
(x) Tax Identification Number (TIN) certificate.
(xi) Any other document as required.
On receiving the application and papers, the office of the CCI&E will scrutinize these and being satisfied
they will issue Demand notice for deposit the Import Registration fees to the Bank through Treasury
Challan. Original copy of deposited Treasury challan to be also deposited to the office of CCI&E.
Thereafter the Chief Controller of Import & Export will issue Import Registration Certificate which will
contain the name of importer, Date of issue, validity period, sometimes items limited and sometimes
amount limited for a period.
(II) Purchase contract with the Seller:
Upon registration, the importer will collect Proforma Invoice directly from the seller through negotiating
the price, quantity, quality and other terms & conditions over phone/Telex/Fax/e-mail or letter. Sometimes
sellers appoint their Agent in some countries who issue offer letter of sale to the importers describing all
terms & conditions which is called Indent.
(III) Opening of Import L/C:
After obtaining the Proforma Invoice or Indent, the importer will go to his banker or any other bank and
approach them for opening of L/C. The bank will verify the Proforma Invoice or Indent whether the item or
other terms of the Proforma Invoice or Indent are restricted by the law of the land. If everything is ok, they
will settle the percentage of margin and the banker may ask the importer to deposit the margin and other
requisite paper(s). Then Bank collect the credit report of the exporter. After completing the formalities, the
banker will issue Letter of Credit (L/C).
(IV) Advising and Confirming the L/C:
The L/C issuing bank (importer’s bank) in accordance with the instruction/request or as per arrangement,
the issuing bank request another bank (advising bank) located in the seller’s/exporter’s country to advise
the L/C to the beneficiary. The issuing bank may also request the advising bank or any other corresponding
bank to confirm the credit, if necessary. The Advising bank inform/advises the seller/exporter that the L/C
has been issued.
(V) Exporter’s duty:
As soon as the exporter receives the L/C and is satisfied that all the terms & conditions of the L/C are in
conformity with the proforma invoice or indent and he can meet the terms & conditions, then he will
arrange to make the shipment of the goods within the time frame. After making shipment of the goods in
favour of the importer then the exporter submit the requisite documents to his bank for negotiation of the
export bill.
(VI) Negotiating bank:
The exporter bank is called Negotiating bank. They receive export documents from the exporter and
scrutinize these with the L/C copy and if found OK then they send the documents to the L/C issuing bank
through reputed Courier service or Registered post.
(VII) Lodgement of documents by the L/C issuing bank:
After receiving the documents from the negotiating bank, the issuing bank will examine the documents and
if found in order, they make payment instruction to the Reimbursing bank from our NOSTRO account with
them. If any discrepancies found in the documents, the issuing bank must inform the negotiating bank
within five working days from the date of receipt of the documents and payments will be held up until
settlement of the discrepancies. If the importer agreed in writing to receive the discrepant document, then
bank may instruct the Reimbursing bank to pay the bill amount to the negotiating bank.
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(VIII) Retirement of documents and release of imported goods:

After lodgement of the documents against L/C, the issuing bank then request the importer for retirement
of documents after making payment or retire the documents duly arrange for making payment to release
the goods from the port authority duly observed custom formalities. If the importer did not come forward
to retire the import documents from the bank for any reason, the bank will then create a forced loan in the
name of the importer and arrange to release the goods from the port authority after observing custom
formalities through their CNF agent and took the goods under Bank’s control.

11. (a) What is Letter of Credit? What are the classifications of L/C?
The Letter of Credit (L/C) is an instrument or document or an undertaking issued by a banker at the
request of the client (importer or purchaser) to the beneficiary (exporter or seller) guarantees to pay at
sight or determinable future date upto a stated sum of payment against shipment of goods made in
conformity with terms & conditions stipulated in the instrument (L/C). As per Article 5 of UCP-600,
“Banks deals with documents and not with goods, services or performance to which the documents may
relate.”
Simply, Letter of Credit is a conditional irrevocable undertaking to the exporter by the issuing bank on
behalf of the importer to pay the money, after complying presentation of documents as per credit.
The Letter of Credit classified into various categories:
(i) Revocable Credit: A Revocable Letter of Credit is a Credit which can be amended or cancelled by the
issuing bank without prior notice to the seller or exporter.
(ii) Irrevocable Credit: An Irrevocable Letter of Credit constitutes a definite undertaking of the issuing bank.
This type of L/C cannot be amended or cancelled without consent of all parties.
(iii) Revolving Credit: The Revolving Letter of Credit is one which provides for restoring the credit to the
original amount after it has been utilized. How many times it will be taking place must be specifically
mentioned in the Credit. The revolving credit may be either cumulative or non cumulative.
(iv) Transferable Credit: A Transferable Credit is one that can be transferred by the original beneficiary in
full or in part to one or more subsequent beneficiaries. Such Credit can be transferred once only, provided
partial drawings or shipments are allowed. Unless otherwise agreed at the time of transfer, all charges
(commissions, fees, costs) incurred in a transfer must paid by the 1st beneficiary.
(v) Red Clause Credit: When the clause of the Letter of Credit authorizing the negotiating bank to provide
pre-shipment advance to the beneficiary is printed/typed in red, the Credit is called Red Clause Letter of
Credit. In this type of L/C, the opening bank is liable for the pre-shipment advances made by the negotiated
bank, in case the beneficiary fails to repay or deliver the documents for negotiation.
(vi) Back to Back Credit: Back to Back Letter of Credit (BTB L/C) is a type of import L/C, either in land or in
abroad, which opens against lien on valid export L/C received by export oriented industrial unit operating
under the Bonded Ware house system, subject to observance of domestic value additional requirement
prescribed by Ministry of Commerce from time to time.
(vii) Green Clause Credit: A clause appearing in anticipatory or pre-shipment types of documentary credits
authorizing the seller of goods to obtain an advance payment before shipping the goods, enabling him to
pay for the goods and all expenses including storage costs prior to shipment on board an ocean vessel. The
opening bank when issuing such irrevocable documentary letter of credit should invariably restrict the
negotiation of the credit at the advising bank with whom the opening bank has such line of credit or
arrangement for allowing pre-shipment credit facility. This type of L/C is called Anticipatory Credit.
However, as per UCP-600, all credits are irrevocable even if there is no indication to that effect.
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(b) Who are the parties of a L/C?

(i) Importer (buyer), (ii) Exporter (seller), (iii) Issuing bank/Opening bank (importers’ bank), (iv) Advising
bank/notifying bank, (v) Negotiating bank (exporters’ bank), (vi) Add confirming bank, (vii) Reimbursing
bank or paying bank.
(c) What are the types of L/C?
As per UCP article no. 6(b) the L/C types may be assert as SIGHT or DEFERRED. All credits must indicate
whether they are available by sight payment or by deferred payment, by acceptance or by negotiation.
(d) What are the duties of an importer and What papers required to open an Import L/C?
Duties of an Importer are:
(i) Whether the import item is permissible for import.
(ii) To declare whether the item is Commercial or Industrial
(iii) To declare whether the L/C will be opened by Cash/Aid/Loan/Barter.
(iv) To declare whether the item to be imported in a group or not
(v) To declare any special condition
(vi) To submit all requisite papers related to the L/C to the banker.
(vii) To sign all requisite papers of Banks.

Papers required for opening an Import L/C:

(i) Application in letter head pad for opening of L/C

(ii) Import Registration Certificate (IRC)
(iii) Proforma Invoice or Indent
(iv) Valid Trade license
(v) Trade Association Membership Certificate.
(vi) TIN number ( in case of new importer)
(vii) Income Tax payment & VAT Certificate ( in case of old importer)
(viii) Insurance Cover note.
(ix)
(x)
(xi)
Printed application form duly stamped
L/C authorization form (LCAF) (six copies)
IMP form one set (four copies)
} to be supplied by Bank

(xii) Credit Report on the Exporter.

12. (a) What is Back to Back L/C (BTB L/C)?

Back to Back L/C (BTB L/C) is a type of import L/C, either inland or in abroad, which opens against lien on
valid export L/C (Mother or Master L/C) received by export oriented industrial unit operating under the
Bonded ware house system, subject to observance of domestic value addition requirement prescribed by
Ministry of Commerce from time to time.
(b) What are the regulatory requirements to open BTB L/C?

(i) Only recognised export oriented industrial units who possess valid registration
with the CCI & E operating under Bonded Ware house system will be allowed the BTB L/C facility.
(ii) The master export L/C against which BTB L/C is requested, should have adequate validity period
(minimum two months) to cover the time needed for import of inputs, manufacturing of
merchandise and shipment to the consignee.
(iii) The BTB L/C value shall not exceed the admissible percentage of net FOB value (not more than
75%) of the relative master export L/C. For computation of net FOB value of a master export L/C,
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the freight charge, insurance cost and commission if payable by the exporter in foreign currency
shall be deducted from the L/C value.
(iv) The BTB import L/C shall be opened on upto 180 days usance (DA) basis except in case of those
opened against Export Development Fund (EDF) administered by the Department of Banking
operation and Development of Bangladesh Bank in which case the BTB L/C will be opened on sight
(DP) basis. Interest for the usance period shall not exceeded LIBOR, or the equivalent interest rate
in the currency of settlement.
(v) All amendments of the master export L/C should be noted down carefully to rule out chances of
excess obligation under the Back to Back import L/C.
(vi) Back to Back import L/C should not be opened against L/Cs received for export under barter/STA,
without prior approval of Bangladesh Bank.
(vii) The BTB import L/C shall contain condition of preshipment inspection by internationally reputed
Inspection firm regarding quality and quantity of the merchandise.

(c) Write the scrutinize points of a Master L/C against which BTB L/C will be open.

(i) Whether Master L/C has been opened by a Internationally reputed bank.
(ii) Whether the L/C is irrevocable.
(iii) Whether the L/C issued covers ICC publication UCP-600.
(iv) L/C should not contain unacceptable conditions/clause.
(v) Terms of payment should be at sight.
(vi) Date of shipment/credit validity/place of expiry should be clearly mentioned.
(vii) Inspection clause, reimbursement clause, disposal of document clause should be clearly mentioned.
(viii) Regarding terms of delivery CIF is preferable as we can make payment the freight and insurance in
local currency.
(ix) If the L/C is transferable, authentication of transfer/letter of transferring bank to the issuing bank is
required.
(x) If exportable goods are under quota, allocation of quota is required.

(d) What are the required papers and documents to be obtained for open a BTB L/C?

(i) L/C application and Agreement form

(ii) LCA form
(iii) IMP form
} To be supplied by Bank.

(iv) Valid Trade License & Membership certificate of the Trade body.
(v) Valid ERC and IRC
(vi) Indent/Proforma invoice
(vii) Insurance Cover note
(viii) Valid Bonded Ware House License
(ix) Quota allocation letter (if applicable)
(x) Indemnity Bond duly stamped
(xi) Credit report
(xii) Letter of Undertaking to the effect that he will export the ready made garments as per
terms & conditions of L/C.
(xiii) Master/Mother L/C duly lien marked
(xiv) Charge documents duly stamped.

13. (a) Write the common major discrepancies those to be checked on receiving
Export/Import documents.
 12

Common discrepancies:

(i) Claused (unclean) Bill of Lading

(ii) Charter party B/L (unless stipulated in the L/C)
(iii) Full set of B/L not presented
(iv) On Board endorsement unsigned, undated, unauthenticated in B/L
(v) Bill of Lading does not evidence whether freight is paid or not.
(vi) Stale Bill of Lading/documents not presented in time.
(vii) Goods shipped on deck (unless stipulated in L/C)
(viii) Shipment effected from port other than that stipulated in the L/C.
(ix) Weightment Certificate not presented.
(x) Weight differ between documents.
(xi) Third party B/L or short form Bill of Lading submitted.
(xii) Late shipment
(xiii) Short shipment
(xiv) Shipping marks and numbers differ between documents
(xv) Description of goods on invoice differs from that in L/C.
(xvi) Documents inconsistent with each other.
(xvii) Amounts in invoice and Bill of Exchange differ.
(xviii) Unit price not mentioned in invoice and inadequate number of invoices.
(xix) Certificate of Country of origin of the goods not submitted.
(xx) Certificate notifying Insurance Company of shipment not presented.
(xxi) L/C amount exceeded
(xxii) L/C expired
(xxiii) Packing list not submitted
(xxiv) Inspection Certificate not submitted
(xxv) Fumigation/Health Certificate (fit for human consumption) not submitted
(xxvi) Bill of Exchange drawn on a wrong party
(xxvii) Bill of Exchange payable on an indeterminable date
(xxviii) Partshipment/transshipment effected by not covered by the terms of L/C
(xxix) Notifying party differs or not as per L/C
(xxx) Forwarder’s Cargo receipt not acceptable (unless provided in the L/C)
(xxxi) Absence of documents called for in the credit.
(xxxii) Absence of signatures where required, on documents printed.
(xxxiii) Description of documents on collection schedule differs with documents presented.
(xxxiv) Cuttings, alterations in documents not authenticated.
(xxxv) Bill of Lading, Insurance documents or Bill of Exchange are not endorsed correctly.
(xxxvi) LCA number or Indentors registration number not mentioned in the invoice.
(b) State the procedure of retirement of import documents.
When the documents are received from foreign correspondent and checked with L/C file by
two officers to ascertain the correctness, if it is found in order, then make entry in the Bill
register and pass the reverse liability voucher within five working days from the time of
receipt is called Lodgement. When the party release/retire the documents from the L/C
issuing Bank by cash payment or by Murabaha Post Import (MPI), Mudaraba, Musharaka,
Bai-muazzal of TR arrangement is known as Retirement.

Documents must not be handed over to the importer without payment or arrangement of
payment.
 13

After shipment of goods the importer requests the Bank in prescribed printed form 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.

14. (a) What are the different modes of International Trade payments?
In International trade there are four methods of payment. These are:
a) Cash in Advance
b) Open account
c) Collection &
d) Documentary Credit.
The first three are the traditional trade payment methods, which views the Bank’s role as an agency for
transmitting or receiving funds or documents. The ordering of the payment and delivery of goods depends
upon the situation and convenience of the buyer and seller. Under Documentary credit the bank assures
payment subject to the completion of documentary conditions.
Cash in Advance: Under this system the buyer puts funds at the disposal of the seller prior to shipment of
goods or provision of services. In other words, exporter receive the value of goods/services before
shipment through Cheque, Draft or TT or any other mode. This is an advantageous system for the exporter
as he can use the fund immediately. But the risk lies to the importer as he cannot receive goods in quantity
& quality in time as per contract/agreement. In this system the Credit report of the exporter should be
obtained and carefully to be examined before making payment.
Open account: An open account method is an arrangement between buyer (importer) and seller (exporter)
whereby the goods delivered before payment is made. Open account thus obviously more advantageous
for the importer as he will pay the price of the goods after satisfying the delivery date, quantity & quality.
In this system the risk is very much high for the exporter. Thus he will collect credit worthiness of the buyer
before agreeing open account business term.
Consignment sale is one of the example of open account transaction. Under this system the buyer receive
goods from the seller and remit sale proceeds to the seller after deducting his commission & charges. As
per Exchange Control regulation only nontraditional items can be sent on consignment basis. Export of
traditional item on consignment basis requires prior approval of Exchange Control authority.
Collection: Collection is a method under which goods are shipped and the Bill of Exchange (Draft) is drawn
by the seller on the buyer. The documents are sent to the bank with clear instruction for collection through
one of its’ correspondent bank located in the buyers country. The documents are to be delivered only after
the payment has been made or Draft is accepted.
Documents against Payment (D/P bill) is one of the most widely used method of trade payment. After
shipped the goods the seller draw a Sight Bill of Exchange (Draft) on the buyer and the same is presented
to the drawee (buyer/importer) alongwith the shipping documents for payment through a Bank in the
country of importer. Banks in buyers’ country gives delivery of documents to buyer only against payment.
This system is also called ‘Cash against Document’ (CAD) or Sight bill.
Documents against Acceptance (D/A bill) is a method where Usance Bill of Exchange is drawn on the buyer
by the seller which is presented to the drawee for acceptance by a bank on his own country (Collecting
Bank). Drawee accept the Draft and Fix-up a date of payment (date of maturity). The collecting bank holds
the accepted draft and release documents to the drawee. The drawee may make payment before the
maturity of the draft. On due date the accepted draft is presented to drawee for payment. This bill is also
called Usance Bill or Deffered Payment against Acceptance.
 14

Documentary Credit: Documentary Credit is the classic form of international trade payment. This method
substantially reduce payment related risk for both exporter and importer. Documentary Credit is a
conditional bank undertaking of payment on behalf of the buyer/applicant/importer to the
seller/beneficiary/exporter against complying presentation of documents.

(b) What is Balance of Trade and Balance of payment?

Balance of Trade refers to the net difference value of Export and Import of commodities from/into a
country. The movement of goods or commodities between countries is known as the visible trade.
Therefore balance of trade refers to the net balance of the visible trade of a country. When the value of
the export goods exceed value of import goods for a given period of time, there is net gain of foreign
exchange to the country and the balance of trade is said to be favourable or surplus or positive. If the value
of import goods exceeds the value of export goods within a period then it is called negative or deficit or
unfavourable.
Balance of Payment is a statement that contain details of all the international economic transactions both
visible and invisible items of a country within a given period of time, usually a year. Here visible items
includes export import of commodities/goods and invisible items are shipping, banking, insurance, tourist,
gift, interest on investment, technical know how, consultancy etc. The balance arrived at taking into
account both the visible and invisible items in foreign trade is known as Balance of payment. Balance of
payment includes Balance of trade and other invisible items of foreign trade. As in the case of Balance of
trade, the total amounts payable and receivable do not balance and the balance of payments for a given
period ends up in favourable/surplus/positive or unfavourable/deficit/negative.

15. What is Transport document?

Goods are carried from the Exporter (seller) to Importer (buyer) through various modes of transport, viz:
Truck, Rail, Air, Ship etc. All these modes are separately at a glance is called Transport document. Transport
documents issued by the freight forwarders. Unless otherwise authorized in the credit, banks will only
accept a transport document issued by a freight forwarder if it appears on its face to indicate the name of
the carrier duly authenticated by the freight forwarder.

(b) What are the types of Transport document?

There are different types of transport documents named on the basis of the different modes of shipment.
Such as:
(i) Marine/Ocean bill of lading or simply Bill of Lading (BL) in case of goods delivered to a ship for
carriage by sea.
(ii) Air transport document/Airway bill (AWB) in case of air shipment of goods.
(iii) Road, Rail or Inland Waterway Transport Document/Truck receipt (TR) in case of goods carried by
Truck, Railway Receipt (RR) in case of goods carried by Rail and so on.
(iv) Courier receipt and Postal receipt in case of shipment of goods by courier and by post respectively.

What is multimodal transport document?

As per article-19 of UCPDC-600, when a transport document covering atleast two different modes of
transport with transshipment, even if the credit prohibits transshipment, is acceptable from the place of
shipment to the place of final destination provided that the entire carriage is covered by one and the same
transport document is called multimodal or combined transport document.
(d) What are the contents of Transport document?
 15

The transport document should contain the following information:

(i) It must be issued by a named carrier or his agent.
(ii) Description of goods consistent with that in the credit.
(iii) Identifying shipping marks.
(iv) The name of the carrying vessel ( in case of marine B/L) or the intended carrying vessel ( in case of
multimodal transport document including sea transport)
(v) An indication of dispatch or taking in charge or loading on board as the case may be.
(vi) An indication of place of such dispatch or taking in charge or loading on board and the place of final
destination.
(vii) The name of shipper, consignee (if not made out ‘to order’) and the name & address of the notify
party.
(viii)Whether freight has been paid or still to be paid.
(ix) Date of issuing the document
(x) The number of originals if issued in more than one original.

16. Write the modes of Import financing by Islami Bank.

(i) Import of goods by Letter of Credit: A Letter of Credit (L/C) is a conditional undertaking to the exporter
(Seller) by a bank on behalf of his customer (Importer/buyer) to pay the bill amount, if all the terms &
conditions of the L/C are fulfilled. By issuing a L/C, a bank undertakes the full responsibility of payment, if
otherwise in order. Since bank takes the liability of payment against some percentage of margin from the
importer, which may be in cash or collateral or both cash & collateral depending upon banker customer
relationship – so it is an Import financing.
(ii) Murabaha Import Bill (MIB): Payment made by the bank against lodgement of transport documents of
goods imported through L/C is called MIB. It is an interim investment for a maximum period of 30 days
connected with import and is generally liquidated against payment usually made by the party for
retirement of the documents for release of imported goods from the customs authority. In conventional
banking this type of investment is called Payment Against Document (PAD).
(iii) Mudaraba Post Import (MPI): Normally importer pay the duty & sales tax of the imported goods after
arrival at the port. Due to shortage of fund or some other reasons, sometimes importer approach the L/C
opener bank to assist him for retirement of the imported goods. In some cases importer do not come
forward to retire the goods. In these cases the L/C opener bank themselves arrange to retire the goods by
pledge in Godown under bank’s lock & key. This type of payment (forced loan) is called MPI. This is a
temporary arrangement for a maximum period of 90 days. Within this time limit, the importer borrower
will release the goods at a time or gradually after making payment to the bank. In traditional banking this
type of investment is called LIM (Loan against Imported Merchandise) or LAM (Loan Against Merchandise)
(iv) Murabaha Trust Receipt (MTR): It is a type of investment allowed by a bank on trust to his experienced,
reliable & reputed importer for retirement of shipping documents towards release the imported goods.
Under this arrangement the importer borrower will deposit the sale proceeds of imported goods which are
under his control at a time or gradually within a maximum period of one year. In traditional banking this
type of facility is called Trust Receipt (TR).

17. (a) What is Factoring?

The word Factor is derived from Latin word ‘Facere’, which means to make or do or to get things done. In
other words, factoring means an agent or a commission merchant. Factoring originated in countries like
USA, UK, France etc where specialized financial institutions were established to assist firms in meeting their
working capital requirements by purchasing their receivables.
(b) What is the meaning of Factoring?
 16

A financial service, whereby an institution called the ‘Factor’, undertakes the tasks of realizing accounts
receivables such as book debts, bills receivables and managing sundry debts and sales register of
commercial and trading firms in the capacity of an agent, for a commission, is known as ‘Factoring’.
Factoring can broadly defined as an agreement in which receivables arising out of sale of goods/services
are sold by a firm (client) to the factor (a financial intermediary) as a result of which the title to the
goods/services represented by the said receivables passes on to the factor. Henceforth, the factor
becomes responsible for all credit control, sales accounting and debt collection from the credit customers.
In certain cases if any of debtor fails to pay the dues as a result of financial inability, in solvency and
bankruptcy the factor has to bear the shortfall. This type of factoring is called factoring without recourse,
but in case of factoring with recourse, credit risk is not undertaken by the factor. The debt outstanding is
automatically assigned back to the seller (client). There is no absolute uniformity in the functions
performed by factors all over the world. Depending upon the requirement of the clients and the business
environment, the functions of factor may vary from country to country.

(d) What are the advantages of Factoring?

Factoring, as an innovative financial services, commands the following major advantages:

(i) Cost savings: Factoring allows for the elimination of trade discounts. Besides, it also helps in reduction of
administrative cost and burden.
(ii) Leverage: Another advantages of factoring is that it helps to improve the scope of operating leverage.
(iii) Enhanced return: Factoring is considered attractive to users as it helps to enhance return.

(iv) Liquidity: Factoring enhances liquidity of the firm by ensuring efficient working capital management.
(v) Credit discipline: It brings about better credit discipline amongst customers due to regular realization of
dues. This is achieved through effective control of sales journal, reduced credit risk, better working capital
management etc.
(vi) Cash Flows: Accelerated cash flows help the client meet liabilities promptly, as and when they arise.
(vii) Prompt payment: Factoring facilitates prompt payments and credits by providing insurance against
bad debts.
(viii) Better linkages: Factoring allows for the promotion of linkages between bankers and factors. Such an
agreement helps better dealings, debt protection, collection of sales ledgers, etc.
(ix) Effective production: The factor undertakes the responsibility of credit control, sales ledger
administration and debt collection problems. Thus, the client can concentrate on functional areas of the
business such as planning, purchase, production, marketing and finance.
(x) Reduced Risk: Factoring allows for reduction in the uncertainty and risk associated with the collection
cycle.
(xi) Export promotion: Factoring facilities are designed to help exporters avail of financial assistance on
attractive terms, which in turn allows for promotion of exports.
(xii) Credit certification: The Factor’s acceptance of the client’s receivables is tantamount to credit
certification by the factoring agency.

(e) What are the disadvantages of factoring?

Despite the fact that factoring offers an excellent sort of financial services, in that it helps sellers of goods
on credit basis to avoid bad debts and at the same time ensure prompt collection from buyers, but there
are some disadvantages or drawbacks which are mentioned below:

(i) Engaging a factor may be reflective of the inefficiency of the management of the firm’s receivables.
(ii) Factoring may be redundant/superfluous if a firm maintains a nation wide network of branches.
 17

(iii) Difficulties arising from the financial evaluation of clients.

(iv) A competitive cost of factoring has to be determined before taking a decision about engaging a factor.

(g) What is Forfaiting?

A form of financing of receivables from international trade is known as forfaiting. With this arrangement, a
bank/financial institution undertakes the purchase of trade bills/promissory notes without recourse to the
seller. Purchase is through discounting of the documents covering the entire risk of non-payment at the
time of collection. All risks become the full responsibility of the purchaser (forfaiter). Forfaiter pays cash to
the seller after discounting the bills/cash.
Forfaiting essentially involve non-recourse bill discounting, in a modified way. It aims at protecting the
exporter from any default risk. Under this arrangement, the bills of exchange or promissory notes accepted
by the importer, and co-accepted by a bank in favour of the forfaiting agency, are exchanged for the
discounted cash proceeds, without recourse by the exporter.
For forfaiting to be successful, it is imperative that there exists a successful secondary market. A Forfaiter
may not be interested in holding the discounted bills or notes upto maturity because of liquidity
considerations. In the secondary market, forfaiters can buy or sell these bills like any other security.

(h) What are the advantages of forfaiting?

(i) It facilitates a broad range of instruments in use, such as promissory notes, bills of exchange,
acceptance, letter of guarantee, documented receivable in balancesheet as pending and can use own
credit lines.

(ii) Averting export risk for non-settlement of claims etc as it provides for a non-recourse facility.
(iii) No risk on account of foreign exchange fluctuations to the exporter for the period between the
insurance date and the maturity of paper.
(iv) Exporters need not have to bother or face credit administration and collection problems.
(v) Provision of finance for counter trade, etc.

(i) Write the distinction between factoring and forfaiting.

Following are the points of distinction between factoring and forfaiting:

Sl.
Characteristics Factoring Forfaiting
No.
For transactions with short term maturity For transactions with medium term
1 Suitability
period. maturity period.
2 Recourse Can be either with or without recourse. Can be without recourse only.
3 Risk Risk can be transferred to seller. All risks are assumed by the forfaiter.
Cost of factoring is usually borne by the Cost of forfaiting is born by the overseas
4 Cost
seller. buyer (importer).
Covers a whole set of jobs at a Structuring and costing is done on a case
5 Coverage
predetermined price. to case basis.
Extent of Only a certain percent of receivables Hundred percent finance is available.
6
financing factored is advanced.
Basis of Financing depends on the credit standing of Financing depends on the financial
7
financing the exporter. standing of the availing bank.
Besides financing, a factor also provides It is pure financing arrangement.
8 Services other services such as ledger administration,
etc.
9 Exchange No security against exchange rate A forfaiter guards against exchange rate
 18

fluctuations fluctuations. fluctuations for a premium charge.

10 Contract Between seller and factor. Between exporter and forfaiter.

18. (a) What is Indent?

Some Firms or Companies are registered with the Regulatory bodies (CCI & E and Bangladesh Bank) to act
as an agent of foreign buyers or sellers. These agents are called Indentor. After negotiation between the
agent and the importer, offer on behalf of the exporter (seller) to importer (buyer) issued by Indentor is
called Indent. It indicates the specifications, price, quantity, delivery period and other terms of sale of a
product.

(b) What is Proforma Invoice?

After negotiation over phone/fax/letter/e-mail or any other mode between exporter and importer, offer
directly issued by the exporter to importer is called Proforma Invoice. It includes the specifications of the
product, price, quantity, delivery period and other terms of sale of a particular product.

(c) What is Commercial Invoice?

Commercial Invoice means a list of articles containing particulars and prices. There is no prescribed form of
Commercial invoice. Each exporter designs his own Commercial invoice forms. Commercial invoice is a set
of five papers or as desired by the importer which should bear the date, full address of exporter
(beneficiary) and importer, currency, quantity and amount as per credit, description of the goods, name of
the vessel/carrier, port of shipment, port of destination, shipping marks, L/C and Indent or Proforma
invoice references, freight, Insurance, origin of goods etc. Normally exporter signed the copies of
Commercial invoice. As per Article 18 a(iv) of UCP-600, Commercial invoice need not be signed by the
exporter.
(d) What is LIBOR?

LIBOR means London Inter Bank Offered Rate. LIBOR is the base rate of interest in London market from
which the Bank fixed its own rate of interest to charge on their lending to other banks for a given period of
time. LIBOR is considered a true reflection of the cost of funds to the banks which thus use it as a base rate
of interest.

(e) What is Consular Invoice?

This is a special type of invoice which is required by some countries. It is a invoice made out in a specially
printed form and is sworn as, being correct in all respect before the Consul of importing country stationed
in the exporters country. A consular invoice may also contain a declaration about the place of origin of the
goods. The consul of the importing country then certifies the invoice. The principal function of the consular
invoice is to enable the authorities of the importing countries to have an accurate record of the types of
merchandise shipped to that country, their quantity, grade and value, both for the purpose of fixing and
for assessing import duties and for general statistical purposes. It helps in clearing of the goods through the
customs of the importing country without undue delay. Any false declaration in the consular invoice
involves heavy penalty.
(f) What is Lodgement?

Documents received from foreign correspondent and checked to ascertain the correctness with the L/C
copy and entry passed through reversing the customers liability, if found documents in order – is called
Lodgement. This is temporary stay entry in the register before retirement. Refusal for any discrepent
document must be informed to the negotiating bank within 5 working days from the date of presentation
as per article 16 of UCPDC-600.
 19

(g) What is ‘Bill of Entry’?

A written statement prepared by the C&F agent on behalf of the merchant or Importer on a prescribed
form describing nature, quantity and value of goods imported alongwith supporting papers. They submit
the same to the custom authority. Custom authority scrutinize the papers and asses the customs duty, VAT
& other charges. Thereafter they ask the C&F agent or importer to deposit the assessed money into Sonali
Bank, Custom House branch. After making payment they submit the main copy of payment to the custom
authority. Finally Custom authority issue a computerised certificate is known as ‘Bill of Entry’. It proves that
the goods imported as per rule/law of the country, entered in the country, paid all Gov’t dues and similar
to Bill of Lading. As per rule of Bangladesh Bank, the importer must submit the Bill of Entry to the L/C
issuing bank within 120 days from the date of payment (creation of PAD/MIB)

19. What is ‘Bill of Lading’? What to be showed on the B/L and what are the kinds of B/L?

A bill of lading (B/L) is a document signed either by the Master of the ship or the owner or their agents
acknowledging receipt of the goods for carriage to a stated destination from the specified ports of
shipment with an undertaking to deliver the goods to the consignee in the like order as received on
payment of a charge called ‘Freight’. A bill of lading is an evidence of contract of carriage. This document is
required by the importer to take delivery or clear the goods. Normally Bill of Lading are issued in three sets
– one is original, other is for negotiable and the last copy will be remains with the shipmaster to enable
him to deliver the goods to the importer. Bill of Lading is ‘quasi-negotiable’ instrument.

Thus the Bill of Lading should show:

(i) The name of the carrying ship.
(ii) The name of shipper, consignee and name & address of notify party
(iii) Description of the goods.
(iv) The port of shipment and discharge.
(v) The date of shipment.
(vi) The number of originals Bill of Lading issued with date duly signed and endorsed.
(vii) Amount of freight paid or unpaid.
(viii) Identifying marks
(ix) Evidence that the goods have been loaded on board.
(x) The Bill of Lading should be clean and it should not bear any clause declaring
defective condition of goods or packages.
21. (a) What is Bill of Exchange?
Bill of Exchange is one of the important negotiable instruments in the mercantile world and used as a vital
document facilitating settlement of payments between buyer/importer and seller/exporter at home and
abroad.

As per Section 5 of Negotiable Instrument Act, 1881 defines Bill of Exchange as, “A Bill of Exchange is an
instrument in writing containing an unconditional order, signed by the maker, directing a certain person to
pay on demand or at a fixed determinable future time a certain some of money only to, or to the order of a
certain person or to bearer of the instrument.”

(b) What are the essential characteristics of a Bill of Exchange?

The essential characteristics of a Bill of Exchange are as follows:

(i) It must be writing with date.

(ii) It must contain an order to pay on demand or at fixed or determinable future time.
(iii) The order must be on unconditional.
(iv) It must be signed by the drawer.
 20

(v) The drawer, drawee and payee must be certain.

(vi) The amount must be certain.
(vii) It should be properly stamped.
(c) Who are the parties of a Bill of Exchange? Write their respective right and
obligation.

There are usually three parties of a Bill of Exchange. They are Drawer, Drawee and Payee. But sometimes
additional two parties Acceptor and Endorser includes in a Bill of Exchange.

(i) Drawer: The maker of a Bill of Exchange (B/E) is called the drawer. The drawer is the person to whom
debt is due. The drawer of a B/E by drawing it engages that on due presentment it shall be accepted and
paid according to its tenor and if it is dishonoured, he shall compensate the holder or any endorser who is
compelled to pay it.

(ii) Drawee: The person thereby directed to pay is called the drawee. He is to accept the B/E to make it a
legal one and he is not liable until and unless he has accepted it.
(iii) Payee: The payee is the person or to whose order the amount of instrument is payable. When the
payee is the same as the drawer and his rights and obligations as payee are merged with his rights and
obligations as drawer. But if the payee is a person other than the drawer, the payee has the right of
recourse to the drawer until the bill is paid by the drawee.
(iv) Acceptor: After the drawee of a Bill has signed his assent upon the bill, or, if there are more parts
thereof than one, upon one of such parts, and delivered the same, or given notice of such signing to the
holder or to some person on his behalf, he is called the Acceptor.
(v) Endorser: The endorser is a person who endorses the Bill by signing his name usually on the back of it.
He may be the payee or a subsequent endorser to whom the payee has assigned the bill. The endorser is
liable to subsequent endorser or to any future holder of the bill and his obligations are the same as those
of the drawer.

(d) Write specimen of (i) Demand Bill of Exchange and (ii) Time Bill of Exchange.
(i) Specimen of Demand Bill of Exchange:

Tk.10,000/- Dhaka
28.8.2007
On demand pay to Mr. Karim or order a sum of Taka Ten thousand only,
value received.

To
Mr. Rahim
70, Motijheel C/A. Stamp
Dhaka Sd/-Karim

(ii) Specimen of Time Bill of Exchange:

Tk.10,000/- Dhaka
28.8.2007
Three months after date pay to Mr. Karim a sum of Taka Ten thousand only,
Value received.

To
Mr. Rahim
70, Motijheel C/A.
Dhaka
 21

Stamp
Sd/-Karim

(e) What are the classification of Bills?

Inland bill: As per section 11 of N.I. Act, “A promissory note or bill of exchange or cheque drawn or made in
Bangladesh and made payable in, or drawn upon any person resident in Bangladesh shall be deemed to be
an inland instrument.
Foreign bill: As per section 12 of N.I. Act, “Any such instrument not so drawn, made or made payable shall
be deemed to be a foreign instrument.” For example, a bill drawn in Bangladesh but accepted in England
or vice versa is a foreign bill.
Time bill: A bill is said to be time bill which is payable at a determinable future time. It is also termed as
Document against acceptance (D.A bill). Time bill also called Usance bill.
Demand bill: A bill is said to be demand bill which is payable on demand or at sight or on presentation and
when no time for payment is specified in it. Demand bill also termed as Sight bill.
Trade bill: A bill drawn and accepted for a genuine trade transaction is termed as trade bill.
Accommodation bill: A bill drawn and accepted not for a genuine trade transaction but only to provide
financial help to some party is termed as an accommodation bill.
Clean bill: A bill which has no documents attached is called clean bill.
Documentary bill: A bill which has documents attached is called Documentary bill.
Domicile Bill: A domicile bill is one which is payable at a place other than the acceptors usual residence or
business place.
Maturity or Due date of bill: Maturity date is the date on which a Bill of Exchange is payable. In calculating
the due date of a bill calendar months are reckoned.

22. Write the steps involved or procedures/formalities for Export. VVI

Procedure for obtaining Export Registration Certificate (ERC):
As per Imports and Exports (Control) Act 1950, an intending exporter must obtain Export Registration
Certificate (ERC) from the Office of the CCI & E (Chief Controller of Import & Export) through submitting the
following papers and after deposit of requisite fees.
(i) Application in the prescribed form
(ii) Nationality Certificate
(iii) Assets Certificate of the proprietor/Director
(iv) Registered partnership deed/Memorandum & Articles of Association alongwith Certificate
of Incorporation (as the case may be).
(v) Bank Solvency Certificate.
(vi) TIN Certificate
(vii) Valid Trade License
(viii) Ownership Certificate or Lease deed of the business premise.
(ix) Membership Certificate of Trade Association
(x) Affidavit from a 1st Class Magistrate.
(xi) Attested two copies photograph of the applicant(s).
(xii) Any other document(s) as required.
Securing the export order or Export L/C:
Upon registration, the exporter may proceed to secure export order. He can do this by contacting the
buyers directly through correspondence or email. To locate the foreign buyers, the exporter may contract
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the local Chamber of Commerce or Bangladeshi Mission abroad or Export Promotion Bureau. Sometimes
TCB, BJMC or other organizations secure bulk contracts and pass or allocate the contracts to the actual
exporters.
Signing the contract or Proforma Invoice:
While signing the export contract, the following points need to carefully observed:
(i) Description of the Commodity permissible by the law of the land.
(ii) Quantity of the commodity.
(iii) Price of the commodity
(iv) Shipment
(v) Insurance
(vi) Inspection
(vii) Arbitration
Receiving the Letter of Credit:
The exporter should looked into the following points while after receive of an export order or L/C:
(i) The terms of the L/C are in conformity with those of the contract.
(ii) The L/C is irrevocable one, preferably confirmed by the Advising bank.
(iii) The L/C allowed sufficient time for shipment and reasonable time for negotiation.
(iv) If the exporter wants the L/C to be transferable, devisable and advisable, he should ensure
that these stipulations are specifically mentioned in the L/C.
Procuring the materials:
After making the deal and on having the L/C opened in his favour, the next step for the exporter is to set
about the task of procuring or manufacturing the contracted merchandise.
Shipment of goods: The following are the documents normally involved at the stage of shipment:
(i) EXP form certified by the bank and thereafter by the Custom authority.
(ii) Photocopy of Export Registration Certificate (ERC)
(iii) Photocopy of the contract (Indent/Proforma invoice)
(iv) Photocopy of the L/C
(v) Transport receipt of Rail/Truck/Barge
(vi) Shipping instruction
(vii) Insurance policy.
Preparation/procurement of Export documents:
(i) Bill of Exchange or Draft
(ii) Bill of Lading
(iii) Commercial Invoice and Invoice
(iv) Insurance policy/Certificate
(v) Certificate of origin
(vi) Inspection certificate
(vii) Packing list
(viii) Preshipment inspection certificate
(ix) Quality Control Certificate
(x) Phyto Sanitary certificate (if food item)

And thereafter submission of the documents to the bank for negotiation.

23. (a) What is Export L/C?

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“The arrangement whereby on behalf of the applicant a bank (issuing bank) undertakes the beneficiary to
make payment or accept the Bill of Exchange or authorizes another bank to effect payment or to negotiate
against stipulated documents in compliance of certain terms and conditions”. Such confirmed and certain
undertaking to seller or exporter is called Export L/C.

35. Write short notes on:

(a) Arbitrage: It refers to the purchasing of foreign currency where it’s price is low and selling it where
the price is high. This is also called currency arbitrage. Arbitrage may be due to interest rate differences
in two financial centers which is known as interest arbitrage.

(b) Swap: Purchasing a foreign currency or securities on the spot for selling forward or selling a foreign
currency on the spot for purchasing forward. Operations consisting of a simultaneous sale or purchase
of spot currency accompanied by a purchase or sale, respectively, of the same currency for forward
delivery are technically known as swap. The process of a banker squaring up his daily exchange position
to protect himself against loss due to an adverse movement in the rate of exchange gave rise to swap
transaction. These transactions may be performed by Central banks, Commercial banks or by major
international companies.

(c) Hedging: Foreign exchange risk can be avoided or covered by Hedging. This usually involves an
agreement to-day to buy or sell a certain amount of foreign currency at some future date at a rate
agreed upon to-day.

(d)Speculation: It is opposite of Hedging. While a hedger seeks to avoid or cover a foreign exchange risk for
fear of loss, the speculator accepts or even seeks a foreign exchange risk in the hope of making profit,
speculation usually occurs in the forward exchange market.

(e)Short position: A position held by a dealer in securities, commodities, currencies, etc. in which sales
exceed holdings because the dealer expects prices to fall, which will enable the shorts to be covered at a
profit.

(f) Long position: The position held by a dealer in securities, commodities, currencies, etc. in which holding
exceed sales, the dealer expects price to rise enabling a profit to be made by selling at higher levels.

(g)Open position: A situation in money market, whereby any purchase or sale, whether spot or forward,
has not been covered by the institution.

(h)Nostro accounts: Accounts maintained by home banks with banks abroad. For example, a bank of
Bangladesh is maintaining its Nostro account with a bank in Hong Kong. Nostro is a Latin word meaning
‘our’.

(i) Vostro accounts: The nostro account when referred to its account holder (foreign bank) by the home
bank relating to any credit or debit is then termed a Vostro account. Vostro is a Latin word means ‘you’.

(j) Loro accounts: The Latin term Loro means ‘their’. These are the accounts of third parties maintained in
domestic or foreign currency.