Export Instruments, Procedures, and Regulations in Bangladesh
This document provides a comprehensive overview of export instruments, procedures, and regulations relevant to businesses operating in Bangladesh. It covers various aspects, including types of export instruments, ex-factory and on-board processes, document submission procedures, the role of the Export Promotion Bureau (EPB), and the significance of the Bill of Lading (BL). Furthermore, it delves into the Rules of Origin applicable to Bangladesh, the process of Proceed Repatriation, and the specifics of exporting under an open account. Finally, it explains key Incoterms such as FOB, CPT, and FCA.
a) Export Instruments and Procedures
Types of Export Instruments
Export instruments are the tools and mechanisms used to facilitate international trade. Common types include:
Letter of Credit (LC): A guarantee from a bank on behalf of the buyer to the seller, ensuring payment upon presentation of conforming documents.
Documentary Collection: A process where the exporter's bank sends documents to the importer's bank, which releases them to the importer against payment or acceptance of a draft.
Advance Payment: The importer pays the exporter before the goods are shipped.
Open Account: The exporter ships the goods and invoices the importer, who pays at a later date.
Ex-Factory (EXW)
Ex-Factory (EXW) is an Incoterm where the seller makes the goods available at their premises, or another named place. The buyer is responsible for all transportation costs and risks from that point onwards.
Process:
Production: The exporter manufactures the goods according to the buyer's specifications.
Packaging: The goods are packaged for export.
Availability: The exporter makes the goods available at their factory or warehouse.
Buyer's Responsibility: The buyer arranges for transportation, insurance, and export clearance.
On Board (FOB)
On Board (FOB) signifies that the seller delivers the goods on board the vessel nominated by the buyer at the named port of shipment. The risk of loss or damage to the goods passes to the buyer when the goods are on board the vessel.
Process:
Production and Packaging: The exporter produces and packages the goods for export.
Transportation to Port: The exporter transports the goods to the port of shipment.
Customs Clearance: The exporter clears the goods for export.
Loading on Vessel: The exporter loads the goods onto the vessel.
Risk Transfer: Risk transfers to the buyer once the goods are on board the vessel.
Document Submission Procedures
The following documents are typically required for export from Bangladesh:
Export Registration Certificate (ERC): Issued by the Chief Controller of Imports and Exports (CCI&E).
Proforma Invoice: A preliminary invoice provided to the buyer.
Commercial Invoice: A final invoice detailing the goods, price, and terms of sale.
Packing List: A detailed list of the contents of each package.
Bill of Lading (BL) / Air Waybill (AWB): A receipt for the shipment issued by the carrier.
Certificate of Origin (COO): Certifies the country of origin of the goods.
Export License/Permit: Required for certain goods.
Letter of Credit (if applicable): The LC document from the issuing bank.
Insurance Certificate: Covering the goods during transit.
Inspection Certificate: If required by the buyer or regulations.
Submission Process:
The exporter prepares all necessary documents.
These documents are submitted to the bank for negotiation under a Letter of Credit or for collection under a Documentary Collection.
The bank verifies the documents and, if compliant, processes the payment.
The documents are then forwarded to the importer's bank or directly to the importer, depending on the payment terms.
Role of Export Promotion Bureau (EPB)
The Export Promotion Bureau (EPB) plays a crucial role in promoting exports from Bangladesh. Its functions include:
Policy Advocacy: Advising the government on export-related policies.
Market Research: Conducting market research to identify export opportunities.
Trade Fairs and Exhibitions: Organizing and participating in international trade fairs and exhibitions.
Exporter Registration: Maintaining a database of registered exporters.
Export Promotion Activities: Implementing various programs to promote exports.
Providing Information: Disseminating information on export procedures, regulations, and market trends.
Bill of Lading (BL)
The Bill of Lading (BL) is a crucial document in international trade. It serves as:
Receipt: A receipt from the carrier acknowledging receipt of the goods.
Contract of Carriage: Evidence of the contract between the shipper and the carrier.
Document of Title: A document that can be used to transfer ownership of the goods.
Types of BL:
Clean BL: Indicates that the goods were received in good condition.
Claused BL: Indicates that the goods were received with some defects or discrepancies.
Straight BL: Specifies that the goods are to be delivered to a named consignee.
Order BL: Allows the consignee to endorse the BL to another party, transferring ownership.
b) Rules of Origin Applicable for Bangladesh
Rules of Origin (ROO) are the criteria used to determine the national source of a product. These rules are essential for preferential trade agreements, as they determine whether goods are eligible for reduced tariffs or other benefits.
Key Aspects for Bangladesh:
Wholly Obtained: Goods that are entirely obtained or produced in Bangladesh.
Substantial Transformation: Goods that undergo significant processing or manufacturing in Bangladesh, resulting in a change in tariff classification or a significant increase in value-added.
Specific Rules: Specific rules may apply to certain products, as defined in trade agreements.
Regional Cumulation: Bangladesh may participate in regional cumulation arrangements, allowing materials from other countries within the region to be considered as originating in Bangladesh for the purpose of meeting ROO.
c) Proceed Repatriation
Proceed Repatriation refers to the process of bringing export earnings back to Bangladesh. The Bangladesh Bank regulates this process to ensure that foreign currency earned through exports is remitted to the country.
Key Requirements:
Mandatory Repatriation: Exporters are required to repatriate export proceeds within a specified period (usually 120 days from the date of shipment).
Authorized Dealer (AD) Banks: Repatriation must be done through authorized dealer banks.
Reporting Requirements: Exporters must report export earnings to the Bangladesh Bank through their AD banks.
Retention Quota: Exporters may be allowed to retain a certain percentage of their export earnings in foreign currency accounts for specific purposes.
d) Export under Open Account
Exporting under an open account means the exporter ships the goods to the importer without any guarantee of payment. The importer pays at an agreed-upon later date.
Risks:
Payment Risk: The importer may fail to pay.
Currency Risk: Fluctuations in exchange rates can affect the value of the payment.
Political Risk: Political instability in the importer's country can disrupt payment.
Mitigation Strategies:
Credit Insurance: Protects against non-payment by the importer.
Credit Checks: Assessing the importer's creditworthiness.
Strong Relationship: Building a strong relationship with the importer.
Clear Contract: Having a clear contract with payment terms.
e) Inco-Terms: FOB, CPT, FCA
Incoterms (International Commercial Terms) are a set of standardized trade terms published by the International Chamber of Commerce (ICC). They define the responsibilities of buyers and sellers in international trade transactions.
FOB (Free On Board): The seller delivers the goods on board the vessel nominated by the buyer at the named port of shipment. The risk of loss or damage to the goods passes to the buyer when the goods are on board the vessel, and the buyer bears all costs from that moment onwards.
CPT (Carriage Paid To): The seller pays for carriage to the named destination. Risk transfers to the buyer when the goods are handed over to the first carrier.
FCA (Free Carrier): The seller delivers the goods to the carrier nominated by the buyer at the seller's premises or another named place. The risk transfers to the buyer at that point. FCA is suitable for all modes of transport.
