General

In recent years, Bangladesh’s economy has grown rapidly. Many industries have a high degree of compatibility with my country’s industries, strong desire for cooperation, and mature cooperation conditions, such as the textile industry, building materials industry, and automobile industry, which is a big market with potential.

But the most troublesome thing for us is that this country is special.

Every foreign trader in the Bangladesh market knows that a letter of credit is an unavoidable obstacle. According to the relevant regulations on foreign exchange management of the Central Bank of Bangladesh, except for special circumstances, foreign payments for imports and exports generally must be made by bank letter of credit. And many of the banks in their countries have bad reputations, and they get cheated if they are not careful!

I recently saw the painful lesson of a foreign trader on the FOB forum:

The order of 140,000 US dollars goes through the letter of credit, and the exporter submits all the documents to the bank in strict accordance with the requirements of the letter of credit. After the other bank receives the documents, there is no response. Our bank contacted and did not reply, and the customer repeatedly shied away. In the end, the freight forwarder reported that the goods had been taken away. The exporter contacted the Chinese embassy and found that the bank in Bangladesh ranked first on the bank blacklist. At this time, the probability of repaying the payment is already very low, very low.

Every foreign trader in the Bangladesh market knows that a letter of credit is an unavoidable obstacle. According to the relevant regulations on foreign exchange management of the Central Bank of Bangladesh, except for special circumstances, foreign payments for imports and exports generally must be made by bank letter of credit.

But there are two types of letters of credit in this world, one is a letter of credit, and the other is a letter of credit from Bangladesh.

The reputation of Bangladesh’s commercial banks is generally poor. Many issuing banks operate in violation of regulations. In the business of Chinese companies’ exports to Bangladesh, they often encounter delays in payment when there are no discrepancies in the spot letter of credit presentation, or in the case of customers. Orders were placed without going through the payment procedures, and the customer filed a quality claim with the exporter after picking up the goods or looking at the goods, and the exporter was forced to reduce the price, resulting in economic losses.

This situation mainly occurs in the export of fruits and vegetables (ginger, apple), chemical raw materials and textile raw materials.

Reminder from the Economic and Commercial Counsellor's Office of the Chinese Embassy in Bangladesh

The main problems encountered by Bangladesh Letter of Credit are:

1. After the importer took delivery, the bank delayed payment without any reason, even if the negotiating bank urged it many times to ignore it.

2. After the bank releases the order to the importer, it does not pay the payment immediately. The importer is allowed to file a so-called quality claim with the exporter after taking the goods, forcing the exporter to discount the price, and then the negotiating bank instructs the issuing bank to deduct the discount from the payment .

3. After the importer took delivery of the goods, he appealed to the local court about the quality of the goods, and the court notified the bank to stop payment. The bank was unable to pay outside during the court hearing, thus delaying the payment time.

4. After the customer accepts the discrepancies, the bank still does not pay for the goods.

In most of the above cases, the customer and the bank negotiated in advance, and the bank illegally operated and placed the order, which artificially created the opportunity for the customer to lower the price to the exporter or delay the payment time. A small number of bank staff believe that this approach is a normal practice and safeguards the interests of customers, and the UCP600 regulations are not binding on them.

And a "chicken thieves" regulation of Bangladesh Customs will also encourage such scams, that is: if the goods remain in the port for more than 3 months (45 days for fruits and vegetables) without customs clearance, the goods will be auctioned by the customs, and the original buyer has the right of first refusal. , The auction revenue is turned over to the state treasury. If the goods that have arrived at the port are to be returned or resold, the original buyer's consent must be obtained.

△Chittagong Port Terminal

For our export companies, to receive orders for letter of credit in Bangladesh, we first need to strictly conduct the examination of the letter of credit to ensure that there are no discrepancies. If any discrepancy is found, the certificate must be changed before delivery, especially the delivery date, so that it conforms to the provisions of the letter of credit. Even if the customer proposes to accept the delivery of the discrepancy, it will not be accepted, and insist on changing the certificate and shipping. In addition, sufficient time should be allowed for delivery and delivery of documents.

In addition, although Bangladesh stipulates that all imported goods must have a letter of credit for customs clearance, this does not mean that 100% L/C must be made. You can do T/T+L/C with the customer, and the two kinds of payment are combined to reduce the risk. As for the ratio, it is up to the two parties to negotiate.

When making a contract, it’s best to make three copies, one is the overall contract (this is very important, it’s important to state in the general contract that this transaction is subject to this contract, and the other two are sub-contracts and are dependent on this contract. ), one is T/T, and the other is L/C (the customer on L/C will ask to write 100% L/C, this is okay, because only in this way can the customer clear customs, otherwise their customs will catch Their little pigtails, besides, L/C can only be used as a payment method, without the effect of the contract, so don’t worry).

T/T must be done before starting to make goods. Some foreign traders will T/T after the shipment. This is very unfavorable to the seller. This payment method is equivalent to meaningless to the seller, because T/T is The role of deposit.

Finally, the Economic and Commercial Counsellor’s Office of the Chinese Embassy in Bangladesh issued a "Statistical Table of Complaints against Commercial Banks in Bangladesh in 2020" in April this year. Foreign traders in the Bangladesh market must keep this form, and remember to avoid it. Issuing banks on the "blacklist".