Post Import Financing Method

Importer very often requires financial support for releasing imported goods. Post import financing is an important part of a banks activities. At the end of import operation the bank finances the importer directly in two forms:-

1. Loan against Imported Merchandise (LIM): 

Such credit facility is allowed against pledge of imported goods. In this case bank clears the goods through its approved 'Clearing Agent' and store the same under its effective control. All relative expenses in connection with clearing of goods are debited to LIM account. In this case the banker has to obtain approval from the competent authority. Necessary charge documents are to be held with the bank for such credit.

2. Loan against Trust Receipt (LTR):

This sort of credit is extended to the importer against trust receipt. In this case unlike LIM, the imported goods remain in the custody of the importer. He is required to execute a stamped trust receipt in favour of the bank. Moreover, the bank retains collateral security for its safeguard. Necessary charge documents are also held with the bank against this type of credit.

3. Forced LMI:

  Upon receipt the shipping/import documents from the Negotiating Bank, the Opening Bank notified the importer about the documents and ask the importer to take delivery of import documents for releasing the goods. If the importer fails to respond within a reasonable time  time,the opening bank retires the bill by creation of forced LIM with approval of its competent authority. In such case the Banks create the goods through its approved 'Clearing Agent' and store the same under its effective control. All relevant expenses in connection with clearing of goods are debited to forced LIM account.

BOOK-KEEPING IN Import Operation:

Importer operation goes on through different stages and the importers bank has to accomplish different jobs in each stage. Therefore the banker makes different forms of book keeping and of course these include income and expenditure of the bank and the importer respectively. Here are some formations of book keeping usually the bankers in our country follow for importer operation:

While Opening L/C

Description	Debit	Credit
Importer's authorized Account Margi on L/C account Commision account Other imcome account (Postage/TT etc. Where applicable)	XXXXXX	XXXXX XXXXX XXXXX

Contra Liability Voucher:

Description	Debit	Credit
Customers Liability for Acceptance on L/C Bankers Liability for Acceptance on L/C	XXXXXX	XXXXX

It is important to mote that accounting procedure may differ from bank to bank. As such we have to follow the guidelines issued by our respective bank. Further we have to take in to account that the amount of margin is to be realized according to agreement made between the bank and the importer.

The margin agrees by the bank will depend upon various factors such as Bangladesh Bank stipulations, the creditworthiness of importer, nature of the commodity to be imported, etc.

IMPORT Payment Procedures

Import means purchase of foreign goods and or services. Hence it needs exchange of money and goods or services. The importer makes payment for the goods and or services he imports. import procedure differs with different means of payment. Different payment procedures are:


1. Cash in Advance:

Importer pays full, partial or progressive payment by a foreign DD, MT or TT. After receiving payment , exporter sends the goods and the transport receipt to the importer. Importer takes delivery of the goods from the transport company.


2. Open Account:

Exporter ships the goods and sends transport receipt to the importer. Importer takes delivery of the goods and makes payment by foreign DD, MT or TT. at some specified date.

3. Collection Methods:

Collection Methods are either clean or documentary. Again documentary collection is of two kinds:

                              a) Documents against payment.
                              b) Documents against Acceptance

In this method the exporter ships the goods and draws a draft/bill on the buyer. The exporter then submits the draft/bill (only or with documents) to the Remitting Bank for collection and the bank acknowledge it. The Remitting Bank sends the draft/bill (with or without documents) and a collection instruction letter to the Collecting Bank notifies the importer upon receipt of the draft. The title of the goods is released to the importer upon full payment or acceptance of the draft/bill.

4. Letter of Credit:

Letter of credit is well accepted and the most commonly used means of payment. It is an undertaking for payment. It is an undertaking for payment by the issuing Bank to the beneficiary, upon submission of some stipulated documents and fulfilling the terms and conditions mentioned in the letter of credit.

Import Financing Source

Import involves outward remittance of foreign currency. It is commonly known that there are different sources of import financing and they are:-

1. CASH:

     a) Cash Foreign Exchange (balance in foreign exchange account of Bangladesh Bank)

     b) Foreign Exchange Account of Non-resident Bangladeshi.

2. Foreign Aid (Commodity aid, loan, grants) :

Developing Countries like Bangladesh sometimes borrow from friendly countries to meet import requirements. Such funds are repaid to the lending countries with agrees interest. Sometimes our government signs agreement on commodity loan with the government of donor countries or with our multilateral credit agencies. Exporters under such commodity loans are reimbursed in cash by the creditor (i.e. government or the loan giving agency) as soon as the goods are exported. The obligation for the payment of the term loan and interest are directly assumed by the importers government.

3. Barter(Exchange of Goods):

When a specific import is paid by a specific export without involvement of monetary transaction is called "Barter Trade". But the price is expressed in terms of a particular currency. Agreement of a Barter Trade is signed between two countries for a fixed period. In case of any imbalance after the expiry of the Barter Trade protocol, the imbalance is squared up by remittance from their own resources.


4. Special Trading Arrangement (STA)

Special Trading Agreements (STA) are signed in order to boost up export and import of two countries. Unlike Barter Trade Agreement. Special Trading Agreements are signed between the enterprises of the countries with the consent of respective governments.

5. Wage Earners Scheme:

Financing From wage earners fund.

Way of Importers registration

According to imports and Exports (Control) Act, 1950, no person without registration granted by the Chief Controller of Imports and Exports shall indent, Import or Export anything into or out of Bangladesh except in cash of exemption issued by the Registration Certificate (IRC) issued by the Chief Controller of Import an Export. To obtain Import Registration Certificate in the intending importer is required to apply to the Controller/joint Controller/ Deputy Controller/Asst. Controller of Import and Exports.

Criteria of Registration:

1. Valid Trade License.

2. Nationality and Asset Certificate.

3. TIN and VAT Registration Certificate.

4. Memorandum & Article of Association and Certificate of incorporation (In case of Limited Company)

5. Bank Solvency Certificate etc..

Fex Regulation act and Policy order by Import

The present import practice has been evolved out of the older ones. However, it is important to mote that under the Imports and Exports (control) Act, 1950 the Government of Bangladesh formulates the Import policy through Ministry of Commerce and all concerned are compelled to meticulously follow the Import policy existing in the country. The existing Import policy (1997-2002) has come in to effect for June 14, 1998 to June 20 2002. Import activities are also regulated by the Foreign Exchange Regulation Act, 1947, consisting of 27 section and number of sub section. Notwithstanding the above, a few provision have been added under the Foreign Exchange regulation (Amendment) Ordinance, 1976 to control over certain payments, dealing in foreign exchange and the import and export of currency and bullion which are very important to know for us.

Above all, internal circulars and guidelines of our respective institutions are absolutely necessary to proceed on the activities..

Definition About Import..

Import means the flow of goods and services purchased by consumers, firms and government of one country from economic agents located in another country. Import is essential for the prosperity of the trading  nations. Because every country lacks some vital resources that it can get only by importing from others. In Bangladesh plenty of different goods are imported every year. To cope with the volume of works related to import procedure a good number of officials of the banks are engaged in various level.

It is needless to mention that people of different government and private sector are also closely concerned with the import activities in the country. For smooth functioning of import activities there must be cordial co-operation and c0-ordination among the concerned agencies.

Functions Of a Banks Foreign Exchange Department

Here is a delineation of the important functions performed by the foreign exchange departments of the commercial banks.

Export	1. Pre-shipment advances 2. Purchase of foreign bills 3. Negotiation of foreign bills 4. Export guarantees 5. Advising/confirming Letters of Cresit 6. Advance for deferred payment exports. 7. Advance againts bills for collection
Import	1. Opening of Letter of Credit 2. Advance bills 3. Bills for collection 4. Import loans and guarantees
Remittances	1. Issuance of DD, MT, TT, etc. 2. Payment of DD, MT, TT, etc. 3. Issuance and encashment of travellers. 4. Sale and encashment of foreign currancy notes. 5. Non-resident accounts
Dealings	1. Rate Computation. 2. Maintenance of foreign currancy accounts. 3. Forward contracts. 4. Exchange possition and cover operations
Statisticso	1. Submission of returns. 2. Collection of credit information.

Role Of Banks In Foreign Trade

Banks Extended credit facilities to the exporter to procure raw materials process them and prepare them for shipment to the importer. They also extend post shipment financing facility to the exporters. Besides financing, the banks render service to the exporters by advising, confirming Letter of Credit issued in favour of the exporters by their correspondent abroad. Banks may also execute guarantees on behalf of their export customers.


Banks issue Letter of Credit on behalf of their importer-customers. Thus they undertake financial guarantee of stipulated documents. They also extend post import financing facility to the importer.

Besides extending services to the importers and exporters banks perform activities of inward and outward remittances and also open and maintain non-resident accounts. Banks also buy and sell foreign exchange from and to the public.

Foreign exchange business is concentrated in selected branches of commercial bank. It is obviously a highly specialized business. The Concerned officers of the foreign exchange department should possess an in depth knowledge of the rules and regulations of foreign exchange business in particular and banking in general.Besides, the foreign exchange dealing branches of the commercial banks should meticulously follow the guidelines prescribed by their head office, From time to time.