With a consistent annual GDP of over 6% for the last 15 years, Bangladesh is one of the most lucrative emerging markets for international investment. If you’re planning to import encrypted goods into the country, here’s all you need to know about the process.
There are two ways to import into Bangladesh
• Without a letter of credit
• With a letter of credit
Importing without a letter of credit is a common and a relatively simple affair, but it only works for specific items whose value does not exceed $2,500. Importing with a letter of credit is more complicated, but it’s the only way to get commercial I.T. equipment into the country. That will be our focus for this article. You can still import under an LC with an Importer of Record.
So, what is a letter of credit?
The letter of credit (also known as a documentary letter of credit) is the most popular payment method for international trade in Bangladesh. It covers matters like the risk that the participating parties (the importers and exporters) will take on, insurance claims, etc.
Why it’s used
Bangladesh is a developing country that's heavily reliant on imports. As such, the government prefers to maintain control over the import-export process. Requiring importers to provide an LCAF facilitates this process by enabling the government to evaluate traders' relative buying power and credibility.
Letter of credit requirements
Importing via letter of credit requires you to fulfil several requirements that include;
• A valid trade license, (c) Membership certificate from a local chamber of commerce operating in a relevant industry. Income tax clearance/ details
• VAT registration certificate
• L/C application, Indent, Performa invoice, or purchase order, insurance over note
• you must be a registered importer with a valid IRC (import registration certificate; more on that below)
Note: The importer must be a customer of the L/C issuing bank
Who are the signatories to the letter of credit?
Applicant or opener
The applicant, also known as the account party, is usually the buyer or recipient of the goods, who must pay the beneficiary. The letter of credit is initiated and issued at their request or based on their instructions.
The opening bank / Issuing bank.
The issuing bank drafts the letter of credit and takes responsibility for making payments after receiving the necessary documents through the beneficiary or their banker.
The beneficiary must receive payments no later than seven working days after receiving the required documentation, provided that it meets all the requirements stated in the letter of credit. If the documents do not meet the specified criteria, the opening back must reject them and relay this decision to the beneficiary within seven working days after receiving them.
the beneficiary represents the seller of the goods and receives payment from the applicant. The opening bank will issue this party a credit to claim payment once they provide the required documents and meet all other requirements in the letter of credit.
The advising bank provides advice to the beneficiary and takes responsibility for sending the documents to the issuing bank. It is typically located in the beneficiary's country.
the confirming bank guarantees the credit opened by the other bank in the transaction. It manages the credit provided by the opening bank.
All commercial importers and private industrial consumers must register with the Ministry of Commerce under the chief controller of imports and exports (CCIE). The CCIE will issue an import registration certificate (IRC) within three working days after a certificate and application have been submitted.
Commercial importers may bring any quantity of non-restricted items into the country. Industrial consumers, on the other hand, cannot. Their imports must not exceed the limits set by the IRC.
How to obtain an IRC in Bangladesh
The IRC is a mandatory requirement for business organisations to import special items like encrypted goods into Bangladesh.
You’ll need to register with the Ministry of Commerce under the chief controller of imports and exports (CCIE). The CCIE will issue an import registration certificate (IRC) within three working days after a certificate and application have been submitted.
You’ll need the following for your application
• A passport size photo of the applicant
• An authentic and current certificate from a regional chamber of commerce and industry or any other relevant trade association.
• Certificate of incorporation, articles of association, and a memorandum.
• Financial solvency certificate from a bank
• An authentic trade license.
• A TIN (Tax Identification Number) certificate
Note: The importer must be a customer of the L/C issuing bank
Additional documents required before import
The following documents are required as part of the documentary letter of credit.
Bill of lading: A bill of lading is a legal document issued to a shipper by a carrier that specifies the type, quantity, and destination of the products to be transported. It may also serve as a receipt when the goods arrive at the destination.
• The bill of lading should be marked as "shipped on Board."
• It should be drafted by the entity chosen as the credit beneficiary.
Bill of exchange: A bill of exchange is a written instruction to one party to pay a fixed sum of money to another in a transaction. The bill of exchange transaction may involve three parties. The drawee is the party that pays the sum specified. The payee receives the money provided, and the drawer obliges the drawee to pay the payee. The drawer and payee are often the same unless the drawer delegates the bill of exchange to a third-party payee.
• The draft must present an accurate documentary reference number
• The draft must remain valid until the expiry of the standby letter of credit and within the available period for negotiation
• It must be drawn or endorsed to the bank’s requirements
The commercial invoice: A commercial invoice is a mandatory document for the import and export clearance process. It is used by customs officials in the country to which goods are being imported to determine applicable duties and fees. —it always helps to consult reliable sources for Bangladesh's specific requirements when filling this document. Most countries will accept the commercial invoice provided regardless of format, but some, like Bangladesh, may have specific requirements. You may need to consult a local IOR for guidance.
• The invoice must bear the exporter's signature.
• The importer of record must provide the required number of invoice copies, as per the terms provided in the letter of credit.
• There should be a complete description of the goods and precise weight/dimensional specifications where applicable.
Please note: the invoice must specify the importer's name and the bank that issues the letter of credit.
Do you need an Importer of record?
As you must have learned by reading this article, importing controlled goods like encrypted equipment into Bangladesh can be a complicated, time-consuming affair. An Importer of Record will take on these duties for you and simplify the entire process.
Partnering with an I.T.-focused multinational IOR service like Blackthorne is even better because it can provide extended support services like mini-forward stocking locations to meet your needs. Contact us today!