In recent years, Bangladesh’s economy has grown rapidly. Many industries are highly compatible with our country’s industries, have a strong desire for cooperation, and have mature cooperation conditions, such as the light textile industry, building materials industry, automobile industry, etc., making it a large market with potential.
But what troubles us the most is that this country is special.
Everyone who is engaged in foreign trade in the Bangladesh market knows that a letter of credit is an unavoidable hurdle. According to the relevant regulations on foreign exchange management of the Central Bank of Bangladesh, external payments for import and export must generally be in the form of bank letters of credit, except under special circumstances.
And many banks in their country have a bad reputation, and they can be cheated if they are not careful!
Recently I saw a painful lesson from a foreign trader on the FOB forum:
An order of US$140,000 requires a letter of credit , the exporter submitted all documents to the bank in strict accordance with the requirements of the letter of credit. The other bank did not respond after receiving the documents, our bank did not reply when contacted, and the customer also repeatedly declined. In the end, the freight forwarder reported that the goods had been taken away.
The exporter contacted the Chinese Embassy and discovered that this bank in Bangladesh was ranked first on the bank blacklist. At this time, the probability of getting the money back is very, very low.
The credibility of Bangladeshi commercial banks is generally poor, and many issuing banks operate in violation of regulations. In Chinese companies’ export business to Bangladesh, they often encounter sight credit without any discrepancies. In the case of certificate of presentation, the payment time is delayed, or the order is released without the customer completing the payment procedures. The customer makes a quality claim to the exporter after picking up the goods or inspecting the goods, forcing the exporter to reduce the price, resulting in economic losses.
This situation mainly occurs in the export of fruits and vegetables (ginger, apples), chemical raw materials and textile raw materials.
Reminder from the Economic and Commercial Counselor’s Office of the Chinese Embassy in Bangladesh:
The main problems encountered by Bangladesh letters of credit are:
1. After the importer takes delivery of the goods, the bank delays the payment without any reason, even if the negotiating bank urges it multiple times. Ignore it.
2. After the bank releases the bill to the importer, it does not pay the payment immediately, allowing the importer to make a so-called quality claim to the exporter after taking delivery of the goods, forcing the exporter to discount and reduce the price, and then the The negotiating bank instructs the issuing bank to deduct the discount from the payment.
3. After the importer takes delivery of the goods, he appeals to the local court about the quality of the goods. The court will notify the bank to stop payment. The bank will make excuses and cannot make external payments while the court is hearing the case, thus delaying payment. time.
4. After the customer accepted the discrepancy in picking up the goods, the bank still did not pay the payment.
Most of the above situations are negotiated in advance between the customer and the bank, and the bank releases the order in violation of regulations, artificially creating an opportunity for the customer to lower the price from the exporter, or delaying the payment time. A small number of bank staff believe that this practice is a normal practice and safeguards the interests of customers, and the regulations of UCP600 are not binding on them.
A “chicken thief” rule of Bangladesh Customs will also encourage this type of scam, that is: goods detained at the port for more than 3 months (45 days for fruits and vegetables) are not cleared for customs clearance , the goods will be auctioned by the customs, and the original buyer has the right of first refusal, and the proceeds from the auction will be turned over to the national treasury. If the goods that have arrived at the port are to be returned or resold, the original buyer’s consent must be obtained.
For our export companies, when receiving Bangladesh letter of credit orders, we first need to strictly review the letter of credit to ensure that there are no discrepancies.
If any discrepancy is found, the certificate must be corrected before delivery. Especially the delivery date must be consistent with the provisions of the letter of credit. Even if the customer proposes to accept the delivery of documents with discrepancies, we must insist on shipping the goods after changing the certificate. In addition, sufficient time needs to be left for delivery and delivery of orders.
In addition, although Bangladesh stipulates that all imported goods must have a letter of credit before customs clearance, this does not mean that 100% L/C must be required. You can combine T/T+L/C payment with the customer to reduce risks, and the proportion is negotiated by both parties.
When making a contract, it is best to make three copies. One is the general contract (this is very important. It must be stated in the general contract that this transaction is based on this contract. Accurate, the other two are sub-contracts, attached to this contract)
One T/T, one L/C (the customer will ask for the L/C to be written as 100 %L/C, this doesn’t matter, because only in this way can customers clear customs, otherwise their customs will catch them. Moreover, L/C can only be used as a payment method and has no contractual effect, so don’t worry).
Be sure to complete T/T before starting to make goods. Some foreign traders ship the goods before T/T. This is very unfavorable to the seller. This payment method is not good for the seller. It is meaningless because T/T is the function of deposit.
The Economic and Commercial Counselor’s Office of the Chinese Embassy in Bangladesh released a “Statistical Table of Complaints against Bangladesh Commercial Banks in 2020” in April this year:
Foreign traders in the Bangladesh market must collect this form and remember to avoid the “blacklist” List of issuing banks!</p
