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LC Opening
Procedure

( BTB LC)
Adnan Zaber Mahmud
Lecturer
Southeast University
BTB FLOWCHART
DHAKA
BANK

SUPPLIERS
BANK

ZXY Buying

FIRST
BENEFICIARY

PRIME
TEXTI
LE LTD

FABRICS
SUPPLIER

SCB
DHAKA

...
Legal Framework:










Import – Export (Control) Act – 1950
(sub section 1 of section 3)

Import Policy Order

...
Main Features of Import Policy:












Who can import• Any Person having Import Registration Certificate
(I...
Main contents of Import Policy
Order (IPO):





Banned items
Restricted items
Permissible items
Restriction of shipme...
FEATURES of BTB









Back to Back LCs to be opened against
export LCs received by export orient
industries under...
FEATURES










(BTB LC)

BTB LCs may be opened upto 180 days usance.
Sight LCs may be opened under EDF.
Inland B...
REQUIRED PAPERS

1. Valid IRC, ERC.
2. Valid Trade License from recognized Trade
Body.
3. TIN & Income Tax payment certifi...
PROCEDURES
1.Receiving Export/Master LC duly advised/
transferred.
2.Scrutiny of Master LC to find out if there is
any adv...
Procedures

Contd…….

6. Issuance of IMP, LCAF
7. Giving entries in LC Opening Register.
8. Vouching:Commissions, charges ...
ACCOUNTING
Liability Voucher:



Dr. Customer’s liability on BTB L/C
Cr. Banker’s liability on BTB L/C
(Applicable rate:...
Commission & others
charges:








Dr. Customers A/c: Commission + FCC +
Postal/ Telex + Misc.
Cr. Income A/c: Comm...
Export documents
purchase:








(Only CM portion is purchased)
Dr. FDBP/FBP Account (@ OD sight
export)
Cr. CD A/...
After realization of Export
Proceeds:





Dr. General A/C ID, HO (CM portion- TT
Clean & rest portion-OD Sight )
Cr. F...
Payment of BTB:









(i) Reversal of acceptance liability:
Dr. Banker’s liability on BTB bills
Cr. Customer’s l...
HOW TO OPEN LC
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HOW TO OPEN LC

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HOW TO OPEN LC

  1. 1. LC Opening Procedure ( BTB LC) Adnan Zaber Mahmud Lecturer Southeast University
  2. 2. BTB FLOWCHART DHAKA BANK SUPPLIERS BANK ZXY Buying FIRST BENEFICIARY PRIME TEXTI LE LTD FABRICS SUPPLIER SCB DHAKA ADVISING BANK RUPALI BANK LC ISSUING BANK/ NEGOTIATING BANK VAI MUNNA GARMENTS 2 ND BENEFICIARY/ EXPORTER AMEX NEWYORK LC ISSUING BANK UBL DHAKA TRANSFERRING BANK JC PENNY BUYER/ APPLICANT
  3. 3. Legal Framework:      Import – Export (Control) Act – 1950 (sub section 1 of section 3)  Import Policy Order  Export Policy Order Foreign Exchange Regulation Act (FERA)-1947 Guidelines for Foreign Exchange Transactions (GFET): Vol – I & Vol - II Directives of NBR  Customs Act – 1969  Pre-shipment Inspection (PSI) Act - 1999 International Rules of ICC  UCPDC–600  eUCP–Version 1.1  URC-522  URR-725  ISBP-681  Incoterms 2000
  4. 4. Main Features of Import Policy:           Who can import• Any Person having Import Registration Certificate (IRC) • Any Person exempted from having IRC How IRC is obtainedHow IRC is renewedList of banned, restricted & permissible itemsHow import can be done: • With LC & LCA • Without LC but against LCA • Without LC & LCA (Import permit or Clearance permit)
  5. 5. Main contents of Import Policy Order (IPO):     Banned items Restricted items Permissible items Restriction of shipment -Prior to opening of LC -Expiry of the LC        Country of Origin (‘CO’ should be mentioned in package/goods) Harmonized commodity description & coding system (H.S. code) Carrying of goods by Bangladesh Flag Vessels Pre-shipment inspection Special conditions for food items CFR/FOB/CIF Insurance cover note.
  6. 6. FEATURES of BTB       Back to Back LCs to be opened against export LCs received by export orient industries under the bonded warehouse system. Required value addition should be observed (value addition is prescribed in IPO) For Quota & Non-quota woven garments Knitted/others (Qouta - price $60/Dozen) Knitted/others (Non- qouta - price $60/Dozen) Sweater : 20% : 15% : 10% : 20%
  7. 7. FEATURES       (BTB LC) BTB LCs may be opened upto 180 days usance. Sight LCs may be opened under EDF. Inland BTB LCs denominated in FC may be opened in favour of local manufacturer-cum-suppliers. BTB LCs may be opened for import of necessary inputs against inland BTB LCs. Accepted (Usance) bills against BTB LCs should be settled at maturity. Cases of failure of export against related LCs should be reported to NBR & Commissioner of Customs.
  8. 8. REQUIRED PAPERS 1. Valid IRC, ERC. 2. Valid Trade License from recognized Trade Body. 3. TIN & Income Tax payment certificate. 4. VAT registration certificate. 5. Valid Bonded Ware House license (foreign import). 6. Other formalities with concern regulatory bodies.
  9. 9. PROCEDURES 1.Receiving Export/Master LC duly advised/ transferred. 2.Scrutiny of Master LC to find out if there is any adverse clause in the LC, shipment & expiry date, reimbursement clause etc. 3.Receiving application from the client in LC Application Form along with PI duly accepted by the importer. 4.Obtaining credit report of exporter ( upto Tk. 700,000 in case of PI and upto Tk. 1000,000 in case of indent) 5.Approval of proposal / office note for opening BTB LC. Contd…….
  10. 10. Procedures Contd……. 6. Issuance of IMP, LCAF 7. Giving entries in LC Opening Register. 8. Vouching:Commissions, charges & Liability. 9. Transmission of LC. 10. Passing liability voucher. 11. Receiving of Shipping documents. 12. Lodgment of import bill, intimating discrepancy. 13. Intimation of maturity date in case of deferred LC. 13. Making payment at sight for sight LC (EDF), payment on due date for deferred LC. 14. IMP reporting to Bangladesh Bank. 15. Matching Bill of Entries.
  11. 11. ACCOUNTING Liability Voucher:   Dr. Customer’s liability on BTB L/C Cr. Banker’s liability on BTB L/C (Applicable rate: B.C Selling rate)
  12. 12. Commission & others charges:      Dr. Customers A/c: Commission + FCC + Postal/ Telex + Misc. Cr. Income A/c: Commission on L/C foreign Cr. Income A/c. Postal/ Telex Recoveries Cr. Income A/c: Miscellaneous earnings (Handling charges, stationery, etc.) Cr. Sundry Deposit A/c: FCC.
  13. 13. Export documents purchase:       (Only CM portion is purchased) Dr. FDBP/FBP Account (@ OD sight export) Cr. CD A/C Cr. Packing Credit/ Others Loan A/C Cr. Income A/C Com Cr. S/D Tax
  14. 14. After realization of Export Proceeds:    Dr. General A/C ID, HO (CM portion- TT Clean & rest portion-OD Sight ) Cr. FC Held ( @ OD Sight Export) Cr. FBP A/C Cr. I/A Exchange Earning
  15. 15. Payment of BTB:        (i) Reversal of acceptance liability: Dr. Banker’s liability on BTB bills Cr. Customer’s liability on BTB bills   (ii) Out of export proceeds settlement in FC: Dr. Exporters F.C held A/c: Bill value with usance interest (O.D sight export) Cr. General A/c: On Nostro A/c( OD sight export)

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