1. LC Opening
Procedure
( BTB LC)
Adnan Zaber Mahmud
Lecturer
Southeast University

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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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)