Application Process of Letter of Credit (LC) in Bangladesh

How to Apply for Letter of Credit (LC) in Bangladesh: The application process of Letter of Credit in Bangladesh consists of a number of steps with the involvement of commercial banks in Bangladesh acting under the rules and regulation of Bangladesh Bank and international rules and regulations of foreign trade. Here’s a step-by-step guide:

1. Select a Bank and Know Requirements

Choose any reputed commercial bank which deals with LC (viz: Sonali Bank, Agrani Bank, BRAC Bank, HSBC etc).

Know the bank’s individual requirements, fees and documentation required.

2. Gather Required Documents

In order to get an LC, the importer (buyer) has to require the following documents:

• Trade License – Which is a valid business license for import activities.
• TIN & VAT Registration – Tax Identification Number (TIN) and Value Added Tax (VAT) registration is required for business.
• Import Registration Certificate (IRC) – Which is issued by the Office of the Chief Controller of Imports & Exports (CCI&E), Bangladesh Government.
• Proforma Invoice – It is issued by the seller, detailing the goods, pricing, and payment terms & conditions.
• Insurance Cover Note – It is a proof copy of sailing insurance coverage for the shipment of goods.
• LC Application Form (LCAF) – This is an application form which is prescribed by the Bangladesh Bank.
• Indent or Purchase Contract – It is an agreement between the buyer and the seller.
• Bank Credit Report – Some of the banks may want to know the creditworthiness check.

3. Submit LC Application to the Bank

• The buyer or importer submits all the documents to the issuing bank along with the LC margin deposit which means a percentage of the total LC value.
• The bank reviews all the documents and verifies the buyer’s creditworthiness.

4. Bank Issues the LC & Sends It to the Exporter’s Bank

• If everything is ok & approved, the bank issues the Letter of Credit and transmits it via SWIFT to the exporter’s bank/Advising Bank.
• The advising bank/exporter’s bank informs the seller about the LC.

5. Exporter Ships Goods & Submits Documents

• The seller ships the goods as per the LC terms & conditions.
• The required shipping documents like Bill of Lading, Commercial Invoice, Packing List, etc.are submitted to the bank for the payment processing.

6. Bank Verifies all the Documents & Makes Payment

• The issuing bank checks & verifies if all documents match with the LC terms.
• If all are correct, then the payment is made to the seller/exporter.
• The buyer receives the documents and release the goods from customs.

Key Regulations & Authorities in Bangladesh

• Bangladesh Bank – Which regulates all foreign trade transactions.
• Customs Authority – Who manages import duties and clearance issues.
• Office of the Chief Controller of Imports & Exports (CCI&E) – It is an Issuing license of Import Registration Certificates (IRC).

Conclusion

Applying for an LC in Bangladesh requires proper documentation and coordination with banks. Importers should ensure compliance with Bangladesh Bank regulations and trade policies for smooth transactions.