Dhaka: Bangladesh Bank (BB) has waived 10 percent retention of advance remittances received against exports to facilitate small exporters. To this end, the central bank issued a circular, stating that banks can now pay out the full amount of advance remittances received from importers against export contracts to the exporters.
According to Bangladesh Sangbad Sangstha, advance payment against exports is a method where the foreign buyer pays the exporter a portion or the full amount of the invoice before the goods are shipped. This method significantly reduces the exporter’s risk of non-payment while increasing the buyer’s risk. It is especially beneficial for exporters dealing with new or unreliable customers and can be processed through wire transfers, credit cards, or other electronic platforms.
Bangladesh Bank eased the advance payment for trade facilitation, aiming to help exporters. The circular specifies that before paying out money against advance payment, banks must maintain certain instructions. These include ensuring the exporter has received an irrevocable LC/contract to execute export against advance payment, the exporter’s previous performance is satisfactory, and the exporter has adequate capability to execute the order. The advance payment shall not bear any interest, and export needs to be executed within a period not exceeding one year from the date of receipt.
However, the instruction regarding export execution within one year will not apply to advance payments received against performance bonds or bank guarantees/standby LCs. In case of non-execution of export, including issuance of EXP Form against advance payment, authorized dealers (ADs) may allow a refund of advance payment. In such cases, ADs shall utilize funds from the Exporters’ Retention Quota (ERQ) account first and the remainder from Taka accounts, as per the circular.
Banks have been advised to notify their export customers about the change.