FEPD Circular Letter No. 03: Providing Deemed Export Facilities to Registered Persons for Supply of Goods to Local Contractors Against International Tenders

Foreign Exchange Policy Department Bangladesh Bank Head Office Dhaka. Ref. No. FEPD Circular Letter No. 03 Date: ----------------- Baisakh 09, 1431

To Managing Director / Chief Executive Officer All Scheduled Banks operating in Bangladesh

Dear Sir,

Regarding: Providing deemed export facilities to registered persons (sub-contractor/manufacturer/supplier) for supply of goods to the local contractor against international tender.

Reference is invited to the National Board of Revenue document No. 08.01.0000.068.22.026.12/45 dated February 18, 2024, on the subject cited above.

2. It is stated in the explanation letter attached to the aforementioned document that opportunities are provided to place domestic currency letters of credit for the supply of goods or services by sub-contractors/agents/other suppliers to the main contractor against international tenders. To clarify this matter further, the explanation letter No. 03/Mus/2022 dated November 13, 2022, of the National Board of Revenue (copy attached) is hereby appended.

Yours faithfully,

(A.K.M. Romijul Islam) Director (FEPD) (In-charge) Phone: 9530123

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Explanation Letter No. 03/Mus/2022

Subject: Explanation regarding the provision of deemed export facilities to sub-contractors/suppliers supplying goods to the main contractor against international tenders.

In view of the increasing volume of international tenders awarded to local contractors in Bangladesh, and the subsequent supply of goods/services by local sub-contractors/suppliers to these main contractors, questions have arisen regarding the eligibility of such transactions for deemed export facilities under the Foreign Exchange Regulation, 1947, and the Foreign Exchange Policy Directions issued by the Bangladesh Bank.

2. The National Board of Revenue (NBR) has clarified in various communications that supplies made by local sub-contractors/suppliers to the main contractor against international tenders are treated as deemed exports. Consequently, such transactions are eligible for foreign exchange incentives and other benefits available to exporters.

3. In this context, the following explanations are provided:

   a) Definition of Deemed Export: A deemed export refers to the supply of goods or services by a local supplier to a local contractor who has been awarded an international tender. The goods or services supplied are ultimately intended for export or use in a project outside Bangladesh, or for a foreign entity. Although the immediate buyer is a local contractor, the transaction is treated as an export for the purpose of foreign exchange incentives.

   b) Eligibility Criteria: To qualify for deemed export facilities, the following conditions must be met: i) The main contractor must have won an international tender. ii) The supply must be made by a registered person (sub-contractor, manufacturer, or supplier) to the main contractor. iii) The goods or services supplied must be specifically for the fulfillment of the international tender. iv) The main contractor must provide necessary documentation, including the tender award letter, contract, and proof that the goods/services are for the international project.

   c) Role of Banks: Scheduled banks are directed to accept domestic currency letters of credit (LCs) opened by local contractors for payments to sub-contractors/suppliers against international tenders. Banks should verify the authenticity of the international tender and the related documentation before processing such LCs. Upon verification, banks should treat these transactions as deemed exports and provide the applicable foreign exchange incentives.

   d) Documentation: The following documents are required for processing deemed export facilities: i) Copy of the international tender award letter. ii) Copy of the contract between the main contractor and the foreign entity/employer. iii) Invoice from the sub-contractor/supplier. iv) Certificate of origin, if applicable. v) Any other document required by the Bangladesh Bank or NBR.

   e) Incentives: Sub-contractors/suppliers involved in deemed export transactions are eligible for the same foreign exchange incentives as regular exporters, including: i) Export Promotion Bonus (EPB). ii) Duty drawback, if applicable. iii) Other incentives as per the Foreign Exchange Policy Directions.

4. Banks are advised to ensure strict compliance with the above guidelines. Any discrepancy in documentation or failure to verify the authenticity of the international tender may result in the denial of deemed export status and associated incentives.

5. This explanation letter supersedes any previous conflicting instructions. Banks should update their internal procedures accordingly.

6. For any further clarification, banks may contact the Foreign Exchange Policy Department of Bangladesh Bank.

Enclosures:

1. Copy of NBR Document No. 08.01.0000.068.22.026.12/45 dated February 18, 2024.
2. Copy of NBR Explanation Letter No. 03/Mus/2022 dated November 13, 2022.

Issued by: Foreign Exchange Policy Department Bangladesh Bank Head Office Dhaka

Date: November 13, 2022

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Note: The above text is a translation of the provided Bengali document. The original document contains specific references to NBR document numbers and dates which have been preserved. The structure follows the standard format of a Bangladesh Bank circular letter.