FEPD Circular Letter No. 655: Payment in Foreign Currency of Local Back to Back LC issued in Foreign Currency

Foreign Exchange Policy Department Bangladesh Bank Head Office Dhaka. www.bangladeshbank.org.bd

Jyestha 11, 1415 Date: ------------------- May 25, 2008

Circular Letter No.-FEPD(Import-1)/120/2008-665

All Approved Dealer Banks Head Office / Principal Office.

Dear Sirs,

Regarding payment in foreign currency of local back-to-back letters of credit established in foreign currency.

Guidelines for Foreign Exchange Transactions (Volume-1), Chapter 15, Paragraph 32(B) has declared authorization for establishing local back-to-back letters of credit in foreign currency against received export letters of credit for manufacturing units operating under the bonded warehouse system. Along with this, in accordance with the instructions of Circular Letter No.-ECP(NC)/43/97-1329 dated 10/08/1997, concealed exporters, similar to direct exporters, can deposit foreign currency as retention quota according to entitlement and use the balance of such account for the genuine business needs of their own establishment. In accordance with the instructions of FE Circular No.-05/2001, in the case of payment of bills for import of raw materials (excluding the back-to-back system) for their own production, the concerned manufacturing-exporter establishment may hold the necessary amount of foreign currency (even if in excess of the retention quota) with the Approved Dealer until the date of payment of the import bill, based on the written application of the concerned manufacturing-exporter establishment, within thirty days from the date of receipt of foreign currency against direct or concealed export.

2. Complaints have been raised that while the aforementioned circular instructions are being followed for direct exporters, they are not being followed for concealed exporters. In this situation, you are advised to ensure proper implementation of the instructions of the aforementioned circular and circular letter, and to settle payments for back-to-back letters of credit established in foreign currency through the clearing account maintained with Bangladesh Bank in foreign currency as mentioned herein.

3. Kindly acknowledge receipt and inform all concerned parties about this matter.

Yours faithfully,

(Ahmed Ehteshamul Haider) Deputy General Manager Phone: 7120375