Foreign Exchanges

Foreign Exchanges

Introduction :

4.0 Foreign Exchange

Foreign Exchange refers to the process or mechanism by which the currency of one country is converted into the currency of another country.

In accordance with banks, Foreign exchange refers to the general mechanism by which a bank converts currency of one country into that of another. Foreign trade gives rise to foreign exchange. Foreign trade is transacted either in the currency of the exporter’s country or that of the importer’s country or that of a third country acceptable to both the exporter and the importer.

Foreign Exchange department is divided into two parts. The first part is the export department and the second is the import department.

4.1. Fundamentals of Foreign Exchange     

 

There are 3 fundamental aspects of the general mechanism of Foreign Exchange:

1. Every country has its own currency-legal tender/distinctive unit of account.

2. Banks by bookkeeping entry carried out in the two centers concerned effect the conversion of one currency into another.

3. These exchanges are affected by means of credit instruments viz. Draft, Mail Transfer, Telegraphic Transfer etc.

4.2. Exchange Control

Whenever a country faces a mounting pressure on its balance of payments position, it may impose various forms of restrictions or controls on payments and receipts in foreign exchange and also on the imports and exports of goods and services.

The objectives of exchange control are-

1. To ensure that the receipts from exports of goods and services from Bangladesh are: surrendered to a central pool.

2. To oversee use of foreign exchange resources in accordance with priorities determined by the government.

A . EXPORT

When any organization wants to export any product to other country than that particular organization usually opens an export L/C from this department.

4.3.  Foreign exchange Operation :( Export financing)

Export means any person lawfully exporting goods from Bangladesh to any other country after shipment the exporter has to tender the documents to the Bank within the stipulated period for the negotiation of the documents are drawn under a letter of Credit. If require, finance the duty drawback and cash compensatory support claims of the exporter.

Packing credit means any loan or advance grated or any other credit provided by an institution to the exporter for financing the purchase, processing or packaging or goods on the basis of L/C.

4.4.  Duty Draw Back:

An export of manufactured products is entitled to draw back the value customer’s duties, sales tax etc. already paid on the importation of raw material in the production or manufacture of the products.

1. Export Credit Guarantee Scheme

2. Confessional Rate of Import Duty

3. Income Tax Rebate

4. Retention Quota

5. Traveling Facilities.

                      

4.5   Export Formalities

There is certain formalities involved exporting such as maintaining the books register, L/C checking etc.

1) Procedure of Registration of Exporter.

2) Books and Register/ Ledger required for export

3) B.B.Bill checking/ Lodgments.

4) Export document checking and negotiation/ collection basis

5) Pre- shipment financing

6) Disposal of EXP forms

7) Export Incentives

8) Disputes and settlement of Export claim.

4.6 Procedure for obtaining Export Registration Certificate

   (ERC)

For obtaining export registration certificate form CCI & E, the following documents are required.

1) Application form

2) Nationality Certificate

3) Partnership deed (registered)

4) Memorandum & Article of Association and Incorporation Certificate

5) Bank Certificate

6) Valid Trade License

7) Copy of rent of the business firm.

4.7.  Preparation of Export Documents

1) Bill of Exchange or Draft

2) Commercial Invoice

3) Bill of Lading

4) Inspection Certificate

5) Packing list          

6) Export License

7) Shipment Advice

8) Certificate of Origin

9) Weight Certificate

10) EXP form

11) DHL Courier Receipt

4.8 Export Documents Checking

General Verification:

a) L/C registers or not

b) Exporters submitted documents before expiry date of the credit

c) Shortage of documents etc.

4.9 Sanction of Pre- Shipment

The part is to apply the Bank. On receipt of the application Pre- shipment, section will start security of the application.

Type of pre-shipment: whether clean/pledge/ hypothecation of goods.

a. Whether the investment is within Bangladesh Bank credit restriction.

b. What is the purpose of the investment?

c. Whether the goods specified for finance is eligible for export under control rule.

d. How the PSI A/C will be adjusted.

f. Disbursement

g. Execution of documents

h. Lien mark on Master L/C

B. IMPORT:

When any organization wants to import any product other country than the particular organization usually opens an import L/C from this department.

4.10.  Import of goods by letter of Credit

A letter of credit is a conditional Bank Undertaking of Payment. Credit is a letter form the importer Banker to the exporter that the bills if drawn as per terms and conditions are complied with will be honored on presentation.

Following papers are to be submitted by the importer before opening of the L/C

a) Trade license

b) Import Registration Certificate.

c) Income Tax Declaration with TIN

d) Membership Certificate

e) Memorandum of Article

f) Registered Deed

g) Resolution

h) Photographs           

i) VAT Registration.

Bank will supply the following papers/documents before opening of the L/C:

a) L/C application

b) LCAF

c) IMP

d) TM Form

e) Charge Documents

f) Guarantee Form

The above papers /documents must be completed dully filled and signed by the party and to be verified the signature.

4.11.  Checking of Documents

 Before lodgment, documents must be checked with L/C file. Check-up as under.

a) Invoice

b) Bill of lading

c) Draft

d) Bank forwarding date

4.12  Lodgment of the Document

Documents must be lodged within 7 days and examine the same whether document in order or not.

The exporters of Bangladesh follow the whole procedure. Necessary papers that the exporter sends with the shipment are:

a) Commercial Invoice

b) Packing list

c) Bill of Leading

d) Certificate of original goods

e) Weight and measurement list

f) Other paper that the importer asked.

                                      

4.13 Letter of Credit (L/C)

L/C is the most important thing for doing any sort of foreign business. There is no guaranteed relation between importer and exporter. As a result they use a media to secure their goods and currency. So, exporter and importers use their respective banks as a media and L/C is a legal obligation between the exporter and importer. It is necessary to fill up following forms.

a) LCF form

b) Application and agreement for confirmed irrevocable without resource to drawer’s letter of credit

c) Letter of credit authorization form

d) Form of IMP (importer) and EXP (exporter)

                  

4.13.1.  Classification of L/C

1. Revocable L/C

2. Irrevocable L/C

3. Transferable L/C

4. Confirmed and Unconfirmed L/C

5. Non-revolving L/C

6. Revolving L/C       

1. Revocable L/C

This type of credit can be revoked or cancel at any time without the consent of, or notice of the beneficiary. A revocable credit may be amended or cancelled by the issuing bank at any moment and without prior notice to the Beneficiary.

2. Irrevocable L/C

The Irrevocable credit is a commonly used type of documentary credit. The credits which can not be revoked varied or change/amended without the consent of all parties- buyer (applicant), seller (Beneficiary) Issuing Bank and confirming Bank (in case of confirmed LC).

3. Transferable L/C

The Original beneficiary when request the banker in writing to effect transfer the L/C to the secondary beneficiary, the signature of the original beneficiary on the letter of request must be verified by his banker. The L/C can be transferred only the terms and conditions specified in the original credit.

4. Confirmed and Unconfirmed L/C

A confirmed credit is one that has been confirmed by the advising bank. The bank issuing the credit sends the credit through his branch or correspondent bank located in the beneficiary’s country with a request to add its confirmation to the credit. If the advising bank adds its confirmation to the credit, it becomes a confirming bank and the credit is a confirmed credit. Confirmation constitutes a definite and legal undertaking on the part of the confirming bank that it will duly honor the payment or acceptance, as the case may be, on presentation of the stipulated documents provided the terms and conditions of the credit are satisfied.

5. Non-revolving L/C

A Non-revolving Credit is one in which the limit is reduced permanently to the extent of bills drawn under the credit. In this case, both the amount and the period of availability are fixed, and when either the time is expired or the amount is exhausted the facility comes to an end.

6. Revolving L/C

Banks to fulfill the special requirements of the importers who require regular and continuous payments to their suppliers issue Revolving Credits.

4.13.2  Back-to-Back Letter of Credit

Under this arrangement the bank finances export business by opening a letter of credit on behalf of the exporter who has received a letter of credit form the overseas buyer but is not the actual manufacturer of producer of the exportable goods. The letter of credit opened in favor of the actual producer or supplier within or outside the country. Since the second letter of credit is opened on the strength of and backed by another letter of credit it is called “Back to Back” credit. The back-to-back letter of credit must conform to the terms and conditions of the original letter of credit with the following exceptions:

1. Name of the original beneficiary shall be substituted by that of the actual supplier.

2. The credit amount shall normally be lower than that of the original letter of credit.

3. The back to back letter of credit shall be made valid for shipment and negotiation prior to expiry of the corresponding date.

4.13.3.  Processing and opening of BTB L/C

An exporter desired to have an import L/C limit under Back to Back arrangement. In that case the following papers & documents are required:

a) Full particulars of bank account.

b) Balance Sheet

c) Statement of Assets & liability.

d) Trade License.

e) Valid Bonded Warehouse License

f) Membership Certificate

g) Income Tax Declaration

h) Memorandum of Article

i) Partnership Deed.

j) Resolution

k) Photographs of all Directors.

On receipt of above documents and papers the Bank to Back L/C opening section will prepare a credit report. Branch must obtain sanction from Head office for opening Back-to-Back L/C.

4.14.  Opening of Letter of Credit

Opening of Letter of Credit means, at the request of the applicant (importer) issuance of an L/C in favor of the beneficiary (exporter) by a bank. The bank, which open or issue L/C is called L/C opening bank or issuing bank.     

4.15.  Before Opening an L/C, the issuing Bank must check the following:

1. L/C application properly stamped, signature verified and margin approved and properly retained.

2. Indent/ Proforma Invoice signed by the Importer and Indentor/Supplier.

3. Ensure that the relevant particulars of L/C application correspond with those stipulated in Indent / Proforma Invoice.

4. Validity of LCA entitlement of goods, amount etc. conforms to the L/C application.

5Conversion and rate of exchange correctly applied.

6. Charges like commission, F.C.C.Postage, telex charge, if any recovered.

7. Insurance Cover Note – in the name of issuing Bank-A/C importer covering required Risk and voyage route.

8. Incorporation of instructions for negotiating bank as per bank’s existing arrangement.

9. Reimbursement instructions for Reimbursing Bank.

10. If add confirmation is required on account of the applicant- charge should be Recovered form the applicant.

11. In case of usence L/C, mention rate of interest clearly in the Letter of credit.

4.16.  Parties to a Letter of Credit                               

Letter of Credit signifies a commitment on behalf of the buyer (importer) given by the buyer’s bank to effect payment to the seller (exporter) subject to fulfillment of certain conditions by the seller specified in the credit. The importer, the exporter and the issuing bank are, thus, obviously parties to a letter of credit. A number of other parties are also involved in a Letter of Credit and the rights and obligations of the different parties involved in the deal will also differ from each other. Usually the following parties are involved in the Letter of Credit.

a. Applicant or Buyer (Importer)

b. Beneficiary or Seller (Exporter)

c. Issuing Bank (Opening Bank)

d. Nominated Bank (intermediary bank) which may be:

e. Advising bank/Notifying bank

f. Confirming bank             

g. Negotiating bank

h. Accepting bank

i. Paying bank

j. Reimbursing bank

4.17.  Papers to Be Submitted By the Importer before L/C Opening

The importer must submit the following papers along with the L/C application before opening the letter of credit:

Import License/Authorization form or Import Registration Certificate as the case may be.

a. TIN Certificate

b. VAT Registration Certificate

c. Indent/Performa Invoice

d. Insurance cover note

e. IMP forms and other documents/papers etc.

4.18.  Procedure of opening L/C

Application

 

Insurance Coverage

Payment

IMF (import form) or EXF (export) form) (export)))))form)

LCF (letter of credit authorization form)

Performa Invoice

TIN Certificate

4.19.  Shipment of Consignment and Lodgment of Documents

There are two types of exporter

a). Merchant/Trade Exporter

b). Manufacturer Exporter

If the supplier is a merchant exporter, he will immediately start packing and shipping the goods. If he is a manufacturer exporter, he will start manufacturing the item. In either case, he will ship the goods when ready and obtain full set of Bill of Lading etc. from the carrier company and submit the same to the negotiating bank along with other documents that are called for in the credit. The shipping documents usually obtained are:

a. Bill of Lading or Air Consignment Note or Post Parcel Receipt or Truck Receipt.

b. Bill of Exchange

c. Commercial Invoice

d. Certificate of Origin

e. Packing List

f. Weight Certificate

g. Consular Invoice, where necessary

h. A copy of declaration of shipment made to the Insurance Company (to be submitted with original shipping documents)

i. Pre-shipment inspection certificate from internationally reputed surveyor.

j. Analysis certificate where specification of commodity is given.

If the credit is unrestricted, then the beneficiary can go to any bank for the purpose of negotiating his documents. Usually they go to their own bankers. If the credit is restricted, then the beneficiary gets his documents collected through his banker who forwards documents to that banker to whom negotiations are restricted.

4.20.  Discrepancies in Shipping Documents

The usual discrepancies found are:

1. L/C expired;

2. Late shipment;

3. Amount drawn in excess of the letter of credit;

4. Bill of Exchange not properly drawn;

5. Description of goods differ;

6. Interest clause is missing in Bill of Exchange, where stipulated;

7. Bill of Exchange is not drawn/signed by the beneficiary of the credit;

8. Bill of Lading or Airway Bill stale;

9. Bill of Lading “Clause”; Full set of B/L not submitted, Or

10. B/L not properly signed and submitted;

11. Bill of Lading is not manually signed by the master or an authorized agent of the shipping company;

12. Bill of Lading indicates that goods are carried on deck;

13. Bill of Lading is issued under a charter party.

Father's right to paternity leave...

Father's right to paternity leave...

A mother usually bears the main responsibility of childcare work in family life. Father's has also duty to take care of both mother and child. Father plays a crucial role in the development of their children. The latest research indicates that fathers who are actively involved in raising their children can make a positive and lasting difference in their lives. So father has also responsibility of childcare parallel to mother. If a woman employee becomes pregnant while in employment, she is entitled to take maternity leave. Under Article 4(1) of Maternity Protection Convention, 2000, ensure the period of maternity leave of not less than 14 weeks. Rule 197(1) of the Bangladesh Service Rules (as amended 9 January 2011) provides for female Government servants six months and the Bangladesh Labour Act, 2006 section 46, provides for a female workers 16 weeks maternity leave. Though paternity leave is not a new concept but Bangladesh has no paternity leave opportunity for its male employees or workers.

 

To take care of a child and also mother, employee father needs paternity leave while in employment. This engagement has positive long-term effects for both father and child. Paternity leave is generally available to fathers only, usually to be taken soon after the birth of a child, and intended to enable the father to spend time with his partner, new child and older children. In 1974, Sweden became the first country in the world to offer fathers the statutory right of taking paid leave from work to be with their families after childbirth and adoption. According to ILO report 2014, approximately 70 countries offer paid leave for fathers in the form of paternity leave or shared parental leave. Also a few progressive companies offer new dads paid time off ranging from a few days to a few weeks like Microsoft gives 2 weeks paid leave and Google India for 10 days.

In UK fathers gained the right to paid paternity leave in 2003. Recent legislation has set the dramatic change in fathers' rights to parental leave. By the new law, mothers and fathers will be able to share up to 50 weeks of parental leave. The rule will also apply to couples who adopt a child. The new law says, "Eligible couples whose child is due on or after April 5, 2015 can now share up to 50 weeks of leave and 37 weeks of pay in the first year of their child's life. Parents can take the time off at the same time as each other or separately. "Under Central Civil Service (Leave) Rules, 1972, Rule 43-A, India made provisions for paternity leave for male government employee with less than two surviving children for a period of 15 days to take care of his wife and new born child. For paternity leave he shall be paid leave salary equal to the pay last drawn immediately before proceeding on leave. New Zealand also has Parental Leave and Employment Protection Act, 1987; section 17 ensures the employee to partners/paternity leave.

Children have been described as our future, our greatest resource, and our hope for a better tomorrow. It is duty of parents to rear their children as a good citizen of a state and at the same time state cannot ignore this duty. Now modern welfare states are taking responsibility of a child. Bangladesh is a progressive, democratic and welfare state in the world and it has so many dynamic laws for the wellbeing of countrymen. Though Bangladesh government is not constitutionally bound for rearing child's mental growth and physical evolution but for the greater good state should regard its duty.

Like other states Bangladesh should welcome the Paternity leave law for the wellbeing of child as well as mother. For proper growing of a child needs the active participation of both mother and father. Beside the mother, a child also needs father so it is high time for the Government of Bangladesh to put attention on enactingPaternity leave law for the male employees and workers. Government can enact Paternity leave law or shared parental leave law for both male and female employees and workers and it would be better for child as well as for the state

Legal Protection of an Accused....

Legal Protection of an Accused....

Audi AlteramPartem (No man shall be condemned unheard) is a basic principle of natural justice that means no one is to be condemned, punished, or deprived of his/her life or property in any judicial proceeding, unless he/she has had an opportunity of being heard. The principles of natural justice have been violated repeatedly by law-enforcement agencies of Bangladesh through so-called 'cross-fires'/ gunfight. The Universal Declaration of Human Rights guarantees the human rights under, especially Article 3; everyone has the right to life, liberty and security of person, Article 5; No one shall be subjected to torture or to cruel, inhuman or degrading treatment or punishment, Article 9; No one shall be subjected to arbitrary arrest, detention or exile.
The Constitution of Peoples' Republic of Bangladesh provides the fundamental rights of the citizens in the third chapter (Article 26 to 47A). It rejects any kind of discrimination in terms of religion, race, caste, sex or place of birth. Articles: 31, 32 and 33 describe that citizens are entitled to enjoy the safeguards as to arrest and detention, protection of the law and treated in accordance with law and not deprived of life or personal liberty except in accordance with law, Article 35 ensures fair trial in criminal prosecution (A man should not be punished prior to conviction).

However, some restrictions may be imposed in conferring the rights. Above all the fundamental rights described in Bangladesh Constitution resemble very effectively the principles inscribed in the UN Universal Declaration of Human Rights and provide a legal basis for citizens for a free and fair environment in the national polity.
The Chief Justice MC Lachin, Supreme Court of Canada in Charkouvi v Canada, 2007 SCC 9, (2007) ISCR 350 Para 64. The Court held that, “How can one meet a case one doesn't know?” In Dr. Bently Case, his Lordship, Justice Fortescue held that, Even God gives chance to Adam for fair opportunity to answer. “Have you eaten from the tree which I forbade you?”-God inquired. R. v University of Cambridge(1723), 1 Str 557 at P 567: 93 ER 698. Article 14.2 of International Covenant on Civil and Political Rights, 1966, which Bangladesh acceded to in 2000, states that everyone charged with a criminal offence shall have the right to be presumed innocent until proved guilty according to law. Presumption of innocence is the vital right of the accused because he possesses some sort of dignity and honour as a human being and never ever he wants to lose it.
A person may be guilty in the eye of law but he cannot be punished without due process of law. We cannot accept the ancient rule that is “Blood for Blood.” We are directly and unquestionably against the crime but as humankind a criminal has right to take protection before the law and the law will be decided whether he is guilty or not. If he is guilty he will be punished in accordance with law but not before trial.

Towards being a role model for ensuring right to food....

Towards being a role model for ensuring right to food....

Right to food though is not an age old notion but now people all over the world including the people of Bangladesh are more or less familiar with this very concept. Though there were some misconceptions mostly because of interpreting it literally, but gradually it is becoming more transparent and practical. With the significant changes to the welfare state concept, now there are some more duties of the state authority other than preservation of law and order, collecting taxes and protecting the citizens from foreign enemies. Rather, it is now a duty of the state to provide the essential security of living peacefully and of course living hunger free in the state. Being the mother of all laws of the country, our Constitution provides various rights for the citizens and imposes obligations upon the state authority in the name of Fundamental Principles of State Policy. State will not feed you but will make you capable to manage your food, ensure your legitimate access to food; the obligation of the state is limited to this extent only.
Bangladesh, has for long been successfully maintaining its people with the advantages of some basic policies and programs targeted towards ensuring the right to food of the people. In the year 1998 the Government of Bangladesh took an exhaustive food security policy for the country which was again revised in the year 2006. In this very policy the three essential features of right to food namely availability, accessibility and utilisation of food are vividly and expressly ensured.

The term 'Right to Food' though not expressly or directly used in our Constitution as a right, but in Part 2 of the Constitution it has been recognised as a part of the fundamental principles of state policy. Through the provision of Article 11, Constitution guarantees the fundamental human rights and freedoms and respect for the dignity and worth of the human person. Those can only be ensured if right to food can be ensured. Article 15 of the Constitution stipulates the fundamental responsibility of the state to secure its citizens with the provisions of basic necessities of life, including food, clothing, shelter, education and medical care.

Article 14, Article 16, Article 18, Article 20 and Article 25 impose upon the state the responsibility to create such a condition where right to food will be ensured. It will not be too much to say that being a very young country taking birth with the poorest economic condition only 44 years ago Bangladesh has attained more than what could be expected and those are of course better than our neighbouring countries. Following the footmark of other developed countries our country is stepping forward giving this very right a concrete shape. There are three obligations of the state to ensure right to food: these are namely, Obligation to Respect, Obligation to Protect and Obligation to Fulfil. By way of various social safety net programs the right to food of the people of Bangladesh is being respected.

Bangladesh has enacted and implemented various laws like Consumer Rights Protection Act, 2009; Safe Food Act, 2013; Formalin Control Act, 2015; Breast Milk Substitutes, Baby Food, Commercially Manufactured Supplementary Baby Food and its Equipment(Regulation of Marketing) Act, 2013 to protect the access to food of the people and protecting their Right to Food thereby. Again Special Powers Act, 1974 also protects Right to Food of the people by way of controlling the hoarding, black marketing and adulteration of the food.

Now it is time to ensure the other two Obligations for which the Constitution must be interpreted in a liberal manner so that Fundamental Principles of State Policy can be enforced against the government for the interest of the people as people are the sole owners of the state and government is merely their representative, so government is bound to obey the people's will, the Constitution; thus it will be the duty of the government to ensure people's right to food by making them capable of earning their own food.

It is now the high time to make such arrangements so that rent seekers may not be able to take control over the food supply chain. Government must make such arrangement so that farmers, the backbone, the insurer of food supply of the country may survive well; the rent seekers and corporate evil must be eliminated with iron hand. If the farmers live, if there are cultivatable land and supply of agricultural commodities are available, if the farmers get just price of their labour, the farmers of Bangladesh will be able to produce enough food to feed us all. Our duties and responsibilities are to protect the framers, protecting from natural as well as corporate calamities and from rent seekers at the top. An umbrella law should be enacted for securing right to food.
We have known that the Law Commission is working on preparing a right to food law for Bangladesh. We will expect that this law will be a model law on right to food and Bangladesh will be a role model for the world on ensuring right to food for its people. It is not possible for a country to ensure full food security for its people. Again, we cannot expect to live better keeping our neighbours hungry, so a regional food safety net must be created. SAARC Food Bank needs to be made a reality as soon as possible. Recently in a Regional Conference titled, 'South Asian Right to Food Conference, 2015' our Finance Minister and government high officials of other SAARC countries have ensured that they are working on it with their utmost effort. Let us wait for the sunrise. Let the world shine by the lights of Bangladesh's success on ensuring right to food.