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An investor’s guide to import in Bangladesh
LUTHFUL AREFIN KHAN
Working for a leading trade bank in Bangladesh – one that manages a significant portion of our country’s foreign direct investments – gives me the opportunity to regularly connect with potential investors.
During our conversations, I have observed that investors and entrepreneurs typically struggle to gain access to the resources required to understand Bangladesh’s trade and investment atmosphere.
Time constraints and language barriers make hardcopy resources inaccessible, while internet-based resources also seem scant. With trade acting as a driver of our nation’s journey of resilient growth, a comprehensive picture of how to conduct a trade transaction is critical for businesses and investors alike.
Imports are an important segment of our economy, with letters of credit (LCs) being the most common payment method for imports in Bangladesh.
The start of the trade journey
Most businesses begin their trade journey by obtaining a mandatory trade licence from a city corporation and a membership certificate from the relevant trade association. It is equally critical to register for a Tax Identification Number (TIN) and Business Identification Number (BIN) with the National Board of Revenue (NBR).
For import-based companies, an Import Registration Certificate (IRC), issued by the Office of Chief Controller of Imports & Exports (CCI&E) or import permit is essential. The type of document depends on the type of business. Traders of finished goods require a commercial/multinational IRC while industries need an industrial IRC.
Traders who usually have commercial IRCs are generally allowed to import on sight letters of credit. Under documentary collection, importers with industrial IRC can import freely, while commercial IRC holders can import up to $500,000 in a fiscal year.
To initiate import transactions, the minimum requirement is an accepted proforma invoice and insurance cover note. Varying payment terms are allowed – up to 180 days for the import of raw materials and up to 360 days for capital machinery. All imported goods must enter Bangladesh within 120 days of payment.
For import transaction initiation, importers need to submit various documents to meet regulatory guidelines, such as: duly signed and accepted proforma invoices, with authorisations from customs authorities; insurance cover note; bank-mandated application form; and specific regulatory approvals related to the goods being imported.
Staying aligned with regulatory guidelines and limiting risk
All imports must align with expectations set by the CCI&E and follow commonly allowed import incoterms, which are widely-used internationally recognised rules that define the responsibilities of sellers and buyers.
In addition to international guidelines, trade transactions are governed by local regulatory bodies such as the Bangladesh Bank, the NBR, the Ministry of Commerce, the Ministry of Finance, and the Bangladesh Investment Development Authority. To mitigate risk, banks must comply with trade-based money laundering guidelines and other stringent frameworks. Aspects such as price checking for international competitiveness and obtaining credit reports on foreign counterparties are used to safeguard businesses from fraud and financial risk.
Global trends, innovation, and the road ahead
In keeping with emerging global trends, regulators are looking to increase digitisation, improve efficiency, and enhance transparency. More digital platforms and payment channels are entering the market, gradually changing the face of commerce in Bangladesh.
This presents a significant opportunity to streamline Bangladesh’s trade processes and boost economic competitiveness. As part of this push, Standard Chartered Bangladesh has successfully petitioned the regulator to eliminate the need for digital signatures when initiating an import transaction, a major step forward in digitising cross-border trade. By embracing innovation and fostering collaboration, we can unlock the full potential of this digital transformation and propel the country towards a more prosperous future.
The author is country head of transaction banking at Standard Chartered Bangladesh.