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Bangladesh seeks letter of credit for unlicensed exporters

  

Bangladesh commerce ministry has asked stakeholders to allow apparel exporters without a bond license with back-to-back letter of credit (LC). To settle this issue, stakeholders hope to amend the VAT law and the Bangladesh Bank guidelines At a meeting directed Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) informed how many readymade and terry towel factories do not have a bond license, how many workers the factories have and how much the factories export.

The revenue board in a letter on August 31 had requested the Bangladesh Bank not to allow non-bonded apparel factories to enjoy back-to-back LC, as it contradicts the central bank's guidelines. The board’s move put around 500 knitwear and home textile exporters without a bond license in a limbo. Stakeholders say if the back-to-back LC benefit goes, more than 500 RMG and home textile factories will no longer be able to procure raw materials and accessories from local and foreign sources on credit.

In a back-to-back LC, an importer issues an LC to an exporter and the exporter can use it as collateral to get another LC issued for sourcing raw materials and accessories on credit. If the facility goes, RMG and home textile factories will have to make full payments plus VAT in cash for local purchases, which will make their survival very difficult.

 
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