Bangladesh’s apex garment makers’ body, the Bangladesh Garments Manufacturer & Exporters Association or BGMEA, is for removing back-to-back LCs (Letter of 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 — for non-bonded exports.
Media reports maintained this adding the President of the garment makers’ body, Faruque Hassan, in a letter written to the Chairman of the country’s National Board of Revenue (NBR) underlined the Commerce Ministry has been requested to revoke exporters’ obligation to have a general bond licence or special bond licence to open a back-to-back LC.
For information, the revenue board in a letter dated 31 August 2021, requested the country’s central bank (Bangladesh Bank) not to allow non-bonded apparel factories the facility as it contradicts the central bank’s guidelines, which allegedly caused a stir amongst the exporters.
The recent BGMEA letter, reportedly, called for immediate action to amend the existing provisions of the NBR’s VAT Act to give permanent approval to non-bonded companies to open local back-to-back LCs for the purpose of procuring raw materials locally even if under the current provisions, institutions without bond licences cannot purchase raw material on credit through back-to-back LCs for export purposes.
