Library of Textile, Apparel and Fashion

How to open LC for Apparel Business

How to open LC for Apparel Business in Bangladesh


LC is a letter of credit, L/C a short-term Letter of Credit, a commercial bank document of credit. LC is an undertaking letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. In the event that the buyer is unable to make a payment on the purchase, the bank will be required to cover the full or remaining amount of the purchase.


Import Registration Certificate (IRC):

               Collect the form from the office of the Chief Controller of Imports and Exports

               Submit Schedule Fee to Bangladesh Bank or Sonali Bank Branch

Submit the application along with the required documents

Necessary documents for import registration certificate:

1. Trade license
2. Passport size photo (3 copies)
3. Tin number
4. Membership Certificate from Chamber of Commerce and Industries or related association
5. Original copy of treasury invoice
6. Copy of Partnership Deed if Partnership Business
7. Limited Company Certificate of Incorporation, Article of Association, Memorandum of Association

You can check on below address:

Office of the Chief Controller of Imports and Exports

111-113 Motijheel or / a, Dhaka-1000

Import via LC: Determining the type of LC:

First, you have to decide what kind of LC you want to open. According to the current rules, there are three types of LCs for importers:

One: Trade based importers

Two: Industry-based importers

Three: Importer under WES (Wage Earner’s Scheme)

Currently, the following 12 types of LCs are in circulation:

1. Revocable LC

2. Irrevocable LC

3. Confirmed LC

4. Transferable LC

5. Divisible LC

6. Revolving LC

7. Restricted LC

8. Red-clause LC

9. Green clause LC

10. Back to back LC

11. With Recourse LC

12. Without Recourse LC

What documents are required to open an LC?

The bank will give you the following documents to open a commercial LC:

Required documents:

1. LC application form

2. Letter of Credit Authorization Application Form

3. IMP form

4. TM form

5. Contract form

6. Charge document

7. Guarantee form

Document for opening Cash / WES LC:

Required Documents:

1. LC opening application

2. LC application form

3. Indent / Proforma Invoice

4. Letter of Credit Authorization Form

5. Import permit

6. Charge document

7. Insurance cover note

You have to fill up the above-mentioned forms and submit the required documents to the bank after verification and signing.

Required documents:

1. Trade license

2. Import Registration Certificate

3. Income tax or tin

4. VAT certificate

5. Membership Certificate

6. Memorandum of Article

7. Registered Deed (in case of partnership firm)

8. Resolution (in case of partnership firm)

9. Pictures

10. Insurance cover note and premium payment receipt

11. Copy of indent / proforma invoice.

Collateral Security:

The bank requires collateral security to open an LC under a project loan.

Documents required for an equitable mortgage:

1. Memorandum of Title Deed

2. Personal Guarantee

3. Original deed of the property

4. Mutation record

5. Receipt of rent (up to date)

6. CS leaflet

7. SA parches

8. R. S. Parches

9. Non-Incumbencies Certificate (with charges)

10. Valuation Certificate

11. Lawyer's Certificate

12. Affidavit by the first class magistrate

13. Registered Irrevocable Power of Attorney

In the case of a private limited company more is required:

1. Board Resolutions (Directors)

2. Personal guarantee of all directors

3. Copy of Memorandum and Articles of Association

4. Certificate of incorporation issued by a joint-stock company

5. Charge document by joint-stock company

Necessary Documents for Imports of Machinery:

In order to exempt imported machines/goods and accessories from customs, the following documents have to be handed over to the bank approved C&F:

One: Commercial Invoice, Packing List, Bill of Lading (BL) or Airway Bill (AWB) or Truck Receipt has to be endorsed by the concerned bank.

Two: Indemnity with Copy Document Non-negotiable Document if the original copy of Commercial Invoice, Packing List, Bill of Lading (BL) or Airway Bill (AWB) or Truck Receipt is not available. An endorsement has to be collected from the respective Shipping line.

Three: LCA must be endorsed by the bank.

Four: Performa Invoice/indent Import Certificate, Export Certificate, and Photocopy of Insurance must be attested by the Bank.

Five: Utilization Declaration (UD) which is issued by BGMEA.

Six: General Bond License and Bonded Warehouse License required.

Seven: The importer has to collect the customs application form from Dock Customs House and sign it.

The following documents have to be handed over to C&F if any consignment of machine papers is to be cleared from customs:

Export Debentures, UDs, General Bond Licenses, and Bonded Warehouse Licenses should be excluded from the said documents and in addition, the following documents will be required.

One: Promise of the importer with two witnesses on a stamp of Rs.500

Two: The main catalog

Three: Certificate from the bank. This means that the bank will issue a certificate to the effect that you are transacting satisfactorily with the bank.

Opening the LC of Principle Machineries:

To open an LC related to importing original machines for a new entrepreneurial industry, the following documents have to be submitted to the bank:

One: Application form to the bank on the pad of the concerned institution.

Two: LC Application Form which has to be collected from the bank and signed by the importer.

Three: Letter of Credit Authorization (LCA) 1 set which is provided by the concerned bank and has to be signed by the importer.

Four: Charge Document-1 set which is supplied by the concerned bank has to be signed by the importer.

Five: Insurance cover note with receipt of Rs.

In addition, if an importer wants to import goods through back-to-back debentures, he has to submit the export credentials along with the above documents to the bank. In this case, the credit report of the exporter of your machine or product has to be collected by the bank.

Examining the LC:

You need to check the LC that the bank has sent or is sending to your seller. In other words, it is necessary to test whether the things that should be in the LC are correct. Things to look for in an LC:

One: Whether the buyer's name and address are spelled correctly.

Two: Whether your / your organization's name and address are correct.

Three: Product price according to Performa Invoice/indent.

Four: Who will do the inspection before export, his name, and address.

Five: We have to see from which port the export will come and to which port it will come.

Six: It has to be seen whether the packing is being done according to the export standard.

Seven: Whether the Payment Clause has been established.

Eight: The name, address of the buyer's bank, and whether the name and address of your bank are correct.

Nine: LC test member is duly mentioned.

Ten: Whether the Marine Insurance cover note is appropriate.

Eleven: Whether the Bill of Lading (BL) clause is appropriate.

Export, Import, and Unloading of Merchandise:

Under the terms of the LC, the exporter will export the goods as per the date and send a set of shipping documents to the buyer and the LC opening bank. You need to check the document according to the LC rules. The original document will be given by the bank to its designated C&F for unloading the goods. If your LC is not bank financed, you can redeem it with C&F as you wish. When fixing the C&F, you must know the good and bad of the C&F and give him the original document to unload. Otherwise, various difficulties (if bad C&F) may occur.

FOB, CFR, & CIF Price:

Factory or ex-factory costs are calculated by adding packing, marking, and labeling costs to raw materials and labor costs. The ex-factory price is obtained by adding the profit margin to the ex-factory cost. The F.O.B. by adding the internal shipping cost and the forwarding agent's commission to the ex-factory price. (Free on Board) Price is calculated. In this case, the seller is responsible for delivering the goods to the ship or aircraft at the sea or airport mentioned in the sales contract. The risk of loss or destruction of goods after lifting on a ship or aircraft rests on the buyer rather than the seller. If the exporter is willing to sell the product on CFR (Cost & Freight) basis, he/she can apply for FOB. Ship freight must be added to the price. In this case, the cost of transporting the goods to the destination port and the ship fare is to be borne by the seller. But after unloading the goods on the ship, the risk of loss or damage to the product or any unexpected expense falls on the buyer instead of the seller. The actual freight rates of ships of any line can be collected from authorized shipping companies or their agents. If the exporter is a CIF. (Cost, Insurance & Freight) If he wants to sell the product, he has to take out a marine insurance policy to cover the risk of loss on the product. The rate of insurance premium under the said policy depends on the amount of risk and varies depending on the product and destination. This insurance cost is usually calculated at the rate of 1% on the CFR value. C.F.R. The CIF adds insurance costs to the original. The price is figured out.

Documents required for import:

The documents to be submitted to C&F Customs House for import are as follows:

One: Bill of entry

Two: Copy of Bill of Leading (Bill of Leading copy)

Three: Copy of invoice

Four: Packing list      

Five: Certificate of Origin (CO)

Six: UD / UP

Seven: VBF-6

Eight: Bond / Stamp (Bond / Stamp) Stamps are not required in the garment industry. In the case of other imports, a bond with a stamp of Rs.1000 has to be paid for goods worth less than Rs.10 lakhs and Rs.2000 for goods worth more than Rs.10 lakhs.

Nine: Copy of Master LC

Ten: Letter of Credit Authorization (LCA)

Eleven: Performa Invoice

Twelve: Insurance Cover Note Copy

Thirteen: PSI certificate if not an export-oriented industry.

Back to back LC:

Through back-to-back LCs, exporters provide funds for the purchase, processing, manufacture, and packaging of goods for export purposes.

The following documents are required to open a back-to-back LC:

One: Application to open LC

Two: LC application form

Three: Indent / Performa Invoice

Four: LCF

Five: Import Permit (IMP Form)

Six: Insurance cover note

Seven: Original copy of export LC

Author of this Article

Sharmin Akther Diba

Industrial & Production Engineer
Rajshahi University of Engineering & Technology (RUET)
LinkedIn: Sharmin Akther Diba

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