International trade transactions and associated services are highly regulated. The Bangladesh Bank (BB) is the authority for regulating and supervising all trade services related activities including the use of transport documents. Practically, Authorised Dealer banks (ADs) offer services as the agents or dealers of the central bank, and banks are required to follow Foreign Exchange Regulation Act 1947, trade policies and a set of international rules and guidelines formulated by International Chamber of Commerce (ICC).
According to the BB Guidelines on Foreign exchange Transactions (BB updated in 2018), before issuance of EXP Forms (export form) by banks in case of exportation from the country, banks should be satisfied with regard to arrangements in place for receipt of title to goods like Bill of Lading, Air Waybill etc. on shipment of the underlying goods. In case of charter party bill of lading, banks should perform enhanced due diligence about the credentials of the charter party to avoid loss of cargo/foreign exchange. Bangladesh Banks has specific provisions on the endorsement of shipping documents by the banks, and has developed Online Export Monitoring System to ensure fair and secured export operation.
According to the BB Guidelines on Foreign exchange Transactions regarding import transactions, other than some exceptions, all Letter of Credits (LCs) and similar undertakings covering imports into Bangladesh must be documentary LCs and should provide for payment to be made against full sets of onboard (shipped) bills of lading, air way bills, railway receipts, truck receipts and post/courier parcel receipts showing dispatch of goods covered by the credit to a destination in Bangladesh. With regard to import through land ports, only one port of entry (land port) is to be mentioned specifically in the LC or purchase contract. BB has specific requirements and prescriptions regarding the use of incoterms which is clearly linked with the use of transportation modes and documents.
Regarding the use of transport documents in international trade facilitation in Bangladesh, other than in the import of scrap vessel/live vessel, in all other cases transport documents are commonly required. Not very different from the global practices, multimodal and bill of lading are the more widely used transport documents both in exportation and importation from and into the country. The use of transport documents vary in different export and import sectors of the country. Document examination is crucial for the bankers, especially in a country like Bangladesh where LC is widely in use. As observed in the BIBM Trade Review, most of the discrepancies are related to transport documents.
According to prevailing rules and regulations in the country, the signatures of bills of lading and any other transport documents should be verified by the banks. But there is no uniform or systematic way to verify it. Moreover, it does not always seem feasible. It also appears that the banks do not have comprehensive information on all the shipping companies and freight forwarders. Greater coordination amongst traders and shipping service providers who may contribute, in this connection, are required. Moreover, the country lacks appropriate regulatory framework for transportation of goods by land. In the absence of the framework, land transport documents are sometimes misused or abused. In addition, currently, there is no standard tool to check the freight amount that banks need to pay irrespective of trade terms use. This is also concerning from the point of view of trade based money laundering.
Growing cost of transportation is concerning for traders, especially exporters of the country. In export, sometimes readymade garments exporters are compelled to make costly air shipment instead of cheap sea shipment to meet the shipment deadline under the underlying contract or documentary credit. This compulsion is negatively impacting the exporters of the country. In addition, environment concerns of the developed countries are going to affect transportation costs in the coming years. It is time for preparation and adaptation. Traders need greater bargaining power to address compensation issues.
Safety and security are crucial for trade sustainability. There are evidences that in Bangladesh a good number of trade transactions did not have legally enforceable purchase/sale agreement for ensuring optimum protection. Though 89 global countries have ratified UN Vienna Convention as the regulatory guideline, Bangladesh is yet to be in this list. For sound purchase/sale agreement with given transportation and document related responsibilities, there should be a regulatory framework/guideline that are commonly accepted. Alongside ratifying UN Vienna Convention on Contract of Sale, there should be clear instruction on the other non-ratifying countries in regard to the guiding framework for all international trade transactions. In addition to this, according to a BIBM (Bangladesh Institute of Bank Management) report, there are instances of impractical, redundant and unscientific conditions on transport documents both in import and export LCs. Moreover, many banks use inappropriate trade terms in trade transactions. These are issues related to the trade credibility and risks as well. Probably awareness and capacity development are the solutions. Moreover, greater coordination of the key stakeholders is critical for safe and secured trade transaction and transportation.
Trade digitisation is another issue. The country is yet to undertake any remarkable steps in this context. In the global context, despite significant technological advances over the last decade, efforts at creating practical electronic alternatives, which are supported by an appropriate enabling legal framework, have to date only been partially successful. Several web-based platforms now offer secure services, which enable commercial parties to generate customised standard form transport documents electronically or allow for remote printing of 'original' documents issued by a carrier and transmitted electronically to the customer's printer. Some key challenges still remained. By some estimates, a single shipment will generate several dozen documents on average, with perhaps as many as 250 copies needed to satisfy all the participants in the supply chain. Paper documents used to be required by everyone concerned. And even now, the comfort of printed legal and commercial documents - particularly those confirming ownership - is demanded by some participants, despite the potential for delay that may be involved.
Bolero has been in the business of the electronic transfer of documents for around two decades. The software-as-a-service business has users operating in more than 50 countries. The 'global solution' provided by Bolero is hosted on UK-based and replicated servers in separate geographical locations to ensure a secure platform and continuity of service.
A key challenge has been the lack of adequate regulatory framework. As yet, existing legal regimes do not adequately ensure that the same legal rights may be attached to electronic alternatives. Although important legislative initiatives are under way and contractual systems are increasingly emerging, the transition to an electronic environment has been slow and, in commercial practice, transactions continue to be conducted largely on the basis of traditional paper documentation. In line with the global development, Bangladesh needs to work on digitisation of transport documents and the supportive regulatory framework.
Dr. Shah Md. Ahsan Habib is Professor and Director (Training), Bangladesh Institute of Bank Management (BIBM).
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