Published :
Updated :
For all latest news, follow The Financial Express Google News channel.
The government is considering mandatory opening of irrevocable confirmed letter of credit (L/C) or advance recovery of proceeds against export of jute goods to avoid uncertainty over receiving payments from abroad.
The move is taken, as local jute spinners alleged that some importers do often withhold payments deliberately or create pressure to cut prices after goods are shipped or make delay in taking delivery of goods from ports on their side by showing various reasons.
The jute spinners also said importers sometimes unnecessarily raise questions over quality of goods, and show various excuses to withhold payments, although tenure is fixed under the 'cash against document' system.
According to the sources, the traders face such problems in case of exporting goods to a number of countries including Turkey and Iran.
No L/C is opened for exporting jute goods to these two countries; rather the 'cash against document' system has been followed over a long time, they added.
Chairman of the Bangladesh Jute Spinners Association (BJSA) Zahid Miah had requested the central bank last year for introduction of 'irrevocable confirmed letter of credit' or provision of 'payment received in advance' to secure payment against export of jute goods.
Following that request, the central bank informed the Ministry of Textile and Jute (MoTJ) that the country's foreign trade is being operated based on Import Policy Order and Export Policy.
The L/C system can be made mandatory and the dealer banks can be given directives after getting consent from the Ministry of Commerce (MoC) in this regard.
MoTJ Secretary Lokman Hossain Miah in a recent letter to the his counterpart in the MoC said that his ministry has found the BJSA's proposal logical.
He requested the commerce secretary to take actions in favour of the proposal, so that the traders can secure their export proceeds.
A senior official of the MoC acknowledged receiving such a request form the MoTJ, and said they are scrutinising the proposal.
Sheikh Shamsul Abedin, the BJSA director, told the FE that the main problem takes place in case of getting money from the importers of Iran and Turkey, two major destinations of Bangladeshi jute goods.
"Cargoes need nearly 45 days to reach Turkey from Bangladesh, and in the meantime if prices go down in the market, the importers show reluctance to make payment."
Mr Abedin said sometimes the importers also bargain on rates and ask for cutting rates once the goods reach their ports.
"If furnishing L/C is made mandatory in trading of jute goods, the importers will not get the chance to show any excuse and make delay in payment," he noted.