When a bank may let an exporter ship on open account, the safety net that must stand behind the buyer, the 3.00 percent cost ceiling, fair pricing in the EXP form, and the partners the bank needs abroad.
In Lesson 12, Safeguards: clean money and careful banking, we saw how a bank checks the channel, the banks and the buyer before it touches an export. Now Evelyn has a new kind of problem, and it comes from a happy place.
Evelyn runs a garment factory in Gazipur. For years she has shipped T-shirts to the same buyer in Hamburg. Last week the buyer wrote: "We trust each other now. Let's skip the paperwork of an LC. You ship, send us the documents, and we pay you later, on open account." Evelyn read the email twice. Less paperwork sounds lovely. But "pay you later" sounds a bit like the cousin who borrows your rice cooker "for one week".
She walks into her bank's AD branch in Dhaka and asks Habib, her trade officer, "Am I even allowed to do this?" Habib pulls out Part D of the export circular. "You may," he says, "but not on trust alone. Open account needs a safety net."
That evening, at an exporters' dinner, Evelyn sits next to Shohag, who built a large garment and textile group from one small unit and once led an exporters' association. He laughs when she tells him. "Every buyer says 'trust me' at some point. The smart exporter says 'yes, and here is who will pay me if you can't.' Let me tell you how it works for an owner like you."
This lesson starts Part D of the export room: exports under open account credit terms.
On open account, the seller ships first and the buyer pays on an agreed later date. No LC stands behind the deal. D-1 says ADs may allow exporters to ship this way on sales contracts, but only if the instructions below are followed.
The time limit. Payment must come within the statutory period, counted from the date of shipment, "if otherwise not extended". D-1 doesn't state the length of that period, and it doesn't say who may extend it.
(a) A safety net must stand behind the buyer. The export must be backed by a payment undertaking or payment risk coverage, so the bills are settled within the statutory period. This cover comes from one of these, which the circular calls designated institutions:
international factoring companies;
foreign banks;
foreign financial institutions;
trade financiers;
insurance entities.
The importer and/or the exporter arranges this cover with the institution.
(b) The net must really catch you. If the importer defaults, the cover must work so that payment is ensured on a priority basis, under the underlying arrangements. Settlement is based on presenting the export invoices, bills or documents, physically or electronically.
(c) Early money is optional. The cover may include an option to be paid early, before maturity, against the export bills. If so, the early payment must be on a non-recourse (without recourse) basis, from the designated institutions or designated financiers, based on that cover. In simple words: once the exporter is paid early, the financier can't come back and claim the money from her if the buyer later fails to pay.
At the desk
Evelyn's Hamburg buyer agrees to open account terms, and a foreign bank agrees to give a payment undertaking, arranged together with the buyer. Habib checks that the undertaking will pay on a priority basis if the buyer defaults, against Evelyn's invoices and documents. "Without this," he tells her, "open account would just be a hope and a handshake. With it, D-1 lets me allow the shipment."
Key words
Open account
The seller ships and sends documents directly to the buyer, who pays on an agreed later date.
Designated institutions
The bodies abroad that D-1 says may give the payment undertaking or payment risk coverage: international factoring companies, foreign banks, foreign financial institutions, trade financiers and insurance entities.
Payment undertaking
A promise from a designated institution abroad that the export bill will be paid, even if the importer defaults.
Without recourse
The financier can't claim the money back from the exporter if the buyer fails to pay.
Read the rule as written (Para D-1)
ADs may allow exporters to ship goods on sales contracts under open account credit terms within the statutory period, if otherwise not extended, from the date of shipment, subject to compliance with following instructions:
(a) Exports shall be executed against payment undertaking/payment risk coverage for settlement of export bills/receivables within the permissible statutory period by international factoring companies/foreign banks/foreign financial institutions/trade financiers/insurance entities (hereinafter referred to as designated institutions) arranged in association with importers and/or exporters.
(b) Payment undertaking/payment risk coverage by designated institutions abroad shall be, in case of default by importers, received in such a way so as to be ensured of payment on priority basis in accordance with appropriate underlying arrangements for settlement on the basis of physical/electronic presentation of export invoices/bills/documents.
(c) Payment undertaking/payment risk coverage from designated institutions abroad may contain option for early payment arrangement before maturity against the relative export bills/receivables. Early payment shall be arranged on non-recourse basis from designated institutions or designated financiers based on the payment undertaking/payment risk coverage.
Source: Bangladesh Bank, FEPD-1 Circular No. 26, 30 July 2026, Part D, paragraph 1 (page 22). The original circular is the authority.
A safety net is not free. Someone charges a fee for the promise, and early money costs interest. D-2 makes sure the exporter is not squeezed.
First, the AD's duty. ADs must satisfy themselves that exporters are appropriately financed.
Second, a cost ceiling. Two kinds of expense are counted together:
the guarantee commission for the payment undertaking or payment risk coverage; and
the interest and relevant charges for early payment against the export bills.
Together, they shall not exceed a mark-up of 3.00 percent over a benchmark rate, such as SOFR or Euribor, per year, on an all-in-cost basis. "All-in" means everything in that basket counts. Imagine, just for the arithmetic, a benchmark of 4.00 percent: the ceiling would then be 7.00 percent a year.
Third, what is left out. The ceiling does not include normal bank charges needed for the transaction.
Fourth, the FOB value. When the FOB export value is calculated, "such charges need to be adjusted". The circular doesn't spell out the method here.
Fifth, claims. If there are export claims, ADs may use their permissible authorisation on outward remittances to make those payments. D-2 doesn't list the details of that authorisation.
At the desk
A trade financier offers Evelyn early payment, but the guarantee commission plus the interest come to a mark-up of 3.50 percent over SOFR a year. Habib shakes his head: D-2 caps the all-in cost at a 3.00 percent mark-up over the benchmark, so the offer must be brought down. The normal bank charges for sending her documents are a separate matter and don't count inside that 3.00 percent.
Key words
All-in cost
The total cost of a financing deal, with interest, commissions and charges counted together.
SOFR
Secured Overnight Financing Rate: a US dollar benchmark interest rate.
Benchmark rate
A published reference interest rate, such as SOFR or Euribor, on which a lender adds its mark-up.
FOB
Free On Board: the seller clears the goods for export and gets them on board the ship at the named port; from then on the risk is the buyer's, and the buyer pays the sea freight.
Read the rule as written (Para D-2)
ADs shall satisfy themselves that exporters are appropriately financed. Expenses to exporters for guarantee commission against payment undertaking/payment risk coverage, and interest with relevant charges for early payment against export bills/receivables shall not exceed mark-up of 3.00 percent over benchmark rate, e.g., SOFR, Euribor etc. (all in cost) annually. These will, however, not include normal bank charges required for transactions. For calculation of FOB export value, such charges need to be adjusted. Additionally, ADs may, in case of export claims, exercise the permissible authorization on outward remittances for effecting the respective payments.
Source: Bangladesh Bank, FEPD-1 Circular No. 26, 30 July 2026, Part D, paragraph 2 (page 22). The original circular is the authority.
On open account, the exporter waits for her money, and waiting has a cost: the guarantee commission, the interest on early money, and the plain fact of being paid later.
D-3 says the export price declared in the EXP form must be competitive, taking into account the necessary costs for the period of the export under open account terms.
Think of selling mangoes at Karwan Bazar on credit to a shopkeeper you know. You would price them a little to cover the wait. But if you priced them far above the market, people would ask questions. D-3 asks for that same balance: the price should be in line with the market and should reflect the real costs of the credit period, not ignore them.
At the desk
Evelyn's buyer asks for 120 days on open account at the same price as her old LC deals. Shohag advises her as an owner: "Your price on the EXP form must stay competitive, but it should also account for the costs of waiting those 120 days. Don't let the credit period quietly eat your margin." Evelyn reworks her costing before signing.
Key words
Competitive price
A price in line with what the same goods sell for in the international market at that time.
EXP form
The export declaration form. Every export, unless exempt, must have one.
Read the rule as written (Para D-3)
Export price declared in EXP Form shall be competitive in consideration of necessary costs for underlying periods of export under open account credit terms.
Source: Bangladesh Bank, FEPD-1 Circular No. 26, 30 July 2026, Part D, paragraph 3 (page 22). The original circular is the authority.
Counterparty arrangements and membership requirements
In plain words
The safety net only works if the bank behind it is solid and reachable. D-4 is about the AD's own partners abroad.
ADs should have counterparty arrangements or relations for these deals with designated institutions of repute.
Those institutions should have acceptable credit ratings and operate under licences from central banks or competent authorities.
To build these relations, ADs may join globally recognised professional bodies that represent such services.
Fees for membership, affiliation or subscription to join such bodies may be remitted abroad, after deduction of applicable taxes.
In everyday terms: you don't hand your house keys to a stranger at the bus stop, however friendly he looks. You give them to someone known, licensed and trusted, and sometimes you join a club to meet such people.
At the desk
Habib's head office wants to build links with well-rated international factoring companies so it can offer open account deals to more garment exporters. It decides to join a globally recognised professional body for such services. When the yearly subscription comes due, the bank remits it abroad after deducting the applicable taxes, as D-4 allows.
Key words
Counterparty
The other party in a deal; here, the designated institution abroad with which the AD has an arrangement.
Credit rating
A grade showing how likely an institution is to pay what it owes. D-4 asks for designated institutions with acceptable credit ratings.
Read the rule as written (Para D-4)
ADs should have counterparty arrangements/relations for such transactions with designated institutions of repute with acceptable credit ratings operating under the licenses of central banks/competent authorities, for which they may join globally recognized professional bodies having representation for the services. Payments on account of membership/affiliation/ subscription required for joining such bodies are remittable abroad subject to deduction of applicable taxes.
Source: Bangladesh Bank, FEPD-1 Circular No. 26, 30 July 2026, Part D, paragraph 4 (page 22). The original circular is the authority.
So far: an AD may let an exporter ship on open account under a sales contract, as long as a designated institution abroad gives a payment undertaking or payment risk coverage that pays on a priority basis if the importer defaults, and any early payment is without recourse. The guarantee commission plus early-payment interest and charges are capped at a 3.00 percent mark-up over a benchmark such as SOFR or Euribor a year, all in, not counting normal bank charges. The EXP price must be competitive and reflect the costs of the credit period, and the AD should have counterparty arrangements with reputable, well-rated, licensed institutions.
Next: Lesson 14, Documents, deadlines and early money. How the transport documents are issued, the 14-day deadline, and how a bank can pay the exporter early from its own funds.
Check yourself
30 questions, in 3 sets of up to 10. Nobody sees your answers but you.
Set 1 of 3
D-1 lets ADs allow shipments on sales contracts under open account credit terms. (D-1)
D-1 counts the statutory period from the date of shipment. (D-1)
D-1(a) names international factoring companies, foreign banks, foreign financial institutions, trade financiers and insurance entities. (D-1)
D-1(a): the cover is arranged in association with importers and/or exporters. (D-1)
D-1(b): in case of default by importers, payment must be ensured on a priority basis under the underlying arrangements. (D-1)
D-1(c): early payment shall be arranged on a non-recourse basis. (D-1)
True. D-1(b) refers to physical/electronic presentation of export invoices, bills or documents. (D-1)
False. D-1(c) says the cover may contain an early payment option; it is optional. (D-1)
D-1(a): open account exports are executed against a payment undertaking or payment risk coverage by designated institutions. (D-1)
D-1(c): early payment is arranged on a non-recourse basis, so the exporter does not have to pay it back if the buyer defaults. (D-1)
Set 2 of 3
D-1 mentions the statutory period from the date of shipment, if otherwise not extended, without stating its length. (D-1)
D-2: ADs shall satisfy themselves that exporters are appropriately financed. (D-2)
D-2: these expenses shall not exceed a mark-up of 3.00 percent over a benchmark rate such as SOFR or Euribor, all in cost, annually. (D-2)
D-2 names SOFR and Euribor as examples of a benchmark rate. (D-2)
D-2: the ceiling does not include normal bank charges required for transactions. (D-2)
D-2: ADs may exercise the permissible authorisation on outward remittances for effecting export claim payments. (D-2)
False. D-2 says that, for calculation of the FOB export value, such charges need to be adjusted. (D-2)
D-2 caps guarantee commission plus early-payment interest and charges at a 3.00 percent mark-up over the benchmark a year, all in. (D-2)
D-2: the all-in ceiling does not include normal bank charges required for transactions. (D-2)
D-2: in case of export claims, ADs may exercise the permissible authorisation on outward remittances. (D-2)
Set 3 of 3
D-3: the export price declared in the EXP form shall be competitive. (D-3)
D-3: the price must be competitive in consideration of necessary costs for underlying periods of export under open account terms. (D-3)
False. D-3 asks for a competitive price that considers the necessary costs for the period of export under open account terms. (D-3)
D-3: the EXP price must be competitive in consideration of the necessary costs of the open account period. (D-3)
D-4: ADs should have arrangements with designated institutions of repute with acceptable credit ratings operating under licences of central banks or competent authorities. (D-4)
D-4: ADs may join globally recognised professional bodies having representation for the services. (D-4)
False. D-4 allows remittance subject to deduction of applicable taxes. (D-4)
D-4: counterparty arrangements should be with designated institutions of repute, with acceptable credit ratings, operating under licences of central banks or competent authorities. (D-4)
D-4: payments for membership, affiliation or subscription are remittable abroad subject to deduction of applicable taxes. (D-4)
D-1(a) names insurance entities among the designated institutions, alongside factoring companies, foreign banks, foreign financial institutions and trade financiers. (D-1)
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