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Lesson 35 of 42 · Part M · Level 2 · Explained

Counter-trade: settling imports and exports against each other

How Bangladeshi traders may settle what they buy abroad against what they sell abroad, through escrow accounts that banks keep for the deal: what goes in, what comes out, who earns a commission, and how it is reported.

M-3

In Lesson 34, Re-export, entrepot and merchanting trade, we watched goods pass through Bangladesh, or skip it entirely, on their way to a buyer abroad, while Eliana made sure the money followed the rules on each road.

Now Tamim is back. On Monday morning he walks into his bank with a cup of tea in one hand and a big idea in the other.

"A counterpart abroad wants to sell goods into Bangladesh," he tells Eliana at the export desk. "And the same people want to buy goods from Bangladesh. Why send dollars out on Monday and wait for dollars to come in on Friday? Can't we just let the two deals pay each other?"

Eliana smiles. "Like two friends who stop sending each other mobile money every week and just settle the difference? The circular has a paragraph for exactly this. It's called counter-trade."

That afternoon the bank has a guest at its training session: Rozy, a development economist at a policy research institute. Eliana asks her why anyone bothers with such an arrangement. Rozy draws two arrows on the whiteboard, one going out and one coming in. "Every country watches what it buys from the world and what it sells to it. When you can tie the two together, the money you earn pays for what you buy. That is the whole idea of counter-trade. Now let's see how the rules make it safe," she says, and hands Eliana the marker.

This lesson closes Part M with a different trick: matching an import payment against an export payment.

Para M-3

Settlement of import and export transactions through counter-trade arrangements

In plain words

Who may do it. Bangladeshi exporters, importers and traders may, by their own choice, agree with counterparts abroad to settle import payments into Bangladesh against the proceeds of goods exported from Bangladesh. Nobody is forced to; it is voluntary. The Word Book's general entry describes counter-trade as paying for goods with other goods; in M-3, the arrangement settles import payments into Bangladesh against export proceeds, through escrow accounts.

The account in the middle. Banks may open and keep escrow accounts in the relevant approved currency, with intimation to Bangladesh Bank (that is, informing it). The account may be in the foreign counterpart's name, or held jointly with the Bangladeshi party. How it works (paragraph 3(1)):

  1. Money in: import payments in approved foreign currencies, received from importers through the local banking channel, with documents to support them.
  2. Money out: export payments to exporters through the local banking channel, with documents, net of permissible commission or service charges.
  3. The middleman's fee: the agreed commission or service charge, after applicable taxes are deducted, is paid to the Bangladeshi party in equivalent Taka from the escrow account.

Other rules:

  • No interest or profit is paid on escrow balances. Unencumbered balances may be moved, on the account holder's instruction, to other escrow accounts in Bangladesh, to help pay for exports under counter-trade.
  • If the parties' agreement says so, the escrow account may be kept in Taka. It is then credited with import payments received in Taka from importers' banks, used for local payments under 3(1)(b) and 3(1)(c), and still earns no interest.
  • Bangladeshi parties must follow up with their counterparts so the escrow position is balanced at periodic intervals. The circular doesn't say how long an interval is.
  • With Bangladesh Bank's approval, Bangladeshi parties may open escrow accounts in the counterpart's country.
  • All imports and exports must meet the relevant regulatory rules and be competitively priced. ADs report the import side under the IMP form procedures, marked 'Counter-trade', with matching formalities. The export side follows the usual EXP formalities, and the realisation of proceeds is also reported marked 'Counter-trade'.
  • ADs must be satisfied the deals are bona fide, follow KYC and AML/CFT standards, and report to Bangladesh Bank on the related Online Systems and statements.
  • None of this applies to transactions through the ACU mechanism.
At the desk

Tamim's counterpart abroad signs a counter-trade agreement with him. Eliana's bank opens an escrow account in US dollars jointly in the counterpart's and Tamim's names, and informs Bangladesh Bank. A local importer pays USD 50,000 for goods from the counterpart through its bank, with the invoice and shipping papers; the money is credited to the escrow account, and the IMP reporting is marked 'Counter-trade'. When a Bangladeshi exporter ships to the counterpart, Eliana pays the export value from the escrow account, net of the agreed commission, and Tamim's commission, after tax, reaches him in Taka.

Key words
Escrow account
An account a bank keeps for a counter-trade deal, in an approved currency or in Taka, into which import payments go and from which export payments come out. It earns no interest or profit.
Unencumbered fund
Money in an account that is not already tied to, or set aside for, a payment.
Bona fide
Genuine; made in good faith.
KYC
Know Your Customer: checking who the customer really is.
Read the rule as written (Para M-3)

(1) Bangladeshi parties (exporters/importers/traders) may voluntarily enter into counter-trade arrangements with counterparts abroad for settlement of import payments into Bangladesh against proceeds of goods exported from Bangladesh. Banks may open and maintain Escrow accounts in relevant approved currency, with intimation to Bangladesh Bank, in the name of foreign counterparts or jointly with Bangladeshi parties, to execute the settlement of payments. Operational procedures for settlement of payments under counter-trade arrangements are as follows:

(a) Credits to Escrow accounts can be made out of import payments in approved foreign currencies received from importers through local banking channel supported by documentary evidences.

(b) The accounts can be debited for export payments, net of permissible commission/ service charges, supported by documentary evidences to exporters through local banking channel.

(c) Agreed commission/service charges, on deduction of applicable taxes, will be payable to Bangladeshi parties in equivalent Taka from the Escrow accounts.

(2) No interest/profit will be payable on balances held in Escrow accounts but unencumbered balances can be transferred, at the instructions of account holders, to other Escrow accounts in Bangladesh for facilitating payments against exports under counter-trade arrangements.

(3) In case of underlying agreement between parties, Escrow accounts as per authorization in paragraph 3(1) of this part may be opened and maintained in Bangladeshi Taka. In this case, import payments can be credited to the accounts against import payments received in Taka from importers' banks. The balances held in Taka accounts can be used for settlement of local disbursement as per paragraphs 3(1)(b) and 3(1)(c) of this part. As usual, the accounts will bear no interest/profit.

(4) Bangladeshi parties shall follow up with their counterparts so that the position in Escrow accounts can be balanced within periodical intervals.

(5) Subject to approval from Bangladesh Bank, Bangladeshi parties can open and maintain Escrow accounts in the countries of their counterparts for settlement of trade transactions under counter-trade arrangements.

(6) All imports and exports are subject to relevant regulatory compliance and shall be competitive in price. ADs executing transactions on behalf of importers and making payments to Escrow accounts as per above instructions shall report the same to Bangladesh Bank in IMP Form procedures with suitable mark as 'Counter-trade' along with matching formalities. Usual EXP formalities need to be observed for export transactions including reporting of proceeds realization with suitable mark as 'Counter-trade'.

(7) ADs shall be satisfied with the bonafides of the underlying transactions and shall comply with KYC and AML/CFT standards, including reporting routines to Bangladesh Bank on related Online Systems and relevant schedule of statements.

(8) The above instructions, however, shall not be applicable for transactions through the ACU mechanism.

Source: Bangladesh Bank, FEPD-1 Circular No. 26, 30 July 2026, Part M, paragraph 3 (page 49). The original circular is the authority.

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Putting it together

So far: Bangladeshi traders may, by choice, settle import payments into Bangladesh against export proceeds through escrow accounts that banks open with intimation to Bangladesh Bank. Import money goes in, export money comes out net of commission, the Bangladeshi party's commission is paid in Taka after tax, and the balances earn no interest. ADs mark the IMP and EXP reporting 'Counter-trade', check the deals are genuine under KYC and AML/CFT, and keep the ACU mechanism outside these rules.

Next: Part M of the export room is complete. Part N, on the export of currency notes and coins, foreign exchange, gold, silver, jewellery and securities, starts in Lesson 36, Taking foreign exchange, Taka and securities out of Bangladesh.

Check yourself

30 questions, in 3 sets of up to 10. Nobody sees your answers but you.

Set 1 of 3

1. Under M-3, what does a counter-trade arrangement settle?
2. Who may enter into counter-trade arrangements under M-3?
3. Under M-3(1), what must go with a bank opening an escrow account in an approved currency for a counter-trade deal?
4. In whose name may a bank open an escrow account in Bangladesh for counter-trade?
5. Which of these may be credited to an escrow account in an approved foreign currency?
6. How are export payments made out of the escrow account?
7. In what form is the agreed commission paid to the Bangladeshi party?
8. How much interest or profit does an escrow account under M-3 earn?
9. Where may unencumbered escrow balances be transferred?
10. Who gives the instruction to transfer unencumbered balances to another escrow account?

Set 2 of 3

11. When may an escrow account for counter-trade be kept in Taka?
12. What is credited to a Taka escrow account?
13. What does M-3 ask Bangladeshi parties to do about the escrow position?
14. What do Bangladeshi parties need before opening an escrow account in their counterpart's country?
15. How must an AD mark the import-side reporting when it pays into an escrow account?
16. Which transactions are outside the M-3 counter-trade rules?
17. True or false: under M-3, Bangladeshi traders are required to settle all their trade with a counterpart through counter-trade.
18. True or false: goods imported and exported under counter-trade must still be competitive in price.
19. True or false: a Taka escrow account under M-3(3) pays interest because it is kept in local currency.
20. True or false: under counter-trade, the export side does not need the usual EXP formalities.

Set 3 of 3

21. True or false: ADs handling counter-trade must comply with KYC and AML/CFT standards.
22. Tamim asks Eliana to open a US dollar escrow account in the name of his foreign counterpart for a counter-trade deal. What must the bank do about Bangladesh Bank?
23. A local importer wants to pay USD 30,000 into the escrow account by handing Eliana cash, with no invoice or shipping papers. What should Eliana do?
24. An exporter ships USD 40,000 of goods to Tamim's counterpart, and the agreed permissible commission is USD 800. How much does Eliana pay the exporter from the escrow account?
25. Tamim's agreed commission on a deal is due from the escrow account. How does Eliana pay it?
26. The escrow account holds USD 15,000 not tied to any payment. The account holders ask Eliana to move it to another escrow account in Bangladesh used for counter-trade export payments. What is the right response?
27. Tamim notices that his escrow account has received far more import money than it has paid out to exporters for many months. What does M-3 expect from him?
28. Tamim wants to open his own escrow account in his counterpart's country to settle counter-trade deals. What does he need?
29. A trade is proposed that would be settled through the ACU mechanism. Tamim asks whether the M-3 escrow rules apply. What does Eliana say?
30. Eliana notices that the goods Tamim's counterpart is selling into Bangladesh under counter-trade are priced far above the market, and the paperwork does not add up. What should she do?
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