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Lesson 34 of 42 · Part M · Level 2 · Explained

Re-export, entrepot and merchanting trade

How banks handle the money side when a Bangladeshi trader buys goods abroad and sells them on: re-export and entrepot trade under the Ministry of Commerce rules, and merchanting trade, where goods go straight from one foreign country to another and every payment runs through one AD.

M-1M-2

In Lesson 33, Tracking payments, bank-to-bank transfers and digital help, we saw banks spot incoming dollars during the day, reconcile their nostro accounts with 60 minutes as the general benchmark, and follow every payment with its UETR right up to the final account.

Now meet Tamim. He runs a small trading house in Motijheel, Dhaka. Tamim does not own a factory. He is a matchmaker for goods: he buys from a supplier in one country and sells to a buyer in another. This morning he walks into Eliana's export desk with two deals and one big question.

"Deal one: I bring a shipment into Chattogram and send it out again to a new buyer. Deal two: a supplier in East Asia ships straight to my buyer in the Middle East. The goods never touch Bangladesh at all. How does my bank handle the money for each?"

Eliana smiles. She has a guest that day: Iyan, former head of operations at a shipping line and freight forwarder. Iyan has watched thousands of containers move around the world. "Goods can take many roads," he says. "Some stop here and leave again. Some sail straight past us. Part M tells the bank how the money should follow each road." This lesson covers M-1 and M-2, the first two paragraphs of Part M.

Para M-1

Re-export and entre-pot trade

In plain words

Think of Tamim's first deal. The goods come into Bangladesh, and later they go out again to a buyer abroad. In everyday trade talk, that idea is re-export. Entrepot trade is a close cousin: a place works as a middle stop where goods come in and go out again. The circular itself does not define the two words. It leaves the trade rules to the Ministry of Commerce, whose guidelines come through the Import Policy Order and the Export Policy in force, published from time to time.

For the foreign exchange side, ADs follow three instructions:

(a) Follow the Ministry's rules. The AD must ensure compliance with the Ministry of Commerce's relevant instructions, including the prescribed minimum value addition requirement. The circular does not give the figure here; the Ministry prescribes it.

(b) Re-export.

  • The import value, including freight, is paid only from the repatriated export value.
  • The usual IMP procedure is followed for the import (including freight), and the usual EXP procedure for the export.

(c) Entrepot.

  • Again, the import value, including freight, is paid only from repatriated export value.
  • Reporting is different: a declaration in Form-C reports receipts of export value, and Form TM (Appendix-14) is used for making import payments (including freight).

The common thread is simple: the buyer's money comes home first, and that money pays the supplier. No other pot of money is used.

One small note: the circular spells the term both "entre-pot" and "entre-port". Note: Part L of the same circular (L-6, Lesson 33) says Form-C and Form-C (ICT) stand discontinued, and that until banks' secure digital interfaces are ready, the purpose and supporting information are collected through banks' existing digital channels. The original circular is always the final word.

At the desk

Tamim has a shipment of spare parts to bring into Chattogram and re-export to a buyer abroad. Eliana first checks that the deal meets the Ministry of Commerce's instructions, including the minimum value addition requirement. When the buyer's payment is repatriated, she uses it to pay the supplier's bill and the freight, with an IMP form for the import and an EXP form for the export. Iyan nods: "Money in first, then money out. The ship can wait a day; the rule cannot."

Key words
Re-export
In everyday trade use, bringing goods into a country and sending them out again to a buyer abroad. M-1 says it follows the Ministry of Commerce guidelines in the Import Policy Order and Export Policy.
Entrepot trade
In everyday trade use, trade through a middle stop where goods come in and go out again. M-1 says import value, including freight, is paid only from repatriated export value, reported on Form-C and Form TM.
Form TM
The form (Appendix-14) that M-1 and M-2 name for reporting import payments in entrepot trade and on the import-leg of merchanting trade.
Value addition requirement
The limit, set by the Ministry of Commerce, on how much of an export's FOB value the imported inputs may take up, stated as a percentage.
Read the rule as written (Para M-1)

Re-export and entre-pot trade by exporters of Bangladesh are subject to the guidelines of the Ministry of Commerce disseminated through Import Policy Order and Export Policy in force published from time to time. However, ADs will abide by the following instructions in conducting foreign exchange transactions in such cases:

(a) Compliance with relevant instructions of Ministry of Commerce including prescribed minimum value addition requirement is to be ensured;

(b) In case of re-export, import value (including freight) will be met from repatriated export value only. Besides, usual IMP and EXP procedures will have to be followed in import (including freight) and export of goods respectively; and

(c) In case of entre-port, import value (including freight) will be met from repatriated export value only. Declaration in 'Form-C', and 'Form TM' (Appendix-14) shall be used for reporting receipts of export value and making import payments (including freight) respectively.

Source: Bangladesh Bank, FEPD-1 Circular No. 26, 30 July 2026, Part M, paragraph 1 (page 48). The original circular is the authority.

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Para M-2

Foreign exchange transactions for merchanting trade

In plain words

Tamim's second deal is merchanting trade. Under the Export Policy in force, it is a trade where goods or services bought from one country are shipped or delivered directly to a third country. Iyan calls it "trade by remote control": the goods sail from East Asia to the Middle East, and Bangladesh only sees the money. There are two halves: the export-leg (Tamim sells to his buyer) and the import-leg (Tamim pays his supplier).

(1) The operating rules.

(a) Normal export rules apply to the export-leg and normal import rules to the import-leg, except the EXP and IMP forms, which are not needed. Reporting is on Form-C (export-leg) and Form TM (import-leg).

(b) The AD checks the deal is bona fide, following KYC and AML/CFT guidelines. The counterparties must be from FATF compliant countries.

(c) The whole trade goes through the same AD. That AD verifies the documents and the genuineness of the trade and, if needed, checks transport documents online through an acceptable tracking system.

(d) If Tamim receives a transferable LC, it may be transferred to the suppliers under the UCP in force, and the supplier is paid as the UCP procedure lays down.

(e) If a fresh LC is opened from Bangladesh to the supplier, the import payment comes out of export-leg receipts. Tamim may pay earlier using short-term buyers' credit from external sources, and assign his export receivables to that lender. But the AD must give no payment undertaking, commitment or acceptance for such credit.

(f) Export-leg receipts (after taking the mark-up, which may go to a retention quota account at Tamim's option) wait in a foreign currency margin account until the import-leg and its charges are paid. Discounted proceeds received before maturity can wait there too.

(2) Agency commission or service charge may be paid from that margin account, as long as it does not leave the supplier short. Applicable taxes are deducted.

(3) The AD must be satisfied about the trader's overall capability to do the trade.

(4) Import-leg payments come from export-leg receipts (other than buyers' credit under 2(1)(e)). ADs must never pay from their own sources. The gap between money in and money out, after all charges, should reasonably cover local expenses and profit. Taxes apply.

(5) Traders get a retention quota on realised proceeds, net of outward remittances, at the rate for service exports in paragraph 1, Part-O.

(6) Reporting to Bangladesh Bank is on a gross basis, with the purpose 'merchanting services' at both legs. Note: Part L of the same circular (L-6, Lesson 33) says Form-C and Form-C (ICT) stand discontinued, and that until banks' secure digital interfaces are ready, the purpose and supporting information are collected through banks' existing digital channels. The original circular is always the final word.

At the desk

Tamim's buyer in the Middle East pays USD 50,000 under an LC; his supplier in East Asia is owed USD 46,000 plus charges. Eliana's branch handles both legs, checks that both counterparties are from FATF compliant countries, and verifies the bill of lading online through an acceptable tracking system. After Tamim's mark-up is taken, the rest waits in a foreign currency margin account until the supplier and charges are paid, and Eliana reports both legs gross as 'merchanting services'. Iyan smiles: "The container never saw Chattogram, but the paper trail is perfect."

Key words
Merchanting trade
Under M-2, a trade in which goods or services bought from one country are shipped or delivered directly to a third country.
Export-leg and import-leg
The two halves of a merchanting trade: the export-leg is the sale to the buyer abroad, and the import-leg is the purchase from the supplier abroad.
FATF
Financial Action Task Force: the international body that sets standards against money laundering and terrorist financing.
Transferable LC
An LC marked "transferable" that the first beneficiary can ask a bank to pass, in whole or in part, to a second beneficiary. It can be transferred only once.
Read the rule as written (Para M-2)

(1) In accordance with Export Policy in force, a trade in which goods/services procured from a country are shipped/delivered directly to a third country is defined as merchanting trade. To facilitate transactional services by ADs to their merchanting traders-customers, a set of operational guidelines has been formulated as outlined below:

(a) Regulatory instructions applicable to exports (except EXP Form) and imports (except IMP Form) shall be complied with for export-leg and import-leg respectively, with reporting routine on Form-C (at export-leg) and Form TM (at import-leg). Requirement of EXP Form and IMP Form respectively for export and import of goods will not be applicable.

(b) ADs shall satisfy themselves with the bonafides of the transactions, including adherence to KYC and AML/CFT guidelines while handling such transactions. The counterparties to merchanting trades shall be from FATF compliant countries.

(c) The entire merchanting trade is to be routed through the same AD. The designated AD shall verify the documents and satisfy themselves about the genuineness of the trade. The designated AD should, if necessary, make online verification of transport documents (in case of goods) through acceptable tracking system.

(d) In case of the receipt of transferable LCs to execute merchanting trade, the same may be transferred favoring suppliers of relevant countries in terms of relevant provisions of UCP in force for procurement of goods/services to be sold to respective customers of third countries. The payment for the procurement will be settled in observance of the procedure laid down in UCP.

(e) In case fresh LCs from Bangladesh to suppliers abroad for import-leg are issued, import payments need to be settled out of receipts from export-leg. Import settlement, however, may be arranged by traders before receipts of payments from export-leg under short term buyers' credit from external sources. Traders can assign the receivables from export-leg for the credits. ADs shall not issue any forms of payment undertaking/commitments/ acceptance for the credits.

(f) Receipts from export-leg, on encashment of mark-up including deposit to retention quota accounts at traders' option, shall be retained in margin accounts maintained in foreign exchange till the settlement of payments under import-leg including charges. Discounted proceeds, if any realized before maturity, can also be retained in the said margin accounts.

(2) Agency commission/service charge is allowed from the receipts of export-leg retained in margin accounts provided that the payment does not result the transactions ending in shortfall of settlement of payments to suppliers abroad. The agency commission is subject to deduction and payment of applicable taxes.

(3) ADs shall satisfy themselves about merchanting traders of goods and services regarding their overall capabilities to perform the said trade.

(4) ADs shall satisfy themselves to the effect that payments for import-leg are to be met out of receipts from export-leg other than buyers' credit as per paragraph 2(1)(e) of this part. ADs shall, in no way, execute payments from their own sources. The difference between inward receipts and outward payments including relevant all charges shall be reasonably satisfactory for meeting local expenses and profits. ADs shall comply with regulations regarding deductions of applicable taxes for the transactions.

(5) Merchanting traders will be entitled to have retention quota facility on realized proceeds, net of outward remittances, in accordance with rate applicable for service exports as per paragraph 1, Part-O of this circular.

(6) Reporting for merchanting trade transactions to Bangladesh Bank shall be done on gross basis with purpose as 'merchanting services' at both legs.

Source: Bangladesh Bank, FEPD-1 Circular No. 26, 30 July 2026, Part M, paragraph 2 (page 48). The original circular is the authority.

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Putting it together

So far: Re-export and entrepot trade follow the Ministry of Commerce's Import Policy Order and Export Policy, including the minimum value addition requirement, and in both the import value, including freight, is paid only from repatriated export value; re-export uses the usual IMP and EXP procedures, while entrepot uses Form-C and Form TM (Appendix-14). In merchanting trade, goods go straight from one foreign country to a third country; the whole deal runs through one AD, without EXP or IMP forms, with Form-C and Form TM, FATF compliant counterparties, and the import-leg paid from export-leg receipts (or short-term buyers' credit with no AD undertaking), never from the AD's own sources. Receipts wait in a foreign currency margin account, traders get a retention quota at the service-export rate in Part-O, and reporting is gross as 'merchanting services' at both legs.

Next: Lesson 35, Counter-trade: settling imports and exports against each other.

Check yourself

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

Set 1 of 3

1. Under M-1, whose guidelines govern re-export and entrepot trade by exporters of Bangladesh?
2. In a re-export, from what money must the import value (including freight) be paid?
3. Which forms does M-1(c) name for entrepot trade?
4. Which Ministry of Commerce requirement does M-1(a) specially name for ADs to ensure?
5. True or false: In a re-export, the usual IMP procedure applies to the import and the usual EXP procedure applies to the export.
6. True or false: In entrepot trade, freight is left out of the import value that must be met from repatriated export value.
7. Desk case: Tamim asks Eliana to pay his supplier for a re-export shipment today, before his buyer abroad has paid, using the bank's own dollars. What should Eliana say?
8. Desk case: An entrepot deal is ready to pay the supplier, including freight. Which form does Eliana use for the import payment?
9. Desk case: Tamim's re-export deal looks profitable, but the Ministry of Commerce's prescribed minimum value addition is not met. What is the right view under M-1?
10. How does M-2 (under the Export Policy in force) define merchanting trade?

Set 2 of 3

11. Which forms are NOT needed for merchanting trade under M-2(1)(a)?
12. On which form is the export-leg of a merchanting trade reported?
13. Under M-2(1)(b), where must the counterparties to a merchanting trade be from?
14. How many ADs may handle one merchanting trade under M-2(1)(c)?
15. Under M-2(1)(e), what must the AD NOT do when a trader uses short-term buyers' credit from external sources?
16. Where are export-leg receipts kept until the import-leg payments and charges are settled?
17. When may agency commission or a service charge be paid from the margin account under M-2(2)?
18. At what rate do merchanting traders get retention quota under M-2(5)?
19. How must merchanting trade transactions be reported to Bangladesh Bank under M-2(6)?
20. True or false: Under M-2(4), an AD may pay a merchanting trader's supplier from the bank's own sources if the buyer's money is late.

Set 3 of 3

21. True or false: A merchanting trader may assign the receivables from the export-leg to the external lender of short-term buyers' credit.
22. True or false: In merchanting trade, an EXP form is needed for the export-leg because goods are being sold abroad.
23. Desk case: Tamim wants to handle his buyer's LC at Eliana's bank but pay his supplier through another bank where the fees are lower. What does M-2 say?
24. Desk case: Tamim's buyer sends a transferable LC. Tamim wants it passed to his supplier in East Asia. How can Eliana handle it?
25. Desk case: In a merchanting deal, Tamim's supplier is in a country that is not FATF compliant. What should Eliana do?
26. Desk case: Eliana is unsure whether the goods in Tamim's merchanting deal were really shipped. What does M-2 let her do?
27. Desk case: Tamim's buyer pays USD 50,000 and his supplier is owed USD 46,000 plus charges. Tamim asks to send USD 4,500 as agency commission now, which would leave only USD 45,500, too little to pay the supplier and charges. What should Eliana say?
28. Desk case: Tamim's buyer pays USD 50,000 and his supplier costs USD 49,950 including all charges, leaving USD 50. Why might Eliana look more closely?
29. Desk case: Before opening a fresh LC for Tamim's import-leg, Eliana's manager asks what she must be satisfied about regarding Tamim himself. What does M-2(3) say?
30. Desk case: Tamim's export-leg bill is discounted, and the proceeds are realised before maturity. Where can the discounted proceeds be kept until the supplier is paid?
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