Open Trade Bangladesh
Home / Import room / Part B
Lesson 12 of 39 · Part B · Level 2 · Explained

Paying in advance

When a supplier wants money before shipping, the bank can pay in advance on its own, if the contract asks for it and a refund promise backs it. The USD 20,000 exception, other payers, and what happens if the goods never come.

B-12

In Lesson 11, When can the bank pay?, Rakib learned when the bank may pay for goods that have already been shipped, and when it must ask Bangladesh Bank first. Today the goods haven't even left the factory.

Tahmid walks in with a big smile and a small worry. He has found a machinery supplier abroad, a company he has never dealt with before. The price is good, but the supplier wants part of the money before it ships. "They say it's normal for new customers," Tahmid says. "But what if they take my money and disappear?"

Rakib looks at Sadia. Sadia nods. "That is exactly the worry this rule was written for. Paying in advance is allowed. The trick is making sure the money can come back if the goods don't."

This lesson is all about one long paragraph: how a bank pays in advance, and how it keeps that money safe.

Para B-12

Advance remittance against imports

In plain words

Paying a tailor in full before he cuts the cloth? Easy for him, risky for you. That is an advance payment.

The AD may send an advance for permissible imports of goods and services without prior approval of Bangladesh Bank. The importer applies with a signed undertaking in the format of Appendix-4, and these conditions apply:

  • (a) The contract asks for it. The purchase contract must specifically require advance payment.
  • (b) A refund promise. The supplier gives a repayment guarantee from a bank abroad, acceptable to the AD. If the supplier fails to deliver as per the contract, the advance comes back.

For advances up to USD 20,000, the AD need not insist on the guarantee, if it follows five instructions:

  1. No Bill of Entry or customs certified invoice of the importer is pending beyond four months (or an extension Bangladesh Bank allowed) on any earlier import payment.
  2. The AD is satisfied that a repayment guarantee is not obtainable from the supplier.
  3. If the goods don't enter the country in the stipulated time, the AD, at its own responsibility, brings the money back.
  4. The IPO in force is followed meticulously.
  5. Before paying, the AD gets the Form of Undertaking (Appendix-4), filled in and signed.
  • (c) Others may pay. External financiers and/or the offshore banking operations of scheduled banks may pay advances directly. They need a repayment guarantee from a bank abroad, acceptable to the AD, whatever the amount, and the circular's other relevant instructions apply. The AD does extended due diligence (KYC, AML/CFT) and checks the guarantee can be enforced.
  • (d) No guarantee on offer. If the supplier is unwilling or unable to give the guarantee referred to in 12(b)(ii), the AD may send the request, with its recommendation, to Foreign Exchange Policy Department-1 of Bangladesh Bank, which decides each case on its merit.
  • (e) Goods don't come. The AD reports to Bangladesh Bank when they don't arrive in due time.
  • (f) Keep the file. Besides usual reporting, the AD keeps the undertaking, the repayment guarantee and a credit report on the guarantor bank, ready for Bangladesh Bank Head Office to inspect, with the probable date of import.

ERQ accounts have their own door: an advance from an ERQ account may follow paragraph 2(4) of Part-O of FEPD-1 Circular No. 26 (30 July 2026).

At the desk

Tahmid's new supplier asks for a USD 15,000 advance, and the signed contract clearly requires it. The supplier's bank won't issue a repayment guarantee. Rakib checks that Tahmid has no Bill of Entry overdue beyond four months on earlier payments and that the IPO allows the machine, then has Tahmid fill in and sign the Appendix-4 undertaking. Sadia adds one more note to the file: "If the machine doesn't arrive in time, getting this money back is our job, not just Tahmid's."

Key words
Advance payment
The buyer pays before the goods are shipped.
Repayment guarantee
A promise from the supplier's bank abroad to refund an advance if the supplier fails to deliver as per the contract.
Form of Undertaking (Appendix-4)
The form the importer fills in and signs before the bank sends an advance payment for an import.
ERQ
Exporters' Retention Quota: the share of export earnings an exporter may keep in foreign currency, in an ERQ account.
Read the rule as written (Para B-12)

Advance remittance for permissible imports of goods and services into Bangladesh may be effected by ADs without prior approval of Bangladesh Bank, against applications from the importers submitted with signed undertaking in the format of Appendix-4 provided that:

(a) the purchase contract with supplier specifically requires advance payment;

(b) the supplier furnishes repayment guarantee acceptable to ADs from a bank abroad, to be invoked for refund of the amount paid in advance in the event of the supplier's default in delivering the goods or services as per contract. Such guarantee need not however be insisted upon in cases of advance payments up to USD 20,000 for import all permissible imports subject to compliance of the following instructions:

(i) ADs shall have to be ensured that the applicant-importers do not have bill of entry/customs certified invoice pending for submission beyond the stipulated period of four months (or such extension as permitted by Bangladesh Bank) against any earlier remittance for imports;

(ii) ADs shall have to be satisfied that repayment guarantee is not obtainable from the suppliers against the remittances to be made in advance;

(iii) ADs shall, at their own responsibility, have to arrange for repatriation of the remittances made in advance in case the entry of goods into the country is not effected within the stipulated time;

(iv) The IPO in force shall have to be meticulously followed;

(v) Before effecting the advance payment, ADs shall obtain Form of Undertaking (Appendix-4) duly filled in and signed by the importer.

(c) Advance payments against permissible imports may also be executed directly by external financiers and/or offshore banking operations of scheduled banks, subject to repayment guarantees irrespective of amount acceptable to ADs received from banks abroad and compliance of other relevant instructions contained herein. In this context, ADs shall observe extended due diligence with regard to the transactions including KYC and AML/CFT standards. ADs shall also satisfy themselves regarding the enforceability of repayment guarantees.

(d) Requests for advance remittance where the suppliers are unwilling or unable to furnish the repayment bank guarantee referred to in paragraph 12(b)(ii) above may be forwarded by ADs, along with their recommendations, for the specific decision of the Foreign Exchange Policy Department-1, Bangladesh Bank on the merit of each case.

(e) ADs shall report to Bangladesh Bank the cases where the goods/services against advance payments are not received in Bangladesh within due time.

(f) In addition to usual reporting to Bangladesh Bank, ADs shall preserve (i) undertaking (as per Appendix-4) (ii) repayment bank guarantee provided by bank abroad (iii) credit report of the guarantee providing bank abroad for the inspection as and when required by Bangladesh Bank, Head Office mentioning the probable date of import of goods/services. However, advance payment for import from ERQ account may be done as per paragraph 2(4) of Part-O of FEPD-1 Circular No. 26, dated July 30, 2026.

Source: Bangladesh Bank, FEPD-1 Circular No. 30, 13 August 2026, Part B, paragraph 12 (page 14). The original circular is the authority.

Ask about this paragraphReport a mistake
Putting it together

So far: an AD may pay in advance for permissible imports of goods and services without Bangladesh Bank's prior approval, if the contract requires it, the importer signs the Appendix-4 undertaking and a bank abroad gives a repayment guarantee. Up to USD 20,000 the guarantee can be skipped, but only under five strict instructions, and the AD itself must bring the money back if the goods don't come. External financiers and offshore banking operations need a guarantee whatever the amount; cases with no guarantee can go to FEPD-1 for a decision, and the AD reports late arrivals and keeps the file ready for inspection.

Next: Lesson 13, The IMP form and the Bill of Entry clock. Once the money has gone, how does the bank prove the goods really arrived?

Check yourself

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

Set 1 of 3

1. Does an AD need Bangladesh Bank's prior approval to send an advance payment for a permissible import that meets the B-12 conditions?
2. Under B-12, advance remittance may be made for which imports?
3. What must the purchase contract say for an advance payment under item (a)?
4. Under item (b), who issues the repayment guarantee?
5. When is the repayment guarantee invoked?
6. Up to what amount need the AD not insist on a repayment guarantee, subject to the five instructions?
7. Under instruction (i), the importer must not have a Bill of Entry or customs certified invoice pending beyond what period on earlier import payments?
8. In a no-guarantee advance, who must arrange to bring the money back if the goods don't enter the country within the stipulated time?
9. Which government rule book must be meticulously followed under instruction (iv)?
10. Under item (c), who else may pay advances for permissible imports directly?

Set 2 of 3

11. Under item (c), for which amounts is a repayment guarantee from a bank abroad needed?
12. Under item (c), what level of checking must the AD apply?
13. Under item (d), where does the AD send a request when the supplier won't or can't give the repayment guarantee?
14. Which of these is NOT one of the five instructions for an advance of up to USD 20,000 without a guarantee?
15. Under item (f), the advance payment file is kept ready for inspection by whom?
16. True or false: under item (c), ADs must satisfy themselves that the repayment guarantees can be enforced.
17. True or false: for an advance of up to USD 20,000 without a guarantee, the importer doesn't need to sign the Appendix-4 undertaking.
18. True or false: when preserving the advance payment papers for Bangladesh Bank's inspection, the AD mentions the probable date of import of the goods or services.
19. True or false: ADs must report to Bangladesh Bank the cases where goods or services paid for in advance are not received in Bangladesh within due time.
20. True or false: when a supplier can't give a repayment guarantee, the AD may approve an advance of any amount on its own.

Set 3 of 3

21. Tahmid's supplier wants USD 15,000 in advance, but the signed contract says payment will be by LC and says nothing about an advance. Can Rakib send the advance under B-12?
22. Tahmid wants a USD 15,000 advance without a guarantee. Rakib finds that an earlier import payment for Tahmid still has its Bill of Entry pending for six months, with no extension from Bangladesh Bank. What follows?
23. All conditions are fine for Tahmid's USD 18,000 no-guarantee advance. What must Rakib obtain before he sends the money?
24. Tahmid needs to pay a USD 45,000 advance. The contract requires it, and the supplier offers a repayment guarantee from a bank abroad that the AD accepts. The import is permissible. What can the AD do?
25. Another of Tahmid's suppliers wants a USD 45,000 advance but refuses to give any repayment guarantee. What can Sadia do?
26. A USD 12,000 advance was sent without a guarantee, but the goods have not entered the country within the stipulated time. What must the bank do?
27. Tahmid says, 'My supplier could give a guarantee, but it's a hassle, so let's skip it. The amount is only USD 10,000.' What should Rakib say?
28. The offshore banking operation of a scheduled bank wants to pay a USD 10,000 advance directly for Tahmid, with no guarantee, 'because it's under USD 20,000'. Is that right?
29. Rakib is filing papers for a guaranteed advance. He has Tahmid's Appendix-4 undertaking and the repayment guarantee from the bank abroad. What else must he keep for Bangladesh Bank's inspection?
30. A customer who also exports spare parts holds an ERQ account. He wants to pay an import advance from it. Which rule does B-12 point to?
Found this useful? Pass it on.

Brain feeling full? Take a tea break.