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Lesson 16 of 39 · Part D · Level 2 · Explained

Buy now, pay later: supplier's credit

How long an importer may take to pay a foreign supplier: 270, 180 or 360 days depending on the goods, up to 3 years for capital machinery, why the cash conversion cycle matters, and the ceiling on usance interest.

D-1D-2

In Lesson 15, Importing on a contract, without an LC, Rakib learned that an importer can buy on a sales contract and pay later, as long as the usance stays within "the limit in paragraph 1 of Part D". He wrote that phrase in his notebook and drew a big question mark next to it.

The answer walks in on Sunday morning. Tahmid, who runs a packaging factory, is buying a new printing machine from a supplier he has never dealt with before. "Good news," he says. "The supplier will let me pay later. He even offered four years! And he'll charge only a little interest." Rakib turns to Sadia, his team lead. "Can he?"

Sadia smiles. "Four years is a long time for a loan, and 'a little interest' is how many loans begin. We have the right person in today." The bank's guest speaker that afternoon is Mithu, a chartered accountant and former CFO of a large export group. Mithu listens to Tahmid's story. "Buy now, pay later is lovely," Mithu says, "until the bill arrives. The circular decides how long you may wait and how much the waiting may cost. Let's look at both."

Para D-1

Import on supplier’s credit/deferred payment basis

In plain words

D-1 is the timetable for paying later. Subject to the other conditions in this Part and the IPO in force, imports are allowed on supplier's credit/deferred payment/usance basis in the cases below. The number is the longest the importer may take to pay.

Up to 270 days

  • Industrial raw materials for the own use of industrial importers, including back-to-back imports (covered in the next section of the circular): up to 270 days or the cash conversion cycle, whichever is earlier. "Earlier" means the shorter of the two. Before allowing usance, the AD must make sure the estimated cash conversion cycle is realistic, based on the customer's past operating and transaction trends. For a back-to-back LC, the usance follows the statutory export proceeds repatriation period; D-1 doesn't give that number here.
  • LPG: imported in bulk, then stored and bottled in cylinders, which takes time. So the circular treats LPG as an industrial raw material, eligible under supplier's or buyer's credit, for up to 270 days, in line with the rule above.
  • Agricultural implements and chemical fertilisers: the same terms, up to 270 days.
  • Unprocessed yarn, for own use by industrial importers whose output goes only to local delivery against back-to-back LCs: up to 270 days, within the factory's production capacity set by the Department of Textiles or the delivery value realised in foreign currency in the last twelve months, whichever is lower.

Up to 180 days

  • Life-saving drugs (certified/declared as such by the Drugs Administration Authority) and ophthalmic medical equipment, including intraocular lenses.
  • Raw materials for pre-fabricated steel structure industries, for these industries only.

Up to 360 days

  • Spares, in all cases.
  • Vessels bought for scrapping.
  • HR coil, scrap, pig iron and sponge iron for making flat and long steel, used in steel industries' own factories.
  • API and laboratory reagents, if the inputs are approved by the DGDA.
  • HFO/HSFO as raw material for the own use of power generating enterprises, imported by their nominated entities with specific approval from the Ministry of Power, Energy and Mineral Resources.
  • Empty LPG cylinders imported by industrial importers for own use.

Up to 3 years

  • Capital machinery and/or capital goods: ADs may allow industrial importers up to 3 years under supplier's/buyer's credit. This also applies to industrial enterprises in EPZs, private EPZs, economic zones, hi-tech parks and other specialised zones designated by the Government.

A handy habit: first find the right box for the goods, then check the conditions attached to it.

At the desk

Tahmid's printing machine is capital machinery for his own factory, so Rakib tells him the AD may allow usance of up to 3 years, not four. Tahmid also wants to bring in paper and ink on credit. Mithu looks at his books: he usually turns raw materials back into cash in about 120 days. Sadia explains that for raw materials the limit is 270 days or the cash conversion cycle, whichever is earlier, so a realistic 120 days is the ceiling for him.

Key words
Supplier's credit
The foreign supplier lets the importer pay later, for example on usance or DA terms.
Usance
A credit period: the buyer pays a set number of days later, for example 90 days from sight or from the shipment date.
Cash conversion cycle
The number of days a business takes to turn the cash it spends on materials back into cash from its sales.
Back-to-back LC
An import LC opened on the strength of an export LC, common in garments.
Read the rule as written (Para D-1)

(1) Subject to compliance with other conditions laid down in this part and in the IPO in force, import is allowed on supplier’s credit/deferred payment/usance basis in the following cases:

(a) Industrial raw material imports for own use of industrial importers (including back to back imports discussed in detail in the next section) on up to 270 days usance basis or the cash conversion cycle, whichever is earlier. Before allowing usance facilities, ADs shall ensure that the estimated cash conversion cycle reflects a realistic position, based on the customer’s historical operating and transaction trends. In the case of back-to-back LC, the usance period shall be determined in line with the statutory export proceeds repatriation period;

Liquefied Petroleum Gas (LPG) is imported in bulk and subsequently bottled in cylinders for domestic use. As a result, local importers require time for storage, bottling and related operational processes. It is hereby clarified that LPG shall be treated as an industrial raw material eligible for import under supplier’s or buyer’s credit. Accordingly, imports of LPG may be allowed for usance terms of up to 270 days, in line with the above provisions.

(b) Imports of agricultural implements and chemical fertilizers shall also be eligible under the same usance terms of up to 270 days, in line with the above provisions;

(c) Import of spares on up to 360 days usance in all cases;

(d) Import of vessels to be procured for scrapping on up to 360 days usance basis;

(e) Import of life saving drugs (certified/declared as such by Drugs Administration Authority) and Ophthalmic Medical Equipment including Intraocular Lens on up to 180 days usance basis;

(f) HR Coil, scrap, pig iron & sponge iron used for manufacturing of flat steel and long steel under steel industries for being used in own factories on up to 360 days usance basis;

(g) Import of unprocessed yarn on up to 270 days for own use by industrial importers producing outputs for only local delivery against back to back LCs. This usance period is usable for imports within the limits of production capacity of the concerned factory as set by the Department of Textiles or up to delivery value realized in foreign currency in last twelve months, whichever is lower;

(h) Import of Active Pharmaceutical Ingredients (API) and Laboratory Reagents on up to 360 days, subject to imports of inputs duly approved by Directorate General of Drugs Administration Authority (DGDA);

(i) Import of Heavy Furnace Oil (HFO)/ High Sulphur Fuel Oil (HSFO) as raw materials for own use of Power Generating Enterprises by their nominated entities against specific approval from Ministry of Power, Energy and Mineral Resources on up to 360 days usance basis;

(j) Import of empty LPG cylinder by industrial importers for own use on up to 360 days usance basis;

(k) Import of raw material for Pre-fabricated Steel Structure industries for these industries only on up to 180 days usance basis.

(2) ADs may allow their industrial importers to import capital machinery and/or capital goods on usance term of up to 3 years under supplier’s/buyer’s credit. The usance tenure shall also be applicable to such imports by industrial enterprises operating in export processing zones/private export processing zones/economic zones/hi-tech parks and other areas designated as specialized zones by the Government.

Source: Bangladesh Bank, FEPD-1 Circular No. 30, 13 August 2026, Part D, paragraph 1 (page 19). The original circular is the authority.

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Para D-2

Interest rate

In plain words

Time is one half of the deal; cost is the other. D-2 sets two rules for these deferred payment imports.

  • The price must be internationally competitive. A supplier can't hide the cost of credit inside a fat price. The goods must cost about what they cost in the world market.
  • Usance interest has a ceiling. Interest, if any, may go up to an all-in-cost ceiling per year of the benchmark rate plus 3.00 percent. The benchmark is the one that applies to the currency of the deal for short-term trade finance in foreign exchange, for example SOFR or Euribor.

How does that look in numbers? Say, just as an example, the benchmark for US dollars is 4.00 percent a year. The ceiling is then 4.00 + 3.00 = 7.00 percent a year. A supplier asking for 9 percent is over the line.

Two small words matter here. "If any" means some suppliers charge no interest at all, which is fine. "All-in" means the whole cost of the credit is held to the ceiling, not only the line marked "interest". The circular doesn't list the items, so the AD looks at the total.

At the desk

Tahmid's new supplier quotes usance interest of the US dollar benchmark plus 4.50 percent a year. Mithu does the sum on the whiteboard: the ceiling is the benchmark plus 3.00 percent, so the quote is 1.50 percent too high. Sadia asks Tahmid to go back to the supplier, and Rakib also checks the machine's price against market quotes to make sure it is internationally competitive.

Key words
Competitive price
A price in line with what the same goods sell for in the international market at that time.
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.
All-in-cost ceiling
The most the whole cost of a credit may come to per year; under D-2, the benchmark rate plus 3.00 percent.
Read the rule as written (Para D-2)

For such deferred payment imports, the prices must be internationally competitive and usance interest, if any, may bear all-in-cost ceiling per annum at mark-up of 3.00 percent over benchmark rate, e.g., SOFR, Euribor, etc. applicable to the relevant currency for short term trade finance in foreign exchange.

Source: Bangladesh Bank, FEPD-1 Circular No. 30, 13 August 2026, Part D, paragraph 2 (page 20). The original circular is the authority.

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Putting it together

So far: D-1 sets how long importers may take to pay on supplier's credit. Industrial raw materials get up to 270 days or a realistic cash conversion cycle, whichever is earlier, and LPG, agricultural implements, fertilisers and some unprocessed yarn also get up to 270 days. Life-saving drugs, ophthalmic equipment and pre-fabricated steel raw materials get up to 180 days; spares, scrap vessels, steel inputs, API and reagents, HFO/HSFO and empty LPG cylinders get up to 360 days; capital machinery gets up to 3 years. D-2 adds that prices must be internationally competitive and usance interest, if any, stays within the benchmark rate plus 3.00 percent a year.

Next: Lesson 17, Buyer's credit and longer terms. What happens when a foreign lender, not the supplier, pays now and the importer repays later.

Check yourself

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

Set 1 of 3

1. What is the longest usance for industrial raw materials imported for an industrial importer's own use?
2. Before allowing usance for industrial raw materials, what must the AD make sure of?
3. For a back-to-back LC, how is the usance period decided?
4. Why does the circular explain that LPG needs a usance period?
5. What is the longest usance for importing spares?
6. What is the longest usance for vessels procured for scrapping?
7. Life-saving drugs certified or declared as such by the Drugs Administration Authority may be imported on usance of up to how long?
8. On what condition may API and laboratory reagents be imported on up to 360 days usance?
9. Who may import HFO/HSFO on up to 360 days usance, and with whose approval?
10. Raw material for pre-fabricated steel structure industries may be imported on usance of up to how long?

Set 2 of 3

11. Under D-1(2), what is the longest usance ADs may allow industrial importers for capital machinery and/or capital goods?
12. Under D-1(1)(g), which limit applies to unprocessed yarn imported on up to 270 days usance?
13. Under D-2, what is the all-in-cost ceiling for usance interest on deferred payment imports?
14. Which are given in D-2 as examples of benchmark rates?
15. What is the cash conversion cycle?
16. True or false: The circular treats LPG as an industrial raw material eligible for import under supplier's or buyer's credit.
17. True or false: Agricultural implements and chemical fertilisers may be imported on usance of up to 360 days.
18. True or false: The 3-year usance for capital machinery is not available to industrial enterprises in EPZs, economic zones or hi-tech parks.
19. True or false: Every deferred payment import must carry usance interest.
20. True or false: For deferred payment imports, the prices must be internationally competitive.

Set 3 of 3

21. Tahmid's new supplier offers him 4 years to pay for a printing machine for his own factory. What may the AD allow?
22. Tahmid also wants to import spare parts for the machine on 360 days usance. What should Rakib tell him?
23. A paint factory imports pigment for its own use, not under a back-to-back LC. Its realistic cash conversion cycle is 150 days, but it asks for 270 days usance. What is the most the AD should allow?
24. An importer claims a cash conversion cycle of 300 days, but his records show he has always turned stock into cash in about 100 days. What should Sadia do?
25. A steel company imports sponge iron to make long steel in its own factory. What is the longest usance it may get?
26. An eye hospital imports intraocular lenses (ophthalmic medical equipment). Rakib asks how long it may take to pay. What is the answer?
27. An industrial importer brings in empty LPG cylinders for its own use. What is the longest usance?
28. A yarn importer qualifies under D-1(1)(g). Its capacity set by the Department of Textiles is worth USD 5 million a year, and its delivery value realised in foreign currency in the last twelve months is USD 3 million. Up to what value can it use the 270-day usance?
29. Tahmid's supplier quotes usance interest of the US dollar benchmark plus 4.50 percent a year. What should Sadia tell him?
30. Tahmid's supplier offers zero interest but quotes a machine price far above what the same machine sells for elsewhere. What does D-2 require?
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