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Lesson 27 of 39 · Part J · Level 2 · Explained

Keeping export earnings to pay for imports

How an exporter under the bonded warehouse system may keep export dollars in a single foreign currency pool for back-to-back payments, hold the value added portion for up to 30 days, keep proceeds for other import bills falling due within 30 days, move unencumbered funds to sister concerns, and use discounted proceeds the same way.

J-1J-2J-3

In Lesson 26, E-documents in import LCs and collections, security and the start, Part I of the import room closed with documents flying about as electronic files. Today we come back down to earth, and to money. Remember Part G (Lessons 20 to 22)? Evelyn, who owns a garment factory in Gazipur, opened back-to-back LCs against her Hamburg export LC: import LCs for fabric from abroad, and an inland back-to-back LC in dollars for yarn from Arman's spinning mill. In Lesson 22 we saw that each back-to-back bill is paid at maturity from the related export money.

Now Evelyn has a happy problem. Hamburg pays in one month, but her fabric bills fall due in different weeks. "Every time Hamburg pays, the bank changes my dollars into Taka," she tells Habib, the trade officer at her bank's AD branch in Dhaka. "Then, two weeks later, I need dollars again for a fabric bill. It feels like changing my shoes at every bus stop."

Arman, who has dropped in with his own papers, nods hard. His yarn sales to Evelyn are paid in dollars too, and he has a cotton bill and a spare-parts bill coming up.

Habib has invited Mithu back. She is a chartered accountant and former CFO of a large export group, and nobody in Dhaka reads a cash flow sheet faster. "Money that arrives on Monday and is needed on Friday should not have to travel to Taka and back," Mithu says. "Part J is about letting it wait, but only for the right bills, and only for a while."

This lesson covers all of Part J: the single pool for back-to-back payments (J-1), keeping export earnings for other import bills (J-2) and discounted proceeds (J-3).

Para J-1

Retention of foreign currency in single pool for back to …

In plain words

J-1 is about an exporter that works under the bonded warehouse system and pays for inputs through back-to-back import LCs. It has three parts.

(1) The single pool. When export proceeds come in, the AD encashes (changes into Taka) the part equal to the value addition. The rest of the proceeds, from different export bills of the same export unit, may be kept in foreign currency in a single pool by the AD.

  • This can be done out of advance payments too.
  • Money from the pool may pay different back-to-back import bills of the same exporting unit, on a maturity basis (as each bill falls due).
  • Why? The circular gives two reasons: to keep the AD's own fund as little involved as possible under its exchange position, and to keep the exporter free from debt burden.

Think of it as one big labelled tiffin carrier instead of a separate box for every export bill.

(2) The value added portion, for 30 days. On the exporter's application, the AD may keep the value added portion in foreign exchange for a maximum of 30 days. It is used through the same AD to settle other import obligations of the same exporter that fall due within this period.

(3) Moving spare money, and the 30-day end.

  • The AD may transfer the unencumbered fund from the pool (money not already tied to a bill) to other ADs, for bonafide use by the exporter and/or its sister concerns, as per the relevant instructions.
  • The amount must not exceed the permissible portion eligible as ERQ entitlement. J-1 doesn't state that percentage itself.
  • Unused fund, if any, must be encashed in Taka compulsorily just after 30 days expire. The circular doesn't spell out the exact day the 30 days start counting for this sentence.
At the desk

Evelyn's Hamburg bill of USD 100,000 is realised. Say the value addition portion is USD 30,000: Habib encashes it in Taka and keeps the remaining USD 70,000 in the single pool for her factory, where an advance from her buyer already sits. Two fabric bills under her back-to-back LCs mature next week and the week after, and Habib pays both from the pool. "No borrowing, no buying dollars back," Mithu notes. "The bank's own dollars stay where they are, and so do yours," she adds.

Key words
Single pool
Under J-1, one foreign currency fund an AD keeps for an exporter under the bonded warehouse system, holding the residual export proceeds of different export bills, to pay that exporter's back-to-back import bills as they mature.
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.
Unencumbered fund
Money in an account that is not already tied to, or set aside for, a payment.
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 J-1)

Retention of foreign currency in single pool for back to back import payments under bonded warehouse system

(1) On encashment of export proceeds equivalent to the portion of value addition, residual portion of export proceeds against different export bills of the same export unit operating under bonded warehouse system may be maintained in foreign currency in a single pool by ADs. Such retention can be made out of advance payment. Funds from this pool may be used for different back to back import payments of the same exporting unit on maturity basis to keep minimum involvement of AD's own fund under the exchange position as well as to keep exporter free from debt burden.

(2) ADs may, on applications from exporters, retain value added portion of export proceeds in foreign exchange for a maximum period of 30 days. The fund so retained will be used through same ADs for settlement of other import obligations payable by same exporters within this period.

(3) ADs are allowed to transfer the unencumbered fund from the pool, not exceeding permissible portion eligible as Exporter’s Retention Quota entitlement, to other ADs for bonafide use by exporters and/or their sister concerns as per relevant instructions. As usual, ADs shall encash the unused fund, if any, compulsorily in Taka just after expiry of 30 days.

Source: Bangladesh Bank, FEPD-1 Circular No. 30, 13 August 2026, Part J, paragraph 1 (page 32). The original circular is the authority.

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Para J-2

Payment of import bills (other than back to back) from direct and deemed export earnings

In plain words

J-1 was about back-to-back bills. J-2 is about other import bills, the ones not under a back-to-back LC. It has two parts.

(1) Keeping proceeds for bills due soon. Suppose an import bill (other than back-to-back) falls due within 30 days of the date the export proceeds are received. Then:

  • The proceeds count whether they come from exporters or deemed exporters, and they include payments received in advance.
  • Note who applies: J-2(1) counts the proceeds of deemed exporters, but it names the manufacturers-cum-exporters as the ones who apply. The circular doesn't say more about how a deemed exporter, such as a local supplier of inputs, fits those words.
  • On application by the manufacturers-cum-exporters, the AD may keep those proceeds in foreign exchange for a maximum of 30 days to make the import payment.
  • This is allowed even if it exceeds the allowable retention quota limit.
  • But there is a catch. Any amount kept above the usual retention quota entitlement must be encashed in Taka compulsorily if it is not used for that import payment within 30 days from the date of receipt.
  • The AD must keep an appropriate register and other records, so these transactions can be identified separately.

Mithu puts it like a wedding budget: "You may keep extra cash at home for the caterer, but only if the caterer is due this month. If the wedding is called off, the extra goes back to the bank."

(2) Helping sister concerns. Unencumbered balances held in the pool may, at the exporter's request within the stipulated time, be used to meet import payments of the exporter's subsidiaries or sister concerns. This must follow the instructions for fund transfer from ERQ accounts in paragraph 2(2) of Part-O of FEPD-1 Circular No. 26, dated 30 July 2026. J-2 doesn't repeat what that paragraph says, and it doesn't state the "stipulated time" in numbers.

At the desk

Evelyn's latest Hamburg proceeds arrive, and an import bill for a new generator, bought on an ordinary LC (not back-to-back), falls due in 18 days. On her application as a manufacturer-cum-exporter, Habib keeps the proceeds in dollars to pay it, even though that is above her usual retention quota, and records the deal in the branch's register. Any excess not used within 30 days of receipt will be encashed in Taka. Arman asks whether the deemed-export dollars he earns from Evelyn's inland LC could wait the same way for his spare-parts bill. Habib explains that J-2(1) counts deemed exporters' proceeds, but it names manufacturers-cum-exporters as the applicants and says no more on how a local supplier fits, so Arman should take the question to his own bank.

Key words
Deemed export
A local supply that counts as export, for example fabric sold to a garment exporter against a back-to-back LC.
Sister concern
A separate company that belongs to the same owners or business group.
Encashment
Converting foreign currency received into Taka.
Read the rule as written (Para J-2)

(1) If import bills (other than back to back LC) fall due for payment within 30 days from the date of receipt of export proceeds including payments realized in advance by the exporters/deemed exporters, ADs may, on application by the manufacturers-cum-exporters retain such proceeds in foreign exchange for a maximum period of 30 days for making such import payments even it exceeds the allowable retention quota limit. However, export proceeds so retained (in excess of the usual retention quota entitlement) shall be encashed compulsorily in Taka if the same is not utilized for such import payment within 30 days from the date of receipt. To identify such transactions distinctly, ADs are required to maintain appropriate register and other necessary records.

(2) Unencumbered balances held in the pool shall, at the request of exporters within the stipulated time, be useable to meet import payments of exporters’ subsidiaries/sister concerns, subject to observance of the instructions applicable for fund transfer from ERQ accounts as per paragraph 2(2) 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 J, paragraph 2 (page 32). The original circular is the authority.

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Para J-3

Retention of discounted proceeds

In plain words

J-3 is one sentence, and it closes a gap. Sometimes an exporter doesn't wait for the buyer to pay. The bank discounts the bill and pays the exporter early. Do those discounted proceeds get the same treatment?

Yes. Discounted proceeds against export bills or local delivery bills may be kept in foreign currency to settle import liabilities:

  • as per paragraph 1 above (J-1), or
  • as per paragraph 2 above (J-2),

depending on the nature of the liabilities.

So the desk asks one simple question: what kind of bill is this money going to pay?

  • A back-to-back import bill: follow J-1.
  • Another import bill, not back-to-back: follow J-2.

Local delivery bills matter for suppliers like Arman, who deliver inputs to exporters at home instead of shipping abroad. "Early money is still the same money," Mithu smiles. "It just arrived before lunch."

That closes Part J.

At the desk

Arman's bill for yarn delivered to Evelyn under her inland back-to-back LC is discounted by his bank, so he gets dollars before Evelyn's bank pays. He needs those dollars for a cotton bill under his own back-to-back import LC. Habib explains that, under J-3, Arman's bank may keep the discounted proceeds in foreign currency, and because the cotton bill is back-to-back, J-1 applies.

Key words
Discounting
Paying the exporter now, minus a cost, for a bill that the buyer will pay later.
Local delivery bill
A bill for goods delivered inside Bangladesh, for example by a local supplier to an exporter under an inland back-to-back LC.
Inland back-to-back LC
A back-to-back LC in foreign currency opened in favour of a local manufacturer-cum-supplier of inputs, against a master export LC.
Read the rule as written (Para J-3)

Discounted proceeds against export/local delivery bills may be retained in foreign currency for settlement of import liabilities as per paragraph 1 or paragraph 2 above in accordance with the nature of liabilities.

Source: Bangladesh Bank, FEPD-1 Circular No. 30, 13 August 2026, Part J, paragraph 3 (page 32). The original circular is the authority.

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Putting it together

So far: an exporter under the bonded warehouse system may have the value addition portion encashed and keep the rest of its export proceeds, including advances, in one foreign currency pool to pay back-to-back bills as they mature; on application, the value added portion may also be kept for up to 30 days for other import bills through the same AD. Unencumbered pool money may go to other ADs for the exporter or its sister concerns within the ERQ entitlement, and unused money is encashed in Taka after 30 days. For non-back-to-back import bills due within 30 days of receipt of export proceeds (including advances and deemed exporters' proceeds), the AD may, on application by manufacturers-cum-exporters, keep the proceeds for up to 30 days even above the retention quota, with a register, and any excess not used within 30 days of receipt is encashed compulsorily in Taka; and discounted proceeds follow J-1 or J-2 depending on the bill.

Next: Part J of the import room is complete. Lesson 28, Inland LCs in foreign currency: making local trade easier, opens Part K: inland LCs in foreign currencies and their operational modalities.

Check yourself

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

Set 1 of 3

1. Under J-1(1), which part of the export proceeds is encashed in Taka before the rest goes into the single pool?
2. Which exporters does the single pool in J-1(1) apply to?
3. What may money in the single pool be used for under J-1(1)?
4. Which two reasons does J-1(1) give for the single pool?
5. Under J-1(2), for how long may an AD keep the value added portion in foreign exchange, on the exporter's application?
6. Under J-1(3), what limit applies when an AD transfers unencumbered pool funds to other ADs?
7. True or false: under J-1(1), retention in the single pool can be made out of advance payments.
8. True or false: under J-1(2), the value added portion kept for 30 days may be used through any bank the exporter chooses.
9. Evelyn's Hamburg bill is realised. Habib encashes the value addition portion. What may he do with the rest under J-1?
10. Evelyn asks Habib to keep the value added portion of her latest export bill in dollars to pay a machinery spare-parts bill due in three weeks. What does J-1(2) allow?

Set 2 of 3

11. Evelyn's pool has some money that is not tied to any bill. Her sister concern, which banks elsewhere, needs dollars for a genuine import. What may Habib do under J-1(3)?
12. Thirty days have passed and some of Evelyn's retained fund has not been used. What must Habib do under J-1(3)?
13. Which import bills does J-2(1) deal with?
14. Under J-2(1), whose application lets the AD retain the proceeds in foreign exchange?
15. Under J-2(1), what happens to proceeds retained above the usual retention quota entitlement that are not used within 30 days from receipt?
16. What must ADs keep so that J-2(1) transactions can be identified distinctly?
17. J-2(2) says unencumbered pool balances used for sister concerns must follow which instructions?
18. True or false: under J-2(1), proceeds may be retained to pay a non-back-to-back import bill even if this exceeds the allowable retention quota limit.
19. True or false: under J-2(1), only the proceeds of direct exporters count; proceeds of deemed exporters are left out.
20. Evelyn's Hamburg proceeds arrive, and an import bill for a generator, on an ordinary LC (not back-to-back), falls due in 18 days. What may Habib do under J-2(1)?

Set 3 of 3

21. Evelyn's next import bill, not under a back-to-back LC, falls due 45 days after her export proceeds arrive. Can she use J-2(1) to keep those proceeds in dollars for it?
22. Evelyn kept proceeds above her usual retention quota for the generator bill, but the supplier delayed the shipment and the bill was not paid within 30 days of receipt. What happens to the excess?
23. Habib's new colleague has kept several customers' proceeds in dollars under J-2 but recorded them like ordinary retention. What should Habib tell him?
24. What does J-3 allow for discounted proceeds against export or local delivery bills?
25. Under J-3, how does the AD decide whether paragraph 1 or paragraph 2 applies?
26. Which kinds of bills does J-3 mention for discounted proceeds?
27. True or false: J-3 says discounted proceeds can never be kept in foreign currency.
28. Arman's local delivery bill to Evelyn is discounted, and he needs the dollars for a cotton bill under his own back-to-back import LC. Which paragraph guides the retention?
29. Evelyn's Hamburg bill is discounted by Habib's bank, and she wants to keep the dollars for an ordinary import bill, not back-to-back, due in two weeks. Which paragraph applies through J-3?
30. Arman asks why J-3 matters to a supplier like him, who never ships goods abroad. What is the best answer?
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