Letters of credit (L/Cs) could play a structural role in new arrangements for goods travelling to and from north eastern India via Bangladesh.

Apart from a relatively small area of land north of Bangladesh, the northeastern states of India are cut off from the rest of the country by Bangladesh.

Difficulties

This means that transporting goods to and from northeastern India and the rest of the country via Bangladesh can be both expensive and bureaucratic.

Now, the Bangladeshi authorities are planning to establish entrepôt facilities in Bangladesh to allow Indian goods to transit through the country more efficiently.

Trade controls

To ensure that Indian goods do not finish up in Bangladesh, traders using the entrepôt would require back-to-back L/Cs provided by the buyers.

These would be obtainable through the office of the Chief Controller of Imports and Exports in Bangladesh.

Guarantee

As well as passing through Bangladesh via road, rail or river to the northeastern states, goods under the new arrangements could be re-exported to countries other than India.

They could be transported to seaports against a bank guarantee equivalent to the amount of duties and taxes returnable on the execution of an export order.

Consignments via the entrepôt would not be allowed out of the port boundary except with special authorisation.

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