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Corporate - July 9, 2021

Expand import of duty-free raw materials other than RMG

Tariff Commission to Commerce Ministry

Staff Correspondent: To diversify exports, the Bangladesh Trade and Tariff Commission (BTTC) has proposed that the government expand the duty-free raw material import facility to enterprises who sell a percentage of their goods in abroad markets.
Under the bonded warehouse plan, 100 percent export-oriented enterprises can now import raw materials duty-free. The facility is mostly used by apparel exporters.
The incentive does not apply to raw material importers in the iron and steel, chemicals, electronics, and furniture industries that export a portion of their products. Rather, they receive a duty drawback, which is a refund of tariffs and taxes paid on inputs or raw materials used in the production of exported goods and services.
However, because the refund is processed after the products have been dispatched, it takes time. As a result, importers are experiencing a capital deficit.
As a result, the BTTC has suggested to the trade ministry that partially export-oriented industries be allowed to import raw materials duty-free through the bonded warehouse facility.
The recommendations were made in a report that was submitted to the commerce ministry on June 25. Bangladesh’s export earnings have been reliant on the garment industry for the last few decades. In the just-concluded fiscal year, about 85 per cent of the total export receipts amounting to $38.75 billion came from the apparel industry.
In a report, the BTTC said that the export dependence on a single product could be overcome by implementing its recommendations. Bangladesh exports 750 types of products.
Of them, 43 are in the garment industry. The raw materials of 48 types of export-oriented goods are locally available.
The rest 659 types of products come from four sectors, namely steel and iron, chemicals, electronics and electrical, and furniture.
But the bonded warehouse facility is not available for the entrepreneurs in the four sectors, although about 80-90 per cent of the raw materials used by them are imported.
As a result, the entrepreneurs in these sectors pay 30 per cent to 65 per cent duty at the import stage, the commission report said. “This inequality is a major obstacle to the diversification of export products.”
It called for permitting these sectors to bring in raw materials duty-free under the bonded warehouse facility.
According to the report, entrepreneurs in Vietnam have been enjoying such benefits for a long time. There is no alternative to achieving the $60-billion export target without the diversification of exports, it said.
The commission suggested imposing conditions so that users could not misuse the facility.
One of the conditions will stipulate that the beneficiary keeps a bank guarantee equal to the duty levied on the imported raw materials. This aims at preventing revenue evasion through encashment of the guarantee in case the importer fails to export or misuses the facility.
The beneficiary companies will submit a report on the import-export data every six months.
The facility might be scrapped if a company fails to ship at least 40 per cent of the goods produced from the imported raw materials within 12 months of availing of the duty-free import opportunity.
Alongside the customs houses, the local VAT offices and the BTTC may be given the task to monitor the use of the bonded warehouse facility, the commission recommended.
Saiful Islam, chairman of SKB Stainless Steel Mills Ltd, told, “We have urged the commerce ministry on several occasions to extend the duty-free raw material import facility to diversify exports. But our demand has not been met.”
He has been exporting steel products to more than 10 countries for the last four years. He did not receive the duty drawback on time.
“We have to pay duty at the import stage. As a result, 30-40 per cent of our capital gets stuck. It discourages many exporters to export.”
Islam hopes the government would come forward to implement the BTTC’s proposals.
Easy access to finance and adequate policy support, including fiscal and non-fiscal incentives to the non-garment potential sectors are necessary to diversify exports after the country’s graduation from the group of the least-developed countries, said experts at a virtual dialogue organised by the Dhaka Chamber of Commerce & Industry on Wednesday.

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