Empowering non-bonded industries for export growth

The government issued a Statutory Regulatory Order (SRO) recently, introducing a new facility for industries without bonded warehouses. This allows duty-free import of raw materials for exports against an unconditional bank guarantee of equal value, subject to specific conditions. The policy expands duty-free access beyond the readymade garment sector, creates space for SMEs to integrate into global value chains, and encourages sector associations to build technical capacity to support their members.

However, several challenges remain. The certification process for value addition is unclear, and bureaucratic hurdles make it difficult to extend export timeframes. Many associations lack the technical capacity to justify input-output norms, while key sectors such as agro-processing, handicrafts, pharmaceuticals, and ceramics remain excluded. Handicraft exports, which often depend on telegraphic transfer (TT) payments, could be included if the policy interpretation is broadened. As the SRO mentions TT, and since many handicraft exports to markets like Japan are conducted through this payment mode, the sector could benefit if permitted.

Industrial Import Registration Certificate (IRC) requirements could also pose problems. Many small exporters operate as traders, sourcing products from manufacturers, but they may not hold an industrial IRC, leaving them ineligible for the facility. SMEs dependent on trader-export models could therefore face compliance and documentation barriers.

Among the conditionalities, exporters must present a buyer contract, letter of credit, or advance TT. The policy was incorporated into the import policy's Chapter 4(8), sub-clauses (ao) and (aaa) under (jo). The National Board of Revenue often takes considerable time to issue official acknowledgements for partial exporters seeking duty-free import of raw materials.

The SRO specifies that the buying-selling contract must be submitted with endorsement from a lien bank, to be integrated through the VAT Administration System (iVAS). The unconditional bank guarantee from the lien bank must be submitted to customs stations, and the minimum value addition must be 30 percent. However, it is still unclear who will issue the value addition certificate. The import policy states that the Bangladesh Trade and Tariff Commission is responsible for issuing it.

To determine the input-output coefficient, information such as HS codes, units, related import materials, and the quantity of each input required (including wastage) to produce one unit of product must be provided. Commissioners may engage universities or specialised organisations to verify these coefficients, with costs borne by importers. Empowering relevant associations will therefore be crucial.

The SRO currently covers eight sectors: furniture, electronics, food processing, light engineering, steel products, plastic products, leather goods, and garments. Some associations already have the technical capacity to determine input-output coefficients, while others will need support to develop it. According to the import policy, the Export Promotion Bureau or the relevant sponsoring authority should issue notifications regarding raw material entitlements.

Notably absent from the list are sectors such as MS rods or bars, prefabricated buildings, cement, cables, paints, lubricants and fuel oils, office equipment, air conditioners, household goods, and particle boards. This exclusion may be due to lower value addition or other policy considerations. The SRO specifies a nine-month export period, extendable by three months upon application to the relevant Customs, Excise, and VAT commissionerate. However, this process risks becoming bureaucratic, forcing businesses to rely on administrative discretion each time.

SMEs have long been excluded from duty-free import facilities through bonded warehouses. This raises their input costs, reduces competitiveness, and limits participation in global value chains. Without targeted reforms, SMEs risk being sidelined in the country's export diversification and post-LDC transition.

Global experience from countries such as Vietnam, India, and Singapore shows that inclusive and modernised bonded warehouse frameworks can significantly lower costs, expand SME participation, and support industrial upgrading.

Clarifying institutional responsibilities for issuing value-addition certificates, expanding sectoral coverage, simplifying export timeframe extensions through automatic approvals for compliant firms, and strengthening association capacity to validate input-output coefficients would all help non-bonded industries.

This new facility is a step forward in making export incentives more inclusive. But unless the policy is clarified and broadened, small industrial enterprises will remain disadvantaged. For Bangladesh to achieve true export diversification and post-LDC resilience, reforms must focus on SME competitiveness, institutional clarity, and sectoral inclusion.

The writer is CEO at Business Initiative Leading Development (BUILD)