NBR expands duty-free import benefits to diversify exports

In a move to facilitate export diversification, the National Board of Revenue (NBR) has opened the door for partial exporters in eight sectors to import raw materials duty-free against a bank guarantee.

In a notification last week, the revenue authority said the facility would cover processed foods, light engineering, furniture, electronics, plastic products and leather goods.

Yesterday, the revenue board said that many exporters cannot avail a bonded warehouse licence under existing rules, which limits their ability to import duty-free raw materials for export production.

They can now bring in raw materials without paying import duties upfront by providing a bank guarantee equal to the customs duty assessed on the products.

The refund of duties after export, which previously frustrated businesses with long delays, will no longer be required.

The change comes as ready-made garments have been dominating the country's export basket for more than three decades, according to the Bangladesh Garment Manufacturers and Exporters Association (BGMEA).

Since fiscal year 2013-14, garments have accounted for more than 80 percent of export earnings, even though the government launched a Tk 941 crore project in 2017 to improve competitiveness in leather, footwear, light engineering and plastics.

The project cost has since risen to Tk 1,264 crore, according to documents from the planning ministry.

Exporters outside the garment sector had been pressing for easier rules, including access to bonded warehouse facilities, to increase their overseas sales.

Until now, businesses selling part of their production at home had to pay full import duty on raw materials, then claim a refund from the Duty Exemption and Drawback Office after exporting the finished goods.

"Now they will be able to bring raw materials against export orders by giving a bank guarantee equivalent to the total amount of import tariffs applicable to the raw materials. Once export proceeds come, they will be able to get their bank guarantee back," said a senior NBR official.

"We expect a big impact. It will be a starting step to come out of the dependency on garment exports," said Mohammad Naziur Rahman Miah, first secretary for customs, export and bond at the NBR.

The notification says that manufacturers will have to hold export orders or contracts with foreign buyers, such as letters of credit (LCs), and ensure at least 30 percent value addition to qualify.

Partial exporters will also require permission from the Chief Controller Office of Imports and Exports as industrial consumers and must comply with value-added tax (VAT) rules.

Selim H Rahman, chairman and managing director of Hatil Furniture, welcomed the decision, calling it "a long-standing demand" from industry players.

"This opens a new door for many Bangladeshi manufacturers, those who primarily sell locally but can contribute to exports if given the right support. Even small contributions, when aggregated, can lead to a large export basket," he said.

High tariffs on imported raw materials had left Bangladeshi products struggling to compete internationally despite adding value, added Rahman.

He added, "That was our biggest challenge, and the government has now eased rules. This is a big opportunity for us to approach new buyers, explore new markets, and build a stronger export footprint."

Abdur Razzak, president of the Bangladesh Engineering Industry Owners Association, urged the authorities to ensure the policy delivers results. "What we need now is action, not promises."

Ferdous Ara Begum, chief executive officer of Business Initiative Leading Development (BUILD), said many small and medium-sized enterprises export partially but could not access bonded warehouse benefits under previous regulations.

She said the facility had been limited to 100 percent export-oriented industries, leaving out many small entrepreneurs who also serve the domestic market.

"These enterprises often import raw materials commercially, which puts them at a competitive disadvantage," Ferdous said.

She added that although the import policy allowed partial exporters to benefit under certain conditions, such as obtaining a utilisation declaration from the Export Promotion Bureau (EPB), a value addition certificate from the customs commission, and providing a 100 percent bank guarantee, implementation had remained inconsistent.