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06 October 2015

Presented by:
Dr. Md. Mozibur Rahman
Course : EIB 534/532: Bangladesh in International Business
EMBA Program
Department of International Business
Faculty of Business Studies
University of Dhaka

ACJ Cl
2

Objectives

Provide an overview of Trade policy of Bangladesh


and its Institutional framework

Provide an analysis of Import policy of Bangladesh

Provide an analysis of Export policy of Bangladesh

Provide an analysis of Tariff and Custom policy of


Bangladesh

Analysis of existing trade policy framework of Bangladesh


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Introduction
Overview of Bangladeshs International Trade

Source: World Bank

Analysis of existing trade policy framework of Bangladesh


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Introduction

Overview of Bangladeshs International Trade (1970-2014)

Indicator Name 1970 1980 1990 2000 2010 2014

Imports of goods and


services (current million
1,124.76 3,239.43 4,076.61 9,060.86 25,106.32 43,853.97
US$)

Exports of goods and


services (current million
747.58 995.27 1,844.50 6,588.07 18,472.45 34,343.96
US$)

Trade (% of GDP)
20.82 23.38 18.97 29.32 37.80 44.99
GDP growth (annual %)
5.62 0.82 5.62 5.29 5.57 6.12
Source: World Development Indicators, World Bank (http://data.worldbank.org/country/bangladesh)

Analysis of existing trade policy framework of Bangladesh


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Introduction

Overview of Bangladeshs International Trade (in Corer Taka)

Indicators FY 2010-11 FY 2011-12 FY 2012-13 FY 2013-14 FY 2014-15

GDP (At constant Price ) 6,46,340 6,88,490 7,29,897 7,74,136 8,24,532

GDP (At Current Price) 9,15,830 10,55,200 11,98,923 13,43,674 15,13,600

GDP Growth Rate (%) 6.46 6.52 6.01 6.06 6.51

Export 1,44,431 1,80,313 1,89,437 2,12,915 2,26,522

Import 2,40,028 2,80,963 2,72,328 3,04,185 3,14,209

Source: Bangladesh Bureau of Statistics & Bangladesh Bank

Analysis of existing trade policy framework of Bangladesh


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Introduction

Trade policy relates to all spheres of government policy that has


an impact on trade. It is generally accepted that government sets
trade policy to maximize social welfare. The 6th Five-Year Plan of
Bangladesh provides that
..it is critical that the trade policy regime is geared to
ensure export competitiveness in general while facilitating
emergence and expansion of new export products
The core Bangladeshi legal framework governing international
trade in goods is composed of three distinct policies, namely
export policy, import policy, and tariff policy.
However, trade policy relates to all issues that affect trade.
Other cross cutting policies affecting trade will discussed in next
class.

Analysis of existing trade policy framework of Bangladesh


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Institutional Framework of Formulating Trade Policy

The Ministry of Commerce (MoC) is entrusted with the


formulation, implementation, monitoring, and evaluating of trade
and tariff policies of the country.
The ministry is supported by the EPB, CCI&E and Bangladesh Tariff
Commission.
The Import Policy Order is monitored and enforced by the office of
the Chief controller of Import and Export. The IPO is issued by the
Ministry of Commerce.
Export Promotion Bureau prepares the export policy and Ministry
of Commerce issues this. EPB implements and monitors export
policy and conducts promotional activities.

Analysis of existing trade policy framework of Bangladesh


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Institutional Framework of Formulating Trade Policy

Bangladesh Tariff Commission provides recommendations to the


ministry of commerce and other ministries on tariff, import and
export policies and to advice the government on antidumping,
countervailing and safeguard measures.
NBR formulates policies related to custom duties, VAT, and
supplementary duties.
Board of investment (BOI) approved the Foreign Investment
outside EPZs.
BEPZA gives permission to invest within EPZs.
Bangladesh Bank implements the provision of Foreign Exchange
Regulation Act 1947.

Analysis of existing trade policy framework of Bangladesh


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Institutional Framework of Formulating Trade Policy

Ministry/Agency Responsibility for


Prime Minister's Office Approval of all trade related policies, including import and export policies
Ministry of Commerce Domestic and international trade regulation, import and export policy
formulation; tariff policy formulation, and trade policy monitoring, WTO
coordination, regional trade agreements, export promotion, and accounting
services.
Office of the Chief Controller of Import Registration of importers and exporters
and Export (CCIE)
Export Promotion Bureau (EPB) Export promotion, textile quota administration
Tariff Commission Tariff policy, anti-dumping and countervailing investigations, safeguards
Ministry of Finance Banking services, subsidies, cash incentive
Bangladesh Bank Export finance, banking services, interest rate, subsidies, cash incentive
National Board of Revenue (NBR) Customs, pre-shipment inspection, customs valuation, import tariffs and
other duties, tax holidays and tax concessions, duty drawbacks
Ministry of Agriculture
SAARC Agricultural Information Center
Department of Agricultural Extension Agricultural policy, SPS
Bangladesh Agricultural Research
Council
Ministry of Fisheries and Livestock
Ministry of Environment and Forest Environmental and forest policy

Analysis of existing trade policy framework of Bangladesh


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Institutional Framework of Formulating Trade Policy

Ministry/Agency Responsibility for


Ministry of Textiles and Jute Textile and jute policy
Ministry of Industries Industrial policy; Standards and quality control, Industrial
Property Rights
Bangladesh Standards and Testing Institute Standardization, quality testing and certification
Department of Patent Designs, and Trademarks Registration of patents, industrial designs, and trade marks
Bangladesh Small & Cottage Industries Corporation Small and cottage industries
Board of Investment Investment policy; Registration of investors (including
foreign investment), investment facilities
Bangladesh Export Processing Zones Authority Export processing zones; Investment policy
(BEPZA)
Ministry of Post and Telecommunications Telecommunications services
Ministry of Civil Aviation and Tourism Air transport; Tourism
Ministry of Shipping Maritime transport
Ministry of Power, Energy and Mineral Resources Energy policy
Ministry of Planning / Planning Commission Poverty Reduction Strategy Paper
Ministry of Communications Road and rail transport
Ministry of Cultural Affairs Copyrights

Analysis of existing trade policy framework of Bangladesh


ACJ Cl
Million USD

5,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000

0
10,000
1972-73
1973-74
1974-75
1975-76
1976-77
1977-78
1978-79
1979-80
1980-81
1981-82
1982-83
1983-84
1984-85
1985-86
1986-87
1987-88
1988-89
1989-90
1990-91

Import
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98

Growth (%)
1998-99
1999-00
Bangladeshs Import scenario

2000-01

Analysis of existing trade policy framework of Bangladesh


2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
2014-15
0%
20%
40%
60%
80%

-40%
-20%

Percentage
12
13

Overview of Import Policy changes since Independence

At the initial stage after independence Bangladesh faced a serious


challenge to rehabilitate the economy by addressing low foreign
exchange reserve; narrow export base and rising import price.
The government emphasized on the improvement of balance of
payment situation through excessive import control measures,
high tariff and NTBs with rigid foreign exchange regime.
Due to the nationalization of large industry, state owned
enterprise of Bangladesh imported consumer goods and raw
materials required by the private sector industry for attaining
economy of scale through bulk import and foreign trade and under
barter trade arrangement.
The main objectives of import policy regime were to involve state
owned enterprises in import activities throughout the period
between 1972 and 1975.
Analysis of existing trade policy framework of Bangladesh
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Overview of Import Policy Changes since Independence

The beginnings of policy reform and liberalization can be


traced to deregulation measures starting in 1976.
Abolition of import licensing for commercial import on 1
January 1976.
In 1978 the Government started issuing annual import policy
order.
Abolition of import licensing for industrial import on July 1
1983.
Import liberalization was made through bringing some
products in open general list (positive list).
In FY 1985-86 abandoned the positive list approached and
adopted the negative list approach.

Analysis of existing trade policy framework of Bangladesh


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Overview of Import Policy Changes since Independence

Import policy order of subsequent years maintained


restrictions two grounds-
Protecting local industries and
For non-traded reason (moral, health, security)
The government has gradually withdrawn all restrictions
maintained to protect local industry.
Until 2000 Bangladesh removed the import restriction as its
own initiatives.
Since 2001 Bangladesh had to dismantle the import
restrictions maintained for trade reasons as per
commitment under WTO Uruguay round agreement.

Analysis of existing trade policy framework of Bangladesh


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Import Policy and Responsible Institutions in Bangladesh

The Office of the Chief Controller of Imports and Exports (CCIE) is


Bangladeshs import control authority. Its primary responsibility is
the implementation of rules, regulations and orders under the
Imports and Exports (Control) Act of 1950, which empowers the
Government to regulate the importation and exportation of goods
and services.
The responsibility for drafting the Import Policy Order (IPO) lies
primarily with the Import Wing of the MoC, with significant inputs
from the CCIE. The MoC had largely abrogated its rights in this
regard and transferred too much of its policy-making powers to
the CCIE. This prevents MoC from taking ownership of the import
policy, resulting in a lack of commitment and support while at the
same time reducing the efficiency of CCIE in administering import
policies.

Analysis of existing trade policy framework of Bangladesh


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Import Policy Order

The IPO aims to make the import regime compatible to WTO


requirements, simplify the procedure to import capital machinery
and raw materials, provide facilities for technological innovation
and allow import of essential commodities on emergency basis.
The IPOs goal is to be achieved through two key instruments:
import policy and import control.
Import policy relates to the policy underlying the decisions
regarding which products to include on the prohibited and
restricted list and the rationale for providing duty drawbacks or
Special Bonded Warehouse (SBW) facilities or preferential
treatment for certain products.
Import control relates to those products that have been placed on
the prohibited list and the conditions pertaining to the
importation of products on the restricted list.
Analysis of existing trade policy framework of Bangladesh
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Import Policy Order

Import policy establishes the principles for imposing restrictions,


however, most of the current IPO, is concerned with the
mechanics of import control. Though import control constitutes
part of trade policy as a whole, it does not relate to import policy
in the sense of developing the economy. Therefore, the two
issues of import policy and import control should be separately
dealt with in the IPO.
The IPO should have as major objectives, first, the support of
overall trade policy and, second, providing support to the Export
Policy. For this reason it is important that the Export Policy be
designed first and that the IPO be finalized thereafter, ensuring
that it is aligned to the Export Policy.

Analysis of existing trade policy framework of Bangladesh


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Analysis of Import Policy Order 2012-15

The Import Policy Order 2012-15 (IPO) consists of 9 chapters and 29


sections, with the following lay-out:
Chapter One (Prelude): Provides Short Title, Application, Duration and
Definitions
Chapter Two (General Provisions for Import): This chapter deals with the
general provisions for import, including the regulation of import, i.e.
that all products except those listed in Annexure 1 may be imported
freely and that the import status of a product shall be determined by
the description of the goods rather than the HS code thereof. The
chapter further deals with the conditions for regulating imports and the
general conditions of the import of goods.
Chapter Three (Provisions Regarding Import fees):It deals with import
fees. It provides for registration of importers in six classes on the basis
of their ceiling value of overall annual import and generally deals with
the procedures for registration.

Analysis of existing trade policy framework of Bangladesh


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Analysis of Import Policy Order 2012-15

Chapter Four (Miscellaneous Provisions): It deals with


miscellaneous provisions, including import on joint basis, by the
actual user, by Bangladeshi professionals abroad and the
importation of samples , advertising materials and gifts. The
chapter also deals with the temporary importation of products
and requires a guarantee for the relevant duties to ensure that
goods so imported are actually re-exported within 12 months.
Chapter Five (General Provisions for Industrial Imports): This
Chapter deals with general provisions for industrial imports and
provides in section 22 for the importation of goods that may only
be imported by industrial users, the maximum value of goods that
may be imported by importers, and the regularization of
importers.

Analysis of existing trade policy framework of Bangladesh


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Analysis of Import Policy Order 2012-15

Chapter Six (Provisions for Import by Commercial Importers): It


deals with the additional rules of import applying to commercial
importers. Section 24 provides for the importation of products
that are not on the list of banned or restricted goods under cash
foreign reserve and requires that foreign firms notify the Chief
Controller in advance of any imports to be made by such
company.
Chapter Seven (Import by Public Sector Importers): It deals with
imports by public sector importers, including imports against the
specific allocation of funds, GoB allocations to industrial
enterprises or agencies and the use of cash foreign exchange. It
also provides for pre-shipment inspection and imports by the
Trading Corporation of Bangladesh.

Analysis of existing trade policy framework of Bangladesh


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Analysis of Import Policy Order 2012-15

Chapter Eight (Import Trade Control (ITC) Committee): This


chapter deals with the Import Trade Control Committee (ITCC),
including its constitution, that has jurisdiction in all disputes
between importers and the Customs Authority. It also provides
some general procedural rules regarding the ITCC and appeals
against its decisions to the Central ITCC.
Chapter Nine (Compulsory Membership of recognised Chamber of
Commerce and Industry and Trade Association.): It deals with
compulsory membership of importers, exporters and indentors to
a recognized Chamber of Commerce and Industry or a concerned
trade organization.

Analysis of existing trade policy framework of Bangladesh


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Analysis of Import Policy Order 2012-15


List of Import Control Items
H.S. H.S.Code No. Description of items and Conditions
Heading
03.06 All H.S. Code Imports of Shrimps are banned
12.07 All H.S. Code Import of Poppy seeds & Postadana are banned (Postadana shall not also be
12.11 All H.S. Code importable as spices or in any other way).
Import of Grass (Andropogen Spp.) & Bhang (Cannabis Sativa) are banned.
13.02 All H.S. Code Import of Opium is banned. All items except agar-agar & pectin are importable with
prior clearance from the Directorate of Drug Administration and from the
concerned Sponsor/ Ministry/ Organization for industries other than
pharmaceutical industry.
23.07 2307.00 Imports of Wine Lees, Argol are banned.
27.10 2710.00.71 a) Import of Furnace Oil
27.11 All H.S. Code Petroleum gas and other gaseous hydrocarbons are banned for import.
27.13 All H.S. Code All items including petroleum oil residues are banned except petroleum coke &
petroleum bitumen.
29.29 2929.90.00 Import of Sodium Cyclamate (semi-solid sugar)
29.30 2930.909 Import of Aliyl isothiocyonate (artificial mustard oil)
38.08 All H.S. Code Insecticides, namely Heptachlore-40, WP, DDT, Bidrin Brand in the generic name:
Dicrotopes, Methyl Bromide, Chlorden-40, WP and Daildrin are banned.
56.08 All H.S. Code Fishing nets (Gillnet) with meshes of 4.5 centimetres or less in width or length.
Analysis of existing trade policy framework of Bangladesh
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Analysis of Import Policy Order 2012-15


List of Import Control Items
H.S. H.S.Code No. Description of items and Conditions
Heading
63.05 6305.31 Import of Polypropylene bag
84.08 8408.90 Import of chassis with Two stroke engines of three wheeler vehicles (Tempo, auto
rickshaw etc.)
87.01 to All H.S. Code Motor car of any C.C. and microbus, minibus, jeeps including other old vehicles and
87.04 tractors
8703.221 Three-wheeler vehicles of two-stroke engine (tempo, auto rickshaw etc.)
87.08 All H.S. Code Following used parts of motor vehicles will be importable subject to conditions
mentioned below: Body parts:-,Bumper; Front grill; Door Assy; Wind shield/wind
shield glass; Mirrors; Radiator Assy; Light/Lamps; Desh board Assy; Bonnet Assy;
Felder Assy; Door mirror Assy; Seats; Rear mudguard Assy; Cabin Assy/Bodies;
Head lights(excluding bulb);
87.11 All H.S. Code More than 3 (three) years old and above 155 CC motor cycle
90.18 9018.31 Import of Glass syringe
93.02 All H.S. Code All items including Revolver and Pistol are importable by authorized dealers of
firearms subject to prior permission of the Ministry of Home Affairs.
93.03 to All H.S. Code Import of Air gun is banned.
93.05
93.06 All H.S. Code Import of Air gun ammunition is banned.

Analysis of existing trade policy framework of Bangladesh


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Analysis of Import Policy Order 2012-15

The following goods shall not be importable:


(1) Maps, charts and geographical globes which do not indicate the
territory of Bangladesh in accordance with the maps published by the
Department of Survey, Government of the Peoples Republic of
Bangladesh;
(2) Horror comics, obscene and subversive literature including such
pamphlets, posters, newspapers, periodicals, photographs, films,
gramophone records and audio and video cassette tapes etc;
(3) Books, newspapers, periodicals, documents and other papers,
posters photographs, films, gramophone records, audio and video
cassettes, tapes etc. containing matters likely to outrange the religious
feelings and beliefs of any class of the citizens of Bangladesh;
(4) Unless otherwise specified in this order, goods of secondary or sub-
standard quality or below standard or old, used, reconditioned goods
or factory rejects and goods of job-lot/stock-lot;

Analysis of existing trade policy framework of Bangladesh


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Analysis of Import Policy Order 2012-15

The following goods shall not be importable:


(5) Reconditioned office equipment, photocopier, type-writer machine,
telex, phone, and fax, old computer, old computer accessories, old
electronic items ;
(6) Goods (including their containers) bearing any words or inscriptions
of a religious connotation the use or disposal of which may injure the
religious feelings and beliefs of any class of the citizens of Bangladesh;
(7) Goods (including their containers) bearing any obscene picture,
writing inscription or visible representation;
(8) Import of live Swine and any item prepared from swine;
(9) All kinds of industrial sludge and fertilizer & any other products
produced from sludge; and
(10) Unless or otherwise specified in this order, all kinds of waste;

Analysis of existing trade policy framework of Bangladesh


ACJ Cl
Million USD

0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
1972-73
1973-74
1974-75
1975-76
1976-77
1977-78
1978-79
1979-80
1980-81
1981-82
1982-83
1983-84
1984-85
1985-86
1986-87
1987-88
1988-89
1989-90
1990-91

Export
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97

Growth (%)
1997-98
1998-99
Bangladeshs Export scenario

1999-00

Analysis of existing trade policy framework of Bangladesh


2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
2014-15
0%
10%
20%
30%
40%
50%

-20%
-10%
28

Percentage
29

Overview of Export Policy changes since Independence

During the mid-70s invectives (interest rate subsidy for export,


duty draw back, export bonus for jute sector Export performance
license scheme) were introduced.
In 1980s new schemes were introduced for promote export (B2B
L/C , EPZ, Export development fund, cash compensation scheme)
Duty Exemption Drawback Office (DEDO) was established in 1986.
Export earnings of handicraft and cottage industries have also
been exempted from income tax.
Since 1992 import of machinery and spare parts were made duty
free for export oriented industry.
Rate of cash incentive for textiles and clothing was gradually
reduced since FY 2002-03.
Since 1994 merchandise exporters have been allowed to retain
certain foreign exchange earned on F.O.B export earnings in
foreign currency accounts.
Analysis of existing trade policy framework of Bangladesh
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Various Export Promotional Schemes


Scheme Nature of Operation
Export The XPL was introduced in in 1978.it allowed the nontraditional exporters to receive import license. The
Performance export performance Benefit (XPB) scheme replaced the Export Performance Licensing (XPL)/ Import
Benefit (XPB) Entitlement Certificate (IEC) System on July 1, 1985. It allowed the exporters of nontraditional items to cash a
certain proportion of their earnings (known as entitlements) at a higher exchange rate of WES. In 1992 with
the unification of the exchange rate system, the XPB scheme ceased.
Bonded Private Bonded Warehouses (PBWs) was introduced in 1985. This facility was assisted to exporters of RMG,
Warehouse specialized textiles such as towels and socks, leather, ceramic, printed matter and packaging materials, who
are required to export at least 70 percent of their produce until 1993. Currently this facility was extended to all
exporters. Exporters of manufactured goods are able to import raw materials and inputs without payment of
duties and taxes. The raw materials and inputs are kept in the bonded warehouse. On the submission of
evidence of production for exports, required amount of inputs is released from the warehouse. The bonded
warehouse licensing reform implemented in May 2008
Duty Drawback A national system of custom and other duty duty payment was adopted in 1982-83. Exporters of manufactured
products are given a refund of customs duties and other taxes such as VAT paid on the imported raw
materials that are used in the production of goods exported. Exporters can also obtain drawbacks on the
value added tax on local inputs going into production. During fiscal year 1995-96, the government, in an
attempt to give incentive to the domestic textile and garments sector, allowed 25% compensatory assistance
to the industries of this sector. The Duty Exemption / Drawback office (DEDO) was established in 1986 in the
National Board of Revenue.
Duty Free Since 1992, import of machinery and spare parts were made duty and other tax free for export oriented
Import of industry. Import of machineries without payment of any duties for production in the export sectors.
Machinery

Analysis of existing trade policy framework of Bangladesh


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Various Export Promotional Schemes


Scheme Nature of Operation
Back to Back Back to back LC facilities were started its journey in 1985-86 (1984). It allowed the exporters to open L/Cs for
Letter the required import of raw materials against their export L/Cs in such sectors as RMG and leather goods. The
of Credits system is considered to be one of the most important incentive scheme for the RMG export. The is important
(L/Cs) trade financing concept for exporters. The local suppliers can take the advantage of financing by using inland
B2B L/C. these facility was extended to all exporters since in the mid of 1993.
Cash Subsidy The scheme was introduced in 1986. Since 1986, cash assistance of 15% of export value is granted to
specialized textile products where exporters choose not to use bonded warehouses and duty drawback
facilities. This facility is available mainly to exporters of textiles and clothing who choose not to use bonded
warehouse or duty drawback facilities. Currently, the cash subsidy is 25 percent of the free on board export
value. In recent times, cash subsidies have been offered to agro products exporters.
Interest Rate It allows the exporters to borrow from the banks at lower bands of interest rates of 8-10 percent against 14-16
Subsidy percent of normal charge.
Tax Holiday Tax holiday was in place since mid-70s .Tax Holiday First introduced under the Industrial Policy of 1991-93,
this incentive allows a tax holiday for exporter for 5-12 years depending on various conditions.
Income Tax Income tax rebate was introduced in early 1980s (1985). Exporters are given rebates on income tax. Recently
Rebate this benefit has been increased. The advance income tax for the exporters has been reduced from 0.50
percent of export receipts to 0.25 percent. The total income of small cottage industry is outside the tax.
Retention of Exporters are now allowed to retain a portion of their export earnings in foreign currency. The entitlement
Earnings in varies in accordance with the local value addition in exportable. The maximum limit is 40 percent of total
Foreign earnings although for low value added products such as RMG the current ceiling is only at 7.5 percent. The
Currency foreign exchange retention is extended gradually. As of September 2006, exporters are allowed to retain 10%
(with high import content) to 50% (for low import content) of their f.o.b. export earnings in foreign currency
accounts denominated in U.S. dollars, pounds sterling, Deutsche marks, Japanese yen or euros.

Analysis of existing trade policy framework of Bangladesh


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Various Export Promotional Schemes

Scheme Nature of Operation


Export Credit Introduced in 1978 to insure loans in respect of export finance, it provides pre-shipment and post-shipment
Guarantee (and both) guarantee schemes. Export loan refinancing by Bangladesh Bank in 1984. Commercial banks can
Scheme grant export loans from their own funds or from the refinancing facility of the Bangladesh Bank (Pre-shipment
& post-shipment) (& for 100% export oriented industries) in 1983.
Special In late 70s when individual ownership economy revived in our country EPZ was created to attract capital
Facilities for investment, employment generation and rapid industrialization. The Bangladesh Export Processing Zone
Export Authority (BEPZA) was created under EPZA Act no. 36 of 1980. To promote exports, currently a number of
Processing EPZs are in operation. The export units located in EPZs enjoy various other incentives such as tax holiday for
Zones (EPZs) 10 years, duty free imports of spare parts, exemption from value added taxes and other duties. In 1996
government introduced Bangladesh Private Export Processing Zones Act 1996 where private sectors are
allowed to establish EPZ through its own facilities.
Textile Policy In 1989, the Government announced its first ever textile policy which set as its objective the achievement of
self-sufficiency and development of export potential in textiles and textile goods.
The Unification The unification of exchange rate system 1992.Since 31 May 2003 the government has introduced fully market
of Exchange based interest rates abolishing the system of flexible exchange rate.
Rate
Refund of VAT The VAT system was introduced on 29 July 1991.To support the export the VAT refunded scheme was
introduced in 1992.

Analysis of existing trade policy framework of Bangladesh


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Export Policy and responsible institutions in Bangladesh

Bangladeshs Export Policy is subject to the Import Export


(Control) Act of 1950 in terms of which government may make
an import or export policy order. Prior to 2006 there was an
Export Policy Order, with the status of law, but since then it has
been an Export Policy. The rationale for the difference of the
Export Policy with the Import Policy Order is that the latter is a
control regime requiring directives, whereas the Export Policy is
open, with the objective of promoting exports.
The Export Policy is formulated every three years on the basis of
recommendations of a Consultative Committee comprising
representatives from the main industries/trade associations,
chambers, research organizations, respective Ministries, Divisions
and organizations so to ensure the sustainability of the export
growth during the policy.

Analysis of existing trade policy framework of Bangladesh


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Export Policy and responsible institutions in Bangladesh

The Export Policy explicitly encourages the use of local raw


materials with a view to establishing backward linkage industries,
in particular in textiles and clothing. Thus, it is foreseen to
provide subsidies (cash incentives) as alternative export
promotion instrument for industrial products linked to local-
content/local value added conditions.
While MoC has the mandate to formulate Bangladeshs export
policy every three years and to review export policies and
programmes, the Export Promotion Bureau (EPB) under the MoC,
has the mandate to implement, enforce and monitor the export
policies and to coordinate export promotion initiatives with
private and public sector organizations. Moreover, EPB is in
charge of managing the GSP system and Rules of Origin (RoO)
certifications. It is administered by a board with members from
both public and private sectors.
Analysis of existing trade policy framework of Bangladesh
35

Export Policy and responsible institutions in Bangladesh

There are no product-specific taxes, charges or levies on exports.


Goods subject to export prohibition are listed in the Export Policy
2012-2015. The bans on exports of agricultural commodities and
manufactured goods are in place mainly for reasons of health,
eco-balance, security, archaeological value, or maintenance of
adequate domestic supply.
All exporters, except those in export processing zones (EPZs), are
required to obtain an Export Registration Certificate (ERC) from
the CCIE. The documentation required for an ERC is the same as
for an IRC. Exports of all kinds of products are allowed without
L/C on the basis of consignments or advance cash payments.
Additional export certificates may be required for certain
products. According to the authorities, the number of signatures
required on the manual customs export form has declined from
38-42 in 2006 to about 5- 7 in 2012.
Analysis of existing trade policy framework of Bangladesh
36

Export Policy and responsible institutions in Bangladesh

The authority of ERC permission-


Product Certificate or permit Issuing ministry or agency
Any product as required by Certificate of origin Export Promotion Bureau or
the importing country Chamber of Commerce and
Industry
Frozen fish Health-cum-quality certificate Department of Fisheries
Goods of plant origin Quarantine certificate Ministry of Agriculture
Tea Export authorization Tea Board
Pharmaceutical products No objection certificate Drugs Administration
Goods for international fairs or No objection certificate Export Promotion Bureau
exhibitions
Jute Export price certificate Bangladesh Bank
Goods for repair Export permit CCIE
No objection certificate Bangladesh Bank
Ready-made garments GSP certificate Export Promotion Bureau
Live wild animals Export permit CCIE
No objection certificate Chief Conservator of Forest

Analysis of existing trade policy framework of Bangladesh


37

Analysis of current Export Policy Order 2012-15


The main objective of Bangladeshs export policy is to strengthen export-led growth,
leading to poverty reduction, through enhancing export, increasing productive
capacity of EOIs and facilitating overall export sector through capacity building of local
industries (Export Policy 2012-15). The following eleven key objectives are noted:
1. Updating and liberalizing the trade regime in accordance with the needs and
requirements of the World Trade Organization and globalization;
2. Encouraging labor-intensive (especially female labor) export-oriented production;
3. Ensuring availability of raw materials from home and abroad for manufacturing
export goods;
4. Augmenting productivity and diversification of products;
5. Improving the quality of products, encouraging the use of modern, appropriate and
environment-friendly technology, producing high-end products, and improving the
design of the products;
6. Enhancing efficiency and dynamism by using e-Commerce and e- Governance;
7. Initiating new strategies for the expansion of the markets for export products,
making proper utilization of computer technology and encouraging application of
all modern technologies including e-Commerce;
Analysis of existing trade policy framework of Bangladesh
38

Analysis of current Export Policy Order 2012-15

8. Assisting the development of necessary infrastructure, particularly for


backward and forward linkages in order to encourage the production of
exportable goods;
9. Creating new exporters and providing all-out support to the existing exporters;
10. Assisting the development of a skilled labor-force through proper training for
managing international trade; and
11. Providing adequate guidance to trade bodies, business organizations, business
people and related individuals in understanding the changing international
trading system, etc.
There are some specific activities related to export which are regulated by specific
rules and acts, such as quality control and export clearance; charges and levies;
export restrictions; voluntary restraints, surveillance and similar measures export
subsidies and other financial assistance; duty concessions; tax concessions; export
finance; export insurance and guarantees and export promotion and marketing
assistance.

Analysis of existing trade policy framework of Bangladesh


39

Analysis of Export Policy Order 2012-15

The Export Policy 2012-15 consists of 7 chapters and 2 Annexes, with


the following lay-out:
Preface: The preface sets out the goals of trade and export policy
and indicates specifically that Bangladesh needs to augment the
production capacity of local export-oriented industries, give more
emphasis on protection of environment of the factories including
execution of compliance requirements, improve the quality of the
products, and above all strengthen our efforts to diversify
products and their markets.
Chapter One (Title, Objectives, Strategies, Application and
Scope): It sets out the objectives of the Export Policy, the
implementation strategy and the application and scope of the
policy. The Export policy applies to all products exported from
Bangladesh, but does not apply to EPZs.

Analysis of existing trade policy framework of Bangladesh


40

Analysis of Export Policy Order 2012-15

Chapter Two (General Provisions for Export) : It provides the


general provisions for exports. This lists the 16 export products on
the prohibited list (Annex 1 of Export Policy) and the four products
included on the restricted or conditional export list (Annex 2 of
Export Policy); temporary importation, including entre port, re-
export and importation for repairing, replacement or refilling.
Chapter Three (Steps toward Export Diversification): It deals with
the steps to be undertaken to product diversification. It states
that Product and Service specific Business Promotion Councils
have been set up by the MoC to diversify exports, improve and
ensure the quality of products, acquire appropriate technologies,
fulfill compliance requirements and to market products. No
evidence could be found that any of this happened. The chapter
then lists the 10 product sectors accorded highest priority status
and 10 sectors according special development status.
Analysis of existing trade policy framework of Bangladesh
41

Analysis of Export Policy Order 2012-15

Chapter Four (General Export Facilities) : This chapter deals with


general export facilities and provides that exporters may use part of the foreign
exchange they earn for certain purposes, including business-related foreign trips,
participation in export fairs and seminars abroad, importing raw materials,
equipment or spare parts, and setting up offices abroad. It also provides for setting
up an Export Promotion Fund with the EPB to be used for providing venture capital
at lower interest rates and with soft terms for production of goods. This chapter
also discusses about funding for export, export credit, Rebate of Insurance
Premium, Incentives for Export of Non-traditional Industrial Products, Bond
Facilities for Export Oriented Industries, initiating brand names to fetch higher price
will be encouraged, Providing alternative incentives, instead of duty bond or duty
draw-back to export-oriented local textiles and readymade garment industries,
General Facilities for Export-Oriented Industries, Venture Capital Facilities for
export-oriented Small and Medium Enterprises, Encouragement and Facilities for
Exports Based on Sub-Contracting, Strengthening Export Related Training.
Analysis of existing trade policy framework of Bangladesh
42

Analysis of Policy Order 2012-15

Chapter Five (Product-Specific Export Facilities) : This chapter


provides separate sub-chapters related to the RMG, frozen fish,
handicrafts, tea, jute, leather, pottery and other sectors. These
sub-chapters are considered separately.
Chapter Six (Export of Services): Chapter 6 deals with the export
of services and indicates inter alia that the EPB will prepare a
comprehensive plan of action in coordination with the concerned
departments and institutions and take necessary steps for
augmenting export in the services sector; that the EPB will take
initiatives for maintaining export statistics of the services sector;
and that steps will be taken to enhance the capacity of
Bangladesh Missions abroad to promote export in the services
sector.

Analysis of existing trade policy framework of Bangladesh


43

Analysis of Export Policy Order 2012-15

Chapter Seven (Other Steps towards Export Promotion) : Chapter 7


deals with other steps towards export promotion. Most of these
issues deal with infrastructural issues, such as developing Mongla
port, providing uninterrupted electricity supply and providing
more space in aircraft and ships for the export of agricultural
goods.
Annex 1(List of Export-Prohibited Products):
Annex 2 (List of Products under Conditional Export):

Analysis of existing trade policy framework of Bangladesh


44

Analysis of current Export Policy Order 2012-15

List of Highest Priority Sector : Highest priority sectors will refer


to those sectors which have special export potentials, but such
potentials could not be utilized properly due to certain
constraints, and more success is attainable if adequate support is
rendered to them. The sectors are:
1) Agro-products and agro-processed products;
2) Plastic Products;
3) Footwear and leather products;
4) Pharmaceutical products;
5) Software and ICT products;
6) Home textile;
7) Ocean going Ship Building Industries;
8) Furniture Industries;
9) Terri Towel; and
10) Tourism Industries
Analysis of existing trade policy framework of Bangladesh
45

Analysis of Export Policy Order 2012-15

Special Priority Sector : Product sectors which have export


potentials but whose production, supply and export base are not
consolidated will be included in special development sectors to
strengthen their export base. The following product sectors will
be included in the special development sectors:
(1) Light engineering products (including auto-parts and bicycles);
(2) Electric and electronic products;
(3) Jute products;
(4) Hand loom fabrics;
(5) Ceramic products;
(6) Frozen fish;
(7) Printing and packaging;
(8) Rubber;
(9) Uncut diamonds and jewelry; and
(10) Cosmetics and toiletries.
Analysis of existing trade policy framework of Bangladesh
ACJ Cl
47

Tariff reform

The policy of tariff reform and rationalization of tariff structure


was initiated in the late 1980s and reinforced in 1990s.
The first attempt was made to remove anomalies in tariff structure
in FY 1985-86.
Tariff reduction process was accelerated in early 90s.
The highest tariff was brought down from as high as 300% in FY
1991-92 to 50% in FY 1995-96 and again reduced to 40% in FY 1989-
99.
The maximum tariff was further reduced to 25% in FY2005-06.
The number of tariff slabs has come down from 24 in the 1980s to
only 4 in FY 2005-06.
Applied MFN average lowered from 70.6% in 1992 to 14.9% in 2012.
However, at the same time, para tariffs had been increased from
3% to 13%. This had the effect that the rate of protection has
remained stagnant in the past decade at about 28%.
Analysis of existing trade policy framework of Bangladesh
48

Tariff Structure

Average MFN tariffs declined markedly from 70.6% in FY1992 to


28.7% in FY1996 and further to 14.9% in FY2012, they remain
amongst the highest in the region.
Tariffs are ad valorem with few exceptions and are levied on the
c.i.f. value of imports.
Four-tier customs tariff structure.
Duties on basic raw materials, capital machinery and parts,
intermediate goods and finished products are 5%, 3%, 12%, and
25%, respectively.
The 0% rate on commodities like rice, wheat, onions, pulses, edible
oils, seeds, fertilizers, medicines and cotton.
The average rate for agricultural products continues to be higher
than for industrial imports.
Whereas 100% of agricultural tariff lines (WTO definition) are
bound, only 2.7% of industrial tariff lines are bound.
Analysis of existing trade policy framework of Bangladesh
49

Tariff Structure

There are three types of tariff concessions: those on imports of


capital machinery and spares/parts by registered industrial
consumers, including export-oriented industries; those targeting
exporters; and those provided for a specific use or user (i.e. end-
use provisions) such as the dairy and poultry, pharmaceutical,
leather and textile industries.
Only 20 HS eight-digit tariff lines are subject to specific duties. A
specific duty on some essential commodities is imposed to reduce
the tax burden on these commodities or minimize the impact of
customs duty on the price in the domestic market due to price
fluctuation. Specific duties are levied on: cement clinkers;
petroleum bitumen; vessels and other floating structures for
breaking up; ferrous waste and scrap; iron and non alloy steel
ingots; semi-finished products of iron or non-alloy steel; and
nonmonetary gold.
Analysis of existing trade policy framework of Bangladesh
50

Para tariffs and other charges

Value-added tax (VAT) and advance trade VAT (ATV): VAT is


levied at a single rate of 15% on all imports and domestically
produced goods. In the case of imports, valuation is based on the
c.i.f. value plus import duty and, in some cases, supplementary
duty. Exports are zero-rated; VAT paid on imports used in the
manufacture of exports is refunded. Due to the limited capacity of
the tax administration in collecting VAT on imported items for
trade at retail level, the tax is collected at the import stage.
Supplementary duty (SD) : The widespread use of SDs, which have
become a key instrument of trade policy, is a cause for concern.
In FY2012/13, SDs cover 1,267 tariff lines, up from 1,110 tariff
lines in 2010 and from 356 tariff lines in FY2003. As per the VAT
Act 1991, SDs are aimed at discouraging imports of luxury goods
and production and supply of goods and services considered
undesirable on social, moral, religious or health grounds.
Analysis of existing trade policy framework of Bangladesh
51

Para tariffs and other charges

Regulatory duty (RD): A regulatory duty has been applied as an


interim measure since 2000/01. According to the authorities,
against the backdrop of gradually decreasing customs duties, a 5%
regulatory duty has been imposed on commodities having a 25%
customs duty except those enjoying concessionary rate facilities
with a view to protecting local industry and ensuring revenue
growth. Regulatory duties remain unchanged in FY2012-13.
Advance Income Tax (AIT): importers have to pay a tax called
advance income tax (AIT), which is charged on nearly all imports at
3% of assessable value, and can be credited against the importers
income tax liability. Although not technically a protective tax, the
AIT has cash flow implications for importers.

Analysis of existing trade policy framework of Bangladesh


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Tariffs and responsible institutions

The Ministry of Finance (MoF) revises Bangladeshs import


tariffs and other duties on an annual basis as part of the
National Budget. Ad hoc changes to the announced tariffs
and para-tariffs can, however, be implemented by Statutory
Regulatory Orders (SROs).
The National Board of Revenue (NBR), under the Ministry of
Finance, administers all taxes, including customs duties and
VAT, as well as tax holidays and other tax concessions.
The Bangladesh Tariff Commission (BTC) is supposed to
advise NBR/MoF on the tariff protection level and to
administer tariffs and import duties but criticises that
NBR/MoF does not request its advice prior formulating tariffs
and other duties.

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53

Tariffs and responsible institutions

The revision of import tariff and other duties are not always
undertaken with proper assessment of their impacts and
implications on different economic activities, nor involve
sufficient intra-Ministerial coordination.
The setting of tariffs is a crucial element of Bangladeshs
trade priorities need to be properly taken into consideration
for tariff revisions.
Whilst a uniform tariff is primarily revenue raising,
differential tariffs are a trade issue with budgetary
consequences.
It is therefore crucially important that MoC/BTC carries out
its responsibility in the area of tariff policy formulation in
conjunction with NBR/MoF.

Analysis of existing trade policy framework of Bangladesh


54

Custom and Border Policy

The National Board of Revenue formulates the policies


related to custom duties, VAT and supplementary duties.
The full implementation of the World Customs
Organizations (WCO) Kyoto Protocol (1999) is
internationally regarded as best practice and is also
aimed to be implemented by Bangladesh, which joined
the Kyoto Protocol in 2012.
Bangladeshs Customs Act of 1969, which is currently
revised, lays down the powers and responsibilities of the
Customs Authority in completing the processes and
procedures. Bangladesh Customs works under the
umbrella of the National Board of Revenue (NBR), the
apex body for direct and indirect tax revenue in
Bangladesh under the Ministry of Finance.

Analysis of existing trade policy framework of Bangladesh


55

Custom and Border Policy

Customs Classification Rules


HS Code System: It is actually the shortened name for
Harmonized Commodity Description and Coding System.
It is developed and periodically modified by the WCO. It
guides the codification of all import and export product
categories throughout the world.
Customs administrations in various countries have adapted
their tariff lines and tariff structure in line with the HS Code
system of the WCO.
In Bangladesh, the Customs authority have also done so. The
HS Code system is incorporated into the First Schedule of the
Customs Act. Bangladesh also periodically updates the
revisions made in the system by the WCO.
The First Schedule is named Bangladesh Customs Tariff.

Analysis of existing trade policy framework of Bangladesh


56

Custom and Border Policy

Construction of First Schedule


Section: 21 Sections
Chapter: (2 Digit-level) 98 Chapters (1 unused-
Chapter 77)
Heading: (4 Digit-level) 1135 Headings (31 unused)
Subheading : (6 Digit-level)
National HS Code : (8 Digit-level) Also known as Tariff
Line. In 2013-14 total 6054 Tariff Line (previous year
6434)

Analysis of existing trade policy framework of Bangladesh


57

Custom and Border Policy

The 2015 World Banks Doing Business investigates Bangladeshs


trading across borders performance with respect to documents
required, time of procedure, and costs of exporting/importing.
To export a standard container takes on average 28.3 days,
requires 6 documents and costs US$ 1281, while the import of the
same container takes 33.6 days, requires 9 documents and costs
US$ 1515.
In 2015, Bangladesh ranked 173 out of 189 economies, much
behind all other South Asian economies Sri-Lanka (99), Nepal
(108), Maldives (116), Bhutan (125), Pakistan (128), India (142);
only except Afghanistan (183).
According to OECD estimates, each day of delay in shipping time
costs about 0.8% of the total good, there would be great benefit
for Bangladesh from implementing Customs and Border control
reforms.

Analysis of existing trade policy framework of Bangladesh


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Concluding Remarks
The analyses of the IPO and the Export Policy show that these
policies have been developed in isolation. For the greater part the
IPO deals with import control and import policy without reference
to export policy, tariff policy or industrial policy.
The Export Policy has identified some priority sectors on which
special focus is placed for export purposes, but no exports can
take place if the specific industry is not properly developed.
Accordingly, the IPO, the industrial policy and the tariff policy,
amongst others, should be focused on enhancing the
competitiveness of these priority sectors. In the IPO, however,
very little reference is made to any of these sectors.
Several provisions of the IPO deal with imports for the RMG
sector, which is not one of the sectors identified by the Export
Policy, as the sector is already internationally competitive.
Cash incentives are not aligned to the highest priority sectors and
the special development sectors identified in the Export Policy
Analysis of existing trade policy framework of Bangladesh
59

Concluding Remarks

The major objectives of the Import Policy Order (IPO) and


Tariff and Customs control should be to provide support to
the Export Policy, thereby strengthening Bangladeshs
overall trade policy objectives of export-led growth.
For this reason it is important that the Export Policy is
designed first and that the Import Policy Order (IPO) and
Tariff and Customs procedures are then developed
accordingly; i.e. those priority sectors identified in the
Export Policy should be mirrored in according policy
initiatives of the IPO and Tariff and Customs procedures

Analysis of existing trade policy framework of Bangladesh


Thank you !

ACJ Cl