The National Board of Revenue (NBR) is Considering granting duty-free imports of raw materials to small-scale exporters without bonded warehouse licenses in exchange for a bank guarantee paying the relevant taxes. This is intended to promote diversification, expedite exports, and facilitate business transactions. The advantage would first be available to exporters with yearly exports under $5 million. According to the NBR’s customs wing plans to implement it by next June. The revenue authority met with members from the public and commercial sectors on January 23 to discuss a workable solution according to NBR sources. A committee was established to produce proposals in three weeks. They have had requests for this facility from a few business owners in the food industry, steel, and furniture industries.
An NBR official with knowledge of the situation stated “As an alternative to the bonded warehouse license. We are now thinking about offering it centrally to all exporters.” The NBR’s Customs Bond and IT member Md. Moazzem Hossain, verified the statement. He also saying, “There is a plan to release raw materials for export under a duty-free facility by securing a bank guarantee equivalent to the import tax on raw materials.” He stated “Once the goods are manufactured and exported using those raw materials, the bank guarantee will be released upon providing proof of the foreign exchange inflow (Proceed Realisation Certificate).” Additionally, Moazzem Hossain pointed out that firms without bond licenses already export more than $8 billion. In order to make it easier to import raw materials the government has been permitting duty-free imports as long as the items are kept in a certain warehouse and used to their full potential for exportation. This arrangement is called bonded warehousing.
According to entrepreneurs, small scale exporters sometimes find the “additional expenses” and strict requirements required to obtain a bonded warehouse license intolerable. Many are therefore hesitant to choose it. Over 20,000 exporters are active each year, however not all of them need to import raw materials, according to the Office of the Chief Controller of Imports and Exports. However, under the bond facility, only roughly 6,000 factories including those in the plastics, ready-made clothing, and other industries—are allowed to import raw materials duty-free. The Export Promotion Bureau (EPB) estimates that the nation exports about 87 different kinds of manufactured goods. Over 80% of Bangladesh’s $44.46 billion in manufactured goods exports in FY24 came from the ready-made clothing industry.
A more accessible alternative is what exporters desire
Exporters have praised the NBR’s move, but some have demanded a more accommodating stance. “This is good news in the current situation. Despite our struggles in many areas,” said Mohammad Hatem, head of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA). He continued, “We have long been urging for a efficient solution to facilitate duty free raw material imports for exporters who are unable to obtain a bonded warehouse license.” Since the bank guarantee might not be practical for all exporters. The knitwear exporter from Narayanganj proposed a more approachable substitute. Banks are occasionally hesitant to offer guarantees to all kinds of exporters. he warned that exporters must pay commissions to the banks and deposit a sizeable sum as security. Which could put small scale exporters in a challenging situation.”
Since all exporters are registered with the VAT office he suggested that the NBR take audit reports from that agency into consideration as an alternative to bank guarantees. The duty drawback mechanism now in place allows for the recovery of import taxes paid on imported raw materials following export. Through the NBR’s Duty Exemption and Drawback Office (DEDO), exporters can request a refund of import taxes they have already paid. Although there are a number of obstacles involved. Exporters have complained about them, which include the need to submit copious amounts of documentation, lengthy processing periods, and extra expenses. According to business owners, this deters many people from using DEDO to get reimbursements.
Source: The Business Standard
