Bangladesh has made momentous progress in liberalizing its trade regime during the last decade. The Customs tariff features one of the major tool of its trade policy. Customs Duty has been reduced on various items with the objectives of providing assistance to domestic manufacturing sector as well as to encourage trade and foster competition in the economy. Steps have also been taken to eliminate the existing distortions in the rates of custom duty and rationalise the same. In this context various measures have been taken in the budget for fiscal year (FY) 2002-2003, including reduction of the rate of customs duty on imports, complete withdrawal of supplementary duty on a large number of goods, and withdrawal of license fee etc. As a result, the incidence of custom duty on many imported goods will decrease to a great extent.
- Customs Valuation
- Import Licenses
- Import/Export Documentation
- Standards
- Free Trade Zones/Warehouses
- Membership in Trade Arrangements
The lowest rate of customs duty has been fixed at 7.5 percent, while the highest customs duty rate has been lowered to 32.5 percent from the previous 37.5 percent. As an attempt to bring transparency and gradual withdrawal of supplementary duty, supplementary duty on 120 category of goods out of 170 category is withdrawn in the current budget. The withdrawal list includes industrial raw materials as well. There are a variety of additional border charges. In general, a letter of credit or import permit fee of 2.5% is charged on imports. An advance income tax is levied on importers; the advance tax payments can be claimed as a tax credit at the end of the tax year. A trade neutral VAT of 15% is levied on all imports (and domestically produced goods), with some exceptions. Supplementary duties ranging from 5-270% are levied on certain "luxury" products. Excise duties have been abolished on all items except manually-prepared cigarettes, bank accounts, and textiles. Certain products are exempt from the value-added tax. Other export-oriented industries and indirect exporters can claim a duty-drawback at stated rates.
Customs Valuation
All tariffs are ad valorem except on gold imports, where tariffs are assessed on weight rather than value. Ad valorem tariffs are generally assessed on the basis of the CIF (cost, insurance, freight and other charges) cost of goods. Duties are collected in Bangladesh currency by Customs authorities under the Bangladesh Customs and Excise Departments of the Ministry of Finance's National Board of Revenue. The government has implemented a pre-shipment inspection system for importation of goods in Bangladesh. This system involves certification of quantity, quality and value of imported consignments by reputed pre-shipment inspection companies. Implementation of this system has resulted in faster clearance of consignments from the ports. Internationally-recognized companies have been contracted by the National Board of Revenue to certify value, quantity and quality of imported consignments prior to their shipment from overseas. A new 1% fee on value of imports has been levied to pay for the pre-shipment inspections.Import Licenses
The import permit system is now automatic, and the cumbersome procedure for opening letters of credit has been simplified. Import licenses are not required for any imported items, except those on the restricted list. However, importers need to use Letter of Credit Authorization (LCA) forms to import goods. Importers also need to use an IRC (Import Registration Certificate), which costs between Taka 500 - 5000.Import/Export Documentation
Normally all imports transacted through a bank require a Letter of Credit Authorization (LCA) Form, unless otherwise specified. Obtaining an LCA is not very difficult, and many of the documents required for submission by importers can be kept on file with their banks. Even though there is no lack of foreign currency for import transactions, banks prefer to source foreign currency for L/Cs over $ 500,000 from the central bank as a safety net against currency fluctuation. On average, one or two days are required to obtain registration from the central bank. Unless otherwise specified, all imports must be made by opening a binding L/C. Import against an LCA may be made without opening an L/C in the following areas:
import of books, journals, magazines, and periodicals on display draft of issuance bill basis; import of any permissible item for an amount not exceeding $ 5,000 only during one fiscal year against remittances made from Bangladesh; imports under commodity aid, grant or such other loan for which there are specified procurement procedures for import of goods without an L/C; and imports of "International Chemical References" through bank drafts by recognized pharmaceutical (allopathic) firms on the approval of the Director, Drug Administration, for the purpose of quality control of their products. Importers must submit to their nominated banks the following documents along with the LCA:
L/C application form duly signed by the importer; indents for goods issued by indentor or a proforma invoice obtained from the foreign supplier; and insurance cover note. Foreign firms are allowed to import permissible commercial items against prior permission from the Chief Controller of Import and Export and need to provide following documents: photocopy of the valid Import Registration Certificate; photocopies of invoices, bill of lading, and import permit duly certified by the bank; original or copy General Index Register (GIR) certificate from Income Tax Authority; certified copy of the last income tax assessment order; and name and description of each item to be imported with quantity and approximate CIF value. Public sector importers also need to provide the following documentation: attested photocopy of allocation letter issued by the allocating authority in favor of the concerned public sector agency specifying the source, amount, purpose, validity, and the terms and conditions; attested photocopy of sub-allocation letter, if any, issued in favor of the importing agency or unit; attested photocopy of sanction letter from the administrative ministry or authority, where applicable; and a declaration by the authorized officer of the importing agency indicating the amount of utilized/unutilized government funds and that imported raw materials will not be sold. Private sector importers need to furnish the following documents: valid membership certificate from the registered local chamber of commerce and industry or any trade association, established on an all-Bangladesh basis, representing any special trade or business; proof of payment of renewal fees for the Import Registration Certificate (IRC) for the concerned fiscal year; copy of a "TIN Certificate" issued by the tax authority. The TIN (Tax Identification No.) Certificate is a new requirement aimed at ensuring collection of income tax, VAT and other revenues from importers; a declaration, in triplicate, that the importer has paid income tax or submitted an income tax return for the preceding year; and any such documents as may be required by import policy order or public notice, or instruction issued by the Chief Controller of Imports and Exports. In the following case, neither an LCA nor the opening of an L/C will be necessary, but an import permit (IP) or clearance permit (CP) will have to be obtained by the importer:
import of books, magazines, journals, periodicals and scientific and laboratory equipment against surrender of UNESCO coupons; imports under pay-as-you-earn scheme for a limited number of cars, fishing vessels, cargo or passenger vessels, and new machinery on the basis of clearance from the Bangladesh Bank; import of items by passengers coming from abroad in excess of the permissible limits as per permitted allowance; and import of free samples, advertising materials, and gift items above prescribed ceilings. Agents and representatives of foreign manufacturers are allowed to import machinery and equipment for purposes of demonstration or exhibition, under following conditions: the goods brought into Bangladesh will be re-exported within a period of one year; the importer shall execute a bond and furnish a bank guarantee or understanding or a legal instrument to the satisfaction of Customs at the time of clearance indicating that the goods will be re-exported in a timely manner; and if the goods include any banned or restricted items, prior permission is required from the Chief Controller of Imports and Exports. Equipment or machinery imported on a temporary basis is exempt from duty if the importer obtains an import/export permit. There is no tariff quota on imports.
Standards
Quality standards are set and monitored by the Bangladesh Standards and Testing Institute. Bangladesh also recognizes and accepts goods bearing certification from standard institutions of other countries. Standards for pharmaceuticals are controlled by the Department of Drugs Administration under the Ministry of Health and Family Welfare. The Bangladesh Atomic Energy Commission tests imported food items to ensure that the prescribed standard for radioactivity is maintained.
Free Trade Zones/Warehouses
Bangladesh has two Export Processing Zones (EPZs), one in Chittagong and one in Dhaka. Four new EPZs are under the development process in Comilla, Ishwardi, Saidpur, and Mongla. The EPZs, a non-tariff area, offer tax breaks, a relatively secure power source, duty-free import of capital machinery and raw materials, warehouse facilities, and other benefits to 100% export-oriented industries. Chittagong port has 116,375 square meters of covered warehouse space, with a capacity to hold 50,000 metric tons. The port also has a warehouse for hazardous cargoes (102 metric tons) and for cold storage (500 tons). Mongla port near Khulna (southwest Bangladesh) also has warehouse facilities. For industries outside the EPZ's, the National Board of Revenue provides bonded warehouse facilities to 100% export oriented industries or to industries whose raw materials/components are mainly imported. Production within bonded areas is free of import duties, with a minimum of customs formalities. Privately-owned and operated EPZ's are now legal. Two private EPZ's, including one to be owned and operated by Korean investors, have been approved in Chittagong, although construction is yet to begin.Membership in Trade Arrangements
Bangladesh is one of the founding membesr of the World Trade Organization. It has been active in promoting the interests of the least developed countries in the WTO. Bangladesh is a member of the South Asia Preferential Trade Agreement (SAPTA) under the umbrella of the South Asia Association for Regional Cooperation (SAARC). Bangladesh is also a signatory to the Bangkok agreement, which aims at trade liberalization among LDC's in Asia. Bangladesh is also a member of BIMSTEC, an organization which seeks to promote economic cooperation (without preferential trade arrangements) between Bangladesh, India, Myanmar (Burma), Sri Lanka, and Thailand.