Apparel Online Bangladesh Magazine May Issue 2019 | Page 44

BANGLADESH CANVAS
ALLEGED MISUSE OF BONDED
WAREHOUSE FACILITY AND ITS IMPACTS
Besides loss to national exchequer, such malpractices are posing a huge challenge
to the textile mills of the country
I
ntroduced with noble intentions
to help export-oriented industries
maintain a competitive edge, bonded
warehouse facility is apparently
turning into a big headache for the
Government and the textile sector
alike. The alleged misuse of this
facility is reportedly leading not only
to loss in revenue earning but also
is posing a serious challenge to the
very existence of the textile mills of
the country.
Under the bonded warehouse system,
export-oriented industries can import
duty-free fabrics. Licences are given
to import raw materials without any
duty charges against a commitment
to export the finished products, which
makes exports more competitive.
It helps export-oriented industries,
especially garment exporters, reduce
lead time and keep prices competitive.
As per reports, 90 per cent woven
items, 45 per cent garment accessories
and 35 per cent knit items are imported
under the bond system for the apparel
sector. However, some unscrupulous
entities with vested interests are
allegedly misusing this facility to sell
duty-free imported goods in the local
market, instead of using them for
export purpose, to earn easy money.
If the country’s textile manufacturers
are to be believed, they are losing
around US $ 6 billion annually in the
domestic market due to misuse of
bonded warehouse facility along with
smuggling of yarn and fabrics into the
country. “The size of domestic market
of fabrics is 7 to 8 billion metres worth
US $ 11 to US $ 12 billion. Of this,
local producers meet only 3 to 4 billion
metres worth nearly US $ 6 billion and
the rest is met by smuggled fabrics
and bonded warehouse fabrics,”
maintained Mohammad Ali Khokon,
President, Bangladesh Textile
Mills Association (BTMA) speaking
to media, adding, “Market situation
suggests that smuggling of fabrics
As per reports, 90
per cent woven
items, 45 per cent
garment accessories
and 35 per cent
knit items are
imported under
the bond system
for the apparel
sector. However,
some unscrupulous
entities with vested
interests are
allegedly misusing
this facility to sell
duty-free imported
goods in the local
market, instead
of using them for
export purpose, to
earn easy money.
into the country and misuse of bonded
warehouse are taking place in a big
way.”
If that was not all, loss to exchequer
in the form of taxes and duties is
also quite substantial. As per a
media report published in March this
year which cited some high-ranking
officials of the National Board of
Revenue (NBR), in one-and-a-half
months alone, 40 companies were
reportedly found flouting norms of the
facility thereby depriving the state of
an estimated Taka 30 crore (in duty
and taxes).
In another instance late last year,
Chittagong-based customs officials
reportedly discovered abuse of duty-
free facility under bonded-warehouse
scheme after auditing the documents
of some 136 import consignments
belonging to one particular garment
exporter. The consignments of RMG
fabrics came through the Chittagong
Custom House (CCH) in 2018. The
Customs Valuation and Internal Audit
(CVIA) Commissionarate during
physical verification reportedly found
that the relevant garment company
had sold the fabric imported duty-free
to the local traders. If this particular
case has hit the headlines, scores of
44 Apparel Online Bangladesh | MAY 2019 | www.apparelresources.com
others go unreported, feel many in the
industry. Moreover, licence holders
sometimes purportedly use fake
addresses to escape the monitoring
mechanism, while some deliberately
neglect maintaining records to
hoodwink the authorities.
This has now motivated the NBR
to introduce a system to prevent
the open market sale of items
imported under bond facilities. The
revenue collection authority’s ‘Bond
Automation’ initiative is part of its
plan to stop the illegal practice that
is causing the national exchequer
a huge loss. However, many in the
industry are bemused as to the
unwarranted delay in automating
the whole process. “We have long
been requesting NBR to introduce
software to prevent misuse of bonded
warehouse facility but NBR officials
somehow are unwilling to automate
the system,” alleged President of
Bangladesh Chamber of Industries
Anwar-Ul Alam Chowdhury
Parvez, who reportedly claimed that
Bangladesh’s primary textile sector
was losing its competitiveness due to
misuse of bonded warehouse facility
along with the factor of increased cost
of doing business.