2. Analysis of Existing Trade Policy Framework of Bangladesh

7/23/2019 2. Analysis of Existing Trade Policy Framework of Bangladesh

1/60

ACJ Cl

Presented by:

Dr. Md. Mozibur RahmanCourse : EIB 534/532: Bangladesh in International Business

EMBA ProgramDepartment of International Business

Faculty of Business StudiesUniversity of Dhaka

06 October 2015


2/60

2

Analysis of existing trade policy framework of Bangladesh

Object ives

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


3/60

3


In t roduct ion

Source: World Bank

Overview of Bangladeshs International Trade


4/60

4


In t roduct ion

Overview of Bangladeshs International Trade (1970-2014)

Source: World Development Indicators, World Bank (http://data.worldbank.org/country/bangladesh)

Indicator Name 1970 1980 1990 2000 2010 2014

Imports of goods and

services (current million

US$)

1,124.76 3,239.43 4,076.61 9,060.86 25,106.32 43,853.97

Exports of goods and

services (current million

US$)747.58 995.27 1,844.50 6,588.07 18,472.45 34,343.96

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


5/60

5


In t roduct ion

Overview of Bangladeshs International Trade (in Corer Taka)

Source: Bangladesh Bureau of Statistics & Bangladesh Bank

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


6/60

6


In t roduct ion

Trade policy relates to all spheres of government policy that has

an impact on trade. It is generally accepted that government setstrade policy to maximize social welfare. The 6thFive-Year Plan ofBangladesh provides that

..it is critical that the trade policy regime is geared to

ensure export competitiveness in general while facilitatingemergence and expansion of new export products

The core Bangladeshi legal framework governing internationaltrade 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 nextclass.


7/60

7


Ins t i tut ional Framewo rk of Formulat ing Trade Pol icy

The Ministry of Commerce (MoC) is entrusted with the

formulation, implementation, monitoring, and evaluating of tradeand tariff policies of the country.

The ministry is supported by the EPB, CCI&E and Bangladesh TariffCommission.

The Import Policy Order is monitored and enforced by the office ofthe Chief controller of Import and Export. The IPO is issued by theMinistry of Commerce.

Export Promotion Bureau prepares the export policy and Ministry

of Commerce issues this. EPB implements and monitors exportpolicy and conducts promotional activities.


8/60

8


Ins t i tut ional Framework o f Form ulat ing Trade Pol icy

Bangladesh Tariff Commission provides recommendations to the

ministry of commerce and other ministries on tariff, import andexport 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 ExchangeRegulation Act 1947.


9/60

9



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 policyformulation; tariff policy formulation, and trade policy monitoring, WTO

coordination, regional trade agreements, export promotion, and accounting

services.

Office of the Chief Controller of Import

and Export (CCIE)

Registration of importers and exporters

Export Promotion Bureau (EPB) Export promotion, textile quota administrationTariff 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

Agricultural policy, SPSSAARC Agricultural Information CenterDepartment of Agricultural Extension

Bangladesh Agricultural Research

Council

Ministry of Fisheries and Livestock

Ministry of Environment and Forest Environmental and forest policy


10/60

10



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 (includingforeign investment), investment facilities

Bangladesh Export Processing Zones Authority

(BEPZA)

Export processing zones; Investment policy

Ministry of Post and Telecommunications Telecommunications services

Ministry of Civil Aviation and Tourism Air transport; Tourism

Ministry of Shipping Maritime transportMinistry 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


11/60ACJ Cl


12/60

12


Bangladeshs Import scenario

-40%

-20%

0%

20%

40%

60%

80%

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

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

1991-92

1992-93

1993-94

1994-95

1995-96

1996-97

1997-98

1998-99

1999-00

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

Import Growth (%)

MillionUSD

Percentage


13/60

13


Overview of Impo rt Pol icy changes since Independence

At the initial stage after independence Bangladesh faced a serious

challenge to rehabilitate the economy by addressing low foreignexchange reserve; narrow export base and rising import price.

The government emphasized on the improvement of balance ofpayment 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 rawmaterials required by the private sector industry for attainingeconomy 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 periodbetween 1972 and 1975.


14/60

14


Overview of Impo rt Pol icy Changes s ince Independence

The beginnings of policy reform and liberalization can betraced to deregulation measures starting in 1976.

Abolition of import licensing for commercial import on 1January 1976.

In 1978 the Government started issuing annual import policyorder.

Abolition of import licensing for industrial import on July 11983.

Import liberalization was made through bringing someproducts in open general list (positive list).

In FY 1985-86 abandoned the positive list approached andadopted the negative list approach.


15/60

15


Overview of Impo rt Pol icy Changes s ince 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 restrictionsmaintained to protect local industry.

Until 2000 Bangladesh removed the import restriction as itsown initiatives.

Since 2001 Bangladesh had to dismantle the importrestrictions maintained for trade reasons as percommitment under WTO Uruguay round agreement.


16/60

16


Impo rt Pol icy and Responsib le Inst i tut ion s in Bangladesh

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

Bangladeshsimport control authority. Its primary responsibility isthe implementation of rules, regulations and orders under theImports and Exports (Control) Act of 1950, which empowers theGovernment to regulate the importation and exportation of goodsand services.

The responsibility for drafting the Import Policy Order (IPO) liesprimarily with the Import Wing of the MoC, with significant inputsfrom the CCIE. The MoC had largely abrogated its rights in thisregard and transferred too much of its policy-making powers to

the CCIE. This prevents MoC from taking ownership of the importpolicy, resulting in a lack of commitment and support while at thesame time reducing the efficiency of CCIE in administering importpolicies.


17/60

17


Impo rt Pol icy Order

The IPO aims to make the import regime compatible to WTO

requirements, simplify the procedure to import capital machineryand raw materials, provide facilities for technological innovationand 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 andrestricted list and the rationale for providing duty drawbacks orSpecial 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 theimportation of products on the restricted list.

18


18/60

18


Impo rt Pol icy Order

Import policy establishes the principles for imposing restrictions,

however, most of the current IPO, is concerned with themechanics of import control. Though import control constitutespart of trade policy as a whole, it does not relate to import policyin the sense of developing the economy. Therefore, the twoissues of import policy and import control should be separatelydealt with in the IPO.

The IPO should have as major objectives, first, the support ofoverall trade policy and, second, providing support to the ExportPolicy. For this reason it is important that the Export Policy be

designed first and that the IPO be finalized thereafter, ensuringthat it is aligned to the Export Policy.

19


19/60

19


Analys is o f Impo rt Pol icy 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 thegeneral provisions for import, including the regulation of import, i.e.

that all products except those listed in Annexure 1 may be importedfreelyand that the import status of a product shall be determined bythe description of the goods rather than the HS code thereof. Thechapter further deals with the conditions for regulating imports and thegeneral conditions of the import of goods.

Chapter Three (Provisions Regarding Import fees):It deals with importfees. It provides for registration of importers in six classes on the basisof their ceiling value of overall annual import and generally deals withthe procedures for registration.

20


20/60

20



Chapter Four (Miscellaneous Provisions): It deals with

miscellaneous provisions, including import on joint basis, by theactual user, by Bangladeshi professionals abroad and theimportation of samples , advertising materials and gifts. Thechapter also deals with the temporary importation of productsand requires a guarantee for the relevant duties to ensure thatgoods so imported are actually re-exported within 12 months.

Chapter Five (General Provisions for Industrial Imports): ThisChapter deals with general provisions for industrial imports andprovides in section 22 for the importation of goods that may only

be imported by industrial users, the maximum value of goods thatmay be imported by importers, and the regularization ofimporters.

21


21/60

21



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

deals with the additional rules of import applying to commercialimporters. Section 24 provides for the importation of productsthat are not on the list of banned or restricted goods under cashforeign reserveand requires that foreign firms notify the ChiefController in advance of any imports to be made by suchcompany.

Chapter Seven (Import by Public Sector Importers): It deals withimports by public sector importers, including imports against thespecific allocation of funds, GoB allocations to industrial

enterprises or agencies and the use of cash foreign exchange. Italso provides for pre-shipment inspection and imports by theTrading Corporation of Bangladesh.

22


22/60

22



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 disputesbetween importers and the Customs Authority. It also providessome general procedural rules regarding the ITCC and appealsagainst its decisions to the Central ITCC.

Chapter Nine (Compulsory Membership of recognised Chamber ofCommerce and Industry and Trade Association.): It deals withcompulsory membership of importers, exporters and indentors toa recognized Chamber of Commerce and Industry or a concerned

trade organization.

23


23/60

23



List of Import Control Items

H.S.

Heading

H.S.Code No. Description of items and Conditions

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

importable as spices or in any other way).

Import of Grass (Andropogen Spp.) & Bhang (Cannabis Sativa) are banned.

12.11 All H.S. Code

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 theconcerned 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.

24


24/60

24



List of Import Control ItemsH.S.

Heading

H.S.Code No. Description of items and Conditions

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

87.04

All H.S. Code Motor car of any C.C. and microbus, minibus, jeeps including other old vehicles and

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 syringe93.02 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

93.05

All H.S. Code Import of Air gun is banned.

93.06 All H.S. Code Import of Air gun ammunition is banned.

25


25/60

25



The following goods shall not be importable:

(1) Maps, charts and geographical globes which do not indicate theterritory of Bangladesh in accordance with the maps published by theDepartment of Survey, Government of the Peoples Republic ofBangladesh;

(2) Horror comics, obscene and subversive literature including suchpamphlets, 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 videocassettes, tapes etc. containing matters likely to outrange the religiousfeelings 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 goodsor factory rejects and goods of job-lot/stock-lot;

26


26/60

26



The following goods shall not be importable:

(5) Reconditioned office equipment, photocopier, type-writer machine,telex, phone, and fax, old computer, old computer accessories, oldelectronic items ;

(6) Goods (including their containers) bearing any words or inscriptionsof a religious connotation the use or disposal of which may injure thereligious 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 productsproduced from sludge; and

(10) Unless or otherwise specified in this order, all kinds of waste;


27/60

ACJ Cl

28


28/60

28


Bangladeshs Export scenario

-20%

-10%

0%

10%

20%

30%

40%

50%

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

1991-92

1992-93

1993-94

1994-95

1995-96

1996-97

1997-98

1998-99

1999-00

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

Export Growth (%)

MillionUSD

Percentage

29


29/60

29


Overview of Export Pol icy changes s ince Independence

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

duty draw back, export bonus for jute sector Export performancelicense scheme) were introduced.

In 1980s new schemes were introduced for promote export (B2BL/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 graduallyreduced since FY 2002-03. Since 1994 merchandise exporters have been allowed to retain

certain foreign exchange earned on F.O.B export earnings inforeign currency accounts.

30


30/60


Various Export Promot ional Schemes

Scheme Nature of Operation

Export

PerformanceBenefit (XPB)

The XPL was introduced in in 1978.it allowed the nontraditional exporters to receive import license. The

export performance Benefit (XPB) scheme replaced the Export Performance Licensing (XPL)/ ImportEntitlement 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

Warehouse

Private Bonded Warehouses (PBWs) was introduced in 1985. This facility was assisted to exporters of RMG,

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 ofevidence 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 assistanceto the industries of this sector. The Duty Exemption / Drawback office (DEDO) was established in 1986 in the

National Board of Revenue.

Duty Free

Import of

Machinery

Since 1992, import of machinery and spare parts were made duty and other tax free for export oriented

industry. Import of machineries without payment of any duties for production in the export sectors.

31


31/60




Back to Back

Letterof Credits

(L/Cs)

Back to back LC facilities were started its journey in 1985-86 (1984). It allowed the exporters to open L/Cs for

the required import of raw materials against their export L/Cs in such sectors as RMG and leather goods. Thesystem is considered to be one of the most important incentive scheme for the RMG export. The is important

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

Subsidy

It allows the exporters to borrow from the banks at lower bands of interest rates of 8-10 percent against 14-16

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

Rebate

Income tax rebate was introduced in early 1980s (1985). Exporters are given rebates on income tax. Recently

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

Earnings in

Foreign

Currency

Exporters are now allowed to retain a portion of their export earnings in foreign currency. The entitlement

varies in accordance with the local value addition in exportable. The maximum limit is 40 percent of total

earnings although for low value added products such as RMG the current ceiling is only at 7.5 percent. The

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.

32


32/60




Export Credit

GuaranteeScheme

Introduced in 1978 to insure loans in respect of export finance, it provides pre-shipment and post-shipment

(and both) guarantee schemes. Export loan refinancing by Bangladesh Bank in 1984. Commercial banks cangrant 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

Facilities for

Export

Processing

Zones (EPZs)

In late 70s when individual ownership economy revived in our country EPZ was created to attract capital

investment, employment generation and rapid industrialization. The Bangladesh Export Processing Zone

Authority (BEPZA) was created under EPZA Act no. 36 of 1980. To promote exports, currently a number of

EPZs are in operation. The export units located in EPZs enjoy various other incentives such as tax holiday for

10 years, duty free imports of spare parts, exemption from value added taxes and other duties. In 1996government 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

of Exchange

Rate

The unification of exchange rate system 1992.Since 31 May 2003 the government has introduced fully market

based interest rates abolishing the system of flexible exchange rate.

Refund of VAT The VAT system was introduced on 29 July 1991.To support the export the VAT refunded scheme wasintroduced in 1992.

33


33/60


Export Pol icy and respons ib le inst i tut ions in Bangladesh

Bangladeshs Export Policy is subject to the Import Export

(Control) Act of 1950 in terms of which government maymakean import or export policy order. Prior to 2006 there was anExport Policy Order, with the status of law, but since then it hasbeen an Export Policy. The rationale for the difference of theExport Policy with the Import Policy Order is that the latter is a

control regime requiring directives, whereas the Export Policy isopen, with the objective of promoting exports.

The Export Policy is formulated every three years on the basis ofrecommendations of a Consultative Committee comprising

representatives from the main industries/trade associations,chambers, research organizations, respective Ministries, Divisionsand organizations so to ensure the sustainability of the exportgrowth during the policy.

34


34/60


Export Pol icy and respons ib le inst i tut ions 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 toprovide subsidies (cash incentives) as alternative exportpromotion instrument for industrial products linked to local-content/local value added conditions.

While MoC has the mandate to formulate Bangladeshs exportpolicy every three years and to review export policies andprogrammes, 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 withprivate and public sector organizations. Moreover, EPB is incharge of managing the GSP system and Rules of Origin (RoO)certifications. It is administered by a board with members fromboth public and private sectors.

35


35/60


Export Pol icy and respons ib le inst i tut ions in B angladesh

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

Goods subject to export prohibition are listed in the Export Policy2012-2015. The bans on exports of agricultural commodities andmanufactured goods are in place mainly for reasons of health,eco-balance, security, archaeological value, or maintenance ofadequate domestic supply.

All exporters, except those in export processing zones (EPZs), arerequired to obtain an Export Registration Certificate (ERC) fromthe CCIE. The documentation required for an ERC is the same asfor an IRC. Exports of all kinds of products are allowed withoutL/C on the basis of consignments or advance cash payments.

Additional export certificates may be required for certainproducts. According to the authorities, the number of signaturesrequired on the manual customs export form has declined from38-42 in 2006 to about 5- 7 in 2012.

36


36/60


Export Pol icy and responsib le inst i tut ion s in Bangladesh

The authority of ERC permission-

Product Certificate or permit Issuing ministry or agency

Any product as required by

the importing country

Certificate of origin Export Promotion Bureau or

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 BoardPharmaceutical products No objection certificate Drugs Administration

Goods for international fairs or

exhibitions

No objection certificate Export Promotion Bureau

Jute Export price certificate Bangladesh Bank

Goods for repair Export permit CCIE

No objection certificate Bangladesh BankReady-made garments GSP certificate Export Promotion Bureau

Live wild animals Export permit CCIE

No objection certificate Chief Conservator of Forest

37


37/60


Analys is o f cu rrent Expo rt Pol icy Order 2012-15

The main objective of Bangladeshsexport 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 manufacturingexport 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;

38


38/60



8. Assisting the development of necessary infrastructure, particularly for

backward and forward linkages in order to encourage the production ofexportable 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; exportfinance; export insurance and guarantees and export promotion and marketing

assistance.

39


39/60


Analys is o f Expo rt Pol icy 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 toaugment theproduction capacity of local export-oriented industries, give moreemphasis on protection of environment of the factories including

execution of compliance requirements, improve the quality of theproducts, and above all strengthen our efforts to diversifyproducts and their markets.

Chapter One (Title, Objectives, Strategies, Application and

Scope): It sets out the objectives of the Export Policy, theimplementation strategy and the application and scope of thepolicy. The Export policy applies to all products exported fromBangladesh, but does not apply to EPZs.

40


40/60



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

general provisions for exports. This lists the 16 export products onthe prohibited list (Annex 1 of Export Policy) and the four productsincluded on the restricted or conditionalexport list (Annex 2 ofExport Policy); temporary importation, including entre port, re-export and importation for repairing, replacement or refilling.

Chapter Three (Steps toward Export Diversification): It deals withthe steps to be undertaken to product diversification. It statesthat Product and Service specific Business Promotion Councilshave been set up by the MoC to diversify exports, improve andensure the quality of products, acquire appropriate technologies,fulfill compliance requirements and to market products. Noevidence could be found that any of this happened. The chapterthen lists the 10 product sectors accorded highestpriority statusand 10 sectors according specialdevelopmentstatus.

41


41/60



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

general export facilities and provides that exporters may use part of the foreignexchange 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 chapteralso 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.

42


42/60


Analys is o f Pol icy 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. Thesesub-chapters are considered separately.

Chapter Six (Export of Services): Chapter 6 deals with the exportof services and indicates inter alia that the EPB will prepare a

comprehensive plan of action in coordination with the concerneddepartments and institutions and take necessary steps foraugmenting export in the services sector; that the EPB will takeinitiatives for maintaining export statistics of the services sector;and that steps will be taken to enhance the capacity ofBangladesh Missions abroad to promote export in the servicessector.

43

A l i f E P l i O d 2012 1


43/60



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

deals with other steps towards export promotion. Most of theseissues deal with infrastructural issues, such as developing Monglaport, providing uninterrupted electricity supply and providingmore space in aircraft and ships for the export of agriculturalgoods.

Annex 1(List of Export-Prohibited Products):

Annex 2 (List of Products under Conditional Export):

44

A l i f t E t P l i O d 2012 15


44/60



List of Highest Priority Sector : Highest priority sectors will refer

to those sectors which have special export potentials, but suchpotentials could not be utilized properly due to certainconstraints, and more success is attainable if adequate support isrendered 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; and10) Tourism Industries

45

A l i f E t P l i O d 2012 15


45/60



Special Priority Sector : Product sectors which have export

potentials but whose production, supply and export base are notconsolidated will be included in special development sectors tostrengthen their export base. The following product sectors willbe 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.


46/60

ACJ Cl

47

T if f f


47/60


Tari f f 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 hasremained stagnant in the past decade at about 28%.

48

T if f St t


48/60


Tari f f Struc ture

Average MFN tariffs declined markedly from 70.6% in FY1992 to

28.7% in FY1996 and further to 14.9% in FY2012, they remainamongst 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%, and25%, respectively.

The 0% rate on commodities like rice, wheat, onions, pulses, edibleoils, seeds, fertilizers, medicines and cotton.

The average rate for agricultural products continues to be higherthan for industrial imports.

Whereas 100% of agricultural tariff lines (WTO definition) arebound, only 2.7% of industrial tariff lines are bound.

49

T if f St t


49/60


Tari f f Struc ture

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

capital machinery and spares/parts by registered industrialconsumers, including export-oriented industries; those targetingexporters; 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. Aspecific duty on some essential commodities is imposed to reducethe tax burden on these commodities or minimize the impact ofcustoms duty on the price in the domestic market due to pricefluctuation. Specific duties are levied on: cement clinkers;

petroleum bitumen; vessels and other floating structures forbreaking up; ferrous waste and scrap; iron and non alloy steelingots; semi-finished products of iron or non-alloy steel; andnonmonetary gold.

50

Para tari f fs and o ther charges


50/60



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

levied at a single rate of 15% on all imports and domesticallyproduced goods. In the case of imports, valuation is based on thec.i.f. value plus import duty and, in some cases, supplementaryduty. Exports are zero-rated; VAT paid on imports used in themanufacture of exports is refunded. Due to the limited capacity of

the tax administration in collecting VAT on imported items fortrade at retail level, the tax is collected at the import stage.

Supplementary duty (SD) : The widespread use of SDs, which havebecome 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 VATAct 1991, SDs are aimed at discouraging imports of luxury goodsand production and supply of goods and services consideredundesirable on social, moral, religious or health grounds.

51



51/60



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 facilitieswith 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 at3% of assessable value, and can be credited against the importersincome tax liability. Although not technically a protective tax, the

AIT has cash flow implications for importers.

52

Tari f fs and responsible ins t i tut ions


52/60



The Ministry of Finance (MoF) revises Bangladeshs import

tariffs and other duties on an annual basis as part of theNational Budget. Ad hoc changes to the announced tariffsand para-tariffs can, however, be implemented by StatutoryRegulatory Orders (SROs).

The National Board of Revenue (NBR), under the Ministry ofFinance, administers all taxes, including customs duties andVAT, as well as tax holidays and other tax concessions.

The Bangladesh Tariff Commission (BTC) is supposed toadvise NBR/MoF on the tariff protection level and to

administer tariffs and import duties but criticises thatNBR/MoF does not request its advice prior formulating tariffsand other duties.

53



53/60



The revision of import tariff and other duties are not always

undertaken with proper assessment of their impacts andimplications on different economic activities, nor involvesufficient intra-Ministerial coordination.

The setting of tariffs is a crucial element of Bangladeshstrade priorities need to be properly taken into considerationfor tariff revisions.

Whilst a uniform tariff is primarily revenue raising,differential tariffs are a trade issue with budgetaryconsequences.

It is therefore crucially important that MoC/BTC carries outits responsibility in the area of tariff policy formulation inconjunction with NBR/MoF.

54

Custom and Border Pol icy


54/60



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) isinternationally regarded as best practice and is alsoaimed to be implemented by Bangladesh, which joined

the Kyoto Protocol in 2012.

Bangladeshs Customs Act of 1969, which is currentlyrevised, lays down the powers and responsibilities of theCustoms Authority in completing the processes and

procedures. Bangladesh Customs works under theumbrella of the National Board of Revenue (NBR), theapex body for direct and indirect tax revenue inBangladesh under the Ministry of Finance.

55



55/60



Customs Classification Rules

HS Code System: It is actually the shortened name forHarmonized Commodity Description and Coding System.

It is developed and periodically modified by the WCO. Itguides the codification of all import and export productcategories throughout the world.

Customs administrations in various countries have adaptedtheir tariff lines and tariff structure in line with the HS Codesystem of the WCO.

In Bangladesh, the Customs authority have also done so. The

HS Code system is incorporated into the First Schedule of theCustoms Act. Bangladesh also periodically updates therevisions made in the system by the WCO.

The First Schedule is named Bangladesh Customs Tariff.

56



56/60



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 TariffLine. In 2013-14 total 6054 Tariff Line (previous year6434)

57



57/60



The 2015 World BanksDoingBusinessinvestigates Bangladeshstrading across borders performance with respect to documentsrequired, 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 thesame container takes 33.6 days, requires 9 documents and costsUS$ 1515.

In 2015, Bangladesh ranked 173 out of 189 economies, muchbehind 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 timecosts about 0.8% of the total good, there would be great benefitfor Bangladesh from implementing Customs and Border controlreforms.

58

Conclud ing Remarks


58/60


Conclud ing Remarks

The analyses of the IPO and the Export Policy show that thesepolicies have been developed in isolation. For the greater part theIPO deals with import control and import policy without referenceto export policy, tariff policy or industrial policy.

The Export Policy has identified some priority sectors on whichspecial focus is placed for export purposes, but no exports cantake 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 thecompetitiveness 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 RMGsector, which is not one of the sectors identified by the ExportPolicy, as the sector is already internationally competitive.

Cash incentives are not aligned to the highest priority sectors andthe special development sectors identified in the Export Policy

59

Conclud ing Remarks


59/60


Conclud ing Remarks

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

Tariff and Customs control should be to provide support tothe Export Policy, thereby strengthening Bangladeshsoverall trade policy objectives of export-led growth.

For this reason it is important that the Export Policy isdesigned first and that the Import Policy Order (IPO) andTariff and Customs procedures are then developedaccordingly; i.e. those priority sectors identified in theExport Policy should be mirrored in according policyinitiatives of the IPO and Tariff and Customs procedures


60/60

Thank you !

2. Analysis of Existing Trade Policy Framework of Bangladesh

Documents

Transcript of 2. Analysis of Existing Trade Policy Framework of Bangladesh