Bangladesh gradually opening up the market for imported goods in a snail's pace since 1985facilitating easier import procedures through abolition of import licensing for commercial import and also for industrial import in 1983. In 1978 the government started issuing annual import policy order (IPO) to bring the predictability in import regime. It was primarily on yearly basis subsequently by annual basis and now tri-annual basis. The IPO issued under the Imports and Exports (Control) Act 1950 regulates the condition of import and is legally enforceable. The IPO 2021-2024 issued on 24th April 2022 while the earlier policy order expired in 2018. There is hardly any basic difference between these two policies but the reason of delay of 3 years to issue a new policy remained unknown.
Until 1985, Bangladesh maintained a positive list of items permissible for import, which was carried out from Pakistan period. Another major policy reform in 1985 was changing the list of 'positive list' into 'restricted list' and 'negative list'. Under the negative list approach, items not included in the negative and restricted list are freely importable, while items under the negative list were banned for import and products under restricted list are importable under certain condition.
Under this Section 4 of the IPO 2022-2024 duly recognized the limitation of the order in relation to the Finance Act and other laws. This an appropriate clarification about the status of IPO. But the supremacy of law has a condition that those laws will prevail over this rule provided that the relevant departments of the government will get the Ministry of Commerce issue notification or rule in this regard beforehand. The condition seems confusing for the common people the author of the article.
Upon analyzing some of the clauses are found very much similar to old IPO and need due attention of the policy makers. The world economies are focusing re-export trade to gain advantage of global and particularly regional trades. One of the most restricted countries like India has started re-export trade and gradually taking over regional market through import and re-export of different products from other part of the world. They are replacing Singapore, Hongkong and Dubai as regional hub and taking over Bangladesh market.
The present IPO 2021-2024 has many regressive conditions for Entre-port and re-export. A definition of Entre-port in section 2 (1) imposed condition of value addition of minimum 5%. There are many reasons of change of price and sometime even it is better to export with less profit and even at loss to avoid further loss of global price. It is better not to keep a value addition of minimum 5%.
Section 13- 8 make rule for exportable goods marked as 'Made in Bangladesh' although no country in the world such condition of change the country of origin for re-export. Similarly, the re-export has been defined that any goods shall be modified and change and after the value addition of 10% will treated as re-export. Moreover. Under Section 13-14, the replacement of products under warrantee required prior permission from CCI&E. Section 13 has another condition for re-export through temporary import should conclude within one year and also subject to Bank guarantees or 'other documents'.
Further in the Section 13-4 for Entre-port a prior permission as import permit on returnable basis from Chief Comptroller of Import and Export required against back-to-back L/c. Section 13- 7- under bond license again an import permit on returnable basis permission needed for Entre-port import and re-export trade. The IPO could facilitate-export through Free Economic Zones focusing to the lucrative market of China and India. Following the policy of India, Singapore, Dubai and Hongkong, the policy should be totally modified for entry-port and re-export policies and let the market decide the value addition and the trade should be free from permission and approval from any authority.
Another provision of import with competitive price under section no 5-4 with a condition of obtaining of price from three sources from at least two countries for competitiveness of price and importers are bound to submit the documents to Import control office. The same rule was also in previous IPOs and could not followed both by importers and the regulating authority. Interestingly, it is not practical to submit quotation to the authority for approval before import.
In the section 4 (Gha) imposed restriction on goods and services of Israel or shipment from any Israel port and carrying with Israel flag vessel but Banks insist for a certificate in this regard and put a condition in the L/c. The restriction is acceptable, but many overseas exporters, shippers and bank are not willing to accept a condition of the negative certificate, which is not at all essential. It should be clarified in the IPO.
Under Section 7 a rule is to mark the 2% of the packing with name, address and TIN number of the importer. It is not serving the purpose intended and only adding some cost for the import into Bangladesh. It may be deleted to make imported products competitive.
As per section 8-3 (Kha) of IPO permitting annual Import against telegraphic transfer (TT) for amount of US$5 lac. It is also subject to rule of Central Bank TT. Again, in the clause no 10 -1, the unregistered importer may import up to US$10,000 without permission from Chief Comptroller of Import and Export (CCI&E). Considering the global trade procedure, Bangladesh should gradually allow import against TT for all products. Interestingly, Bangladesh allow import on credit through import against L/c authorization and payment against documents but restricted the advance payments This means we ask the world to trust Bangladesh but we do not trust the partner countries.
There is good news for the members of different clubs that under section 21-2 Ka, Hotel, restaurant, resort and club etc may be allowed to import licker under H S Code 22.03 to 22.06subject to permission from Ministry of Commerce, CCI&E and directorate of Narcotics.
Importers of preservatives for different industrial application are facing restriction over import and cost of collection of preservative became costlier. The Cosmetics, Paints, leather and some other industries are facing odds to import these essential raw materials. The section 25-7 of IPO for Pesticides &Insecticides remained unchanged as mentioned-- importability of pesticides shall be determined in accordance with the Pesticides Ordinance,1971 (Ordinance No.11 of 1971) and the rules made there under and pesticides & insecticides shall be importable subject to some conditions. The Industrial preservatives are different from insecticide and pesticide. The customs department has a misconception that the pesticides, insecticides and preservative are same similar products and fall under same condition.
Based on the confusion, customs department ask all importers of preservatives for registration and prior approval of Plant Protection department of Agricultural Extension Directorate. But upon application, the AE Directorate was not willing to issue permission since industrial preservatives are not made of harmful ingredients like Pesticides and not useable in agriculture production. These products are not under the preview of Pesticide law and scope of evaluation by Plant protection department of Agricultural Extension Directorate of Bangladesh. Preservatives are not banned or restricted as per Pesticide Act 2018 and these preservatives are not made of restricted ingredients. Pesticide and Preservative are not same products.
The new policy referred to INCOTEM and restricted insurance to Bangladeshi insurance companies and not in exporting countries to ensure local insurance business. International Commercial Terms, also known as Incoterms issued by The International Chamber of Commerce (ICC) recently issued INCOTERM 2020 to give more clarity to different trade terms and flexible rule of transportation by the exporter and importer. Apart from Free on Board (FOB), Cost and Freight (C&F). It has clarified the DAT (Delivered at Terminal) to DPU (Delivered at Place Unloaded) etc.
Another change to use the term Free Carrier (FCA) instead of Free on Board (FOB) to avoid some avoid responsibility of uncertain cost beyond control. The Incoterm 2020 has given emphasis to Carriage Paid To (CPT) instead of Cost and Freight (C&F) for ensuring a specific requirement that the seller must comply with any security-related requirements for transport to the destination. These security requirements bring cost and risk delay if not fulfilled by the parties. The new policy may promote INCOTERM 2020 to remain at per with the global trading system.
Section 46 of IPO on import of American cotton reminded unchanged. The then Pakistan government had prepared the 'Destructive insects and plants' rules in 1966 to asked for quarantine certificate from Quarantine Department before release of US origin cotton. This measure was taken by Pakistan to protect its cotton produced in West Pakistan from competing with US cotton, whereas Bangladesh does not grow cotton at that time.
Bangladesh has revised the law and passed new Plant Quarantine law in 2011 and issued rule Plant quarantine Rules in 2018 but same rule for US origin cotton remained unchanged. This is considered as non-tariff barrier. The new Import Policy order also has the same restriction causing a barrier to trade negotiation with USA and obtaining some benefit like GSP facilities. The condition may be withdrawn in the grater interest of our trade.
There is a major dispute arises between Bank and importer and again importer and Customs department over the HS Code of the importable goods. The IPO could refer to the HS Code of WCO not the HS Code declared by NBR in Bangladesh. The HS Code is administrated by the World Customs Organization (WCO) and is updated every five years. It serves as the foundation for the import and export classification systems used by many trading partner countries.
The HS assigns specific six-digit codes for varying classifications and commodities. Countries are allowed to add longer codes to the first six digits for further classification. Most of the countries is not willing to go beyond the HS Code of WCO. Bangladesh authority has no capacity to maintain own HS Code and should follow the code of WTO for uniformity with the global trade.
Section 27 Chapter 3 of IPO propose to form Import trade control (ITC) Committee consists of Representative of CCI&E, Customs department, and Chamber of Commerce to resolve disputes H S Code etc. There will be an appellate board consisting of representatives of NBR and FBCCI at Dhaka for appeal against the decision of the ITC committee. Importer may go the higher authority if they are not satisfied by the decision of the appellate committee and request to Secretary, Ministry of Commerce for review under the "Review, Appeal and Revision Order 1977". It may be good Alternative Dispute Resolution (ADR) but the success will remain on good practice of customs department. Let us see out come in future.
There were some burning issue could be addressed to make the policy dynamic and suitable to integrate to the present international trade system. Bangladesh is going to graduate from its current LDCs status. Trade facilitation is a major issue to address as a developing country. This will necessitate a new shift in trade policy regime for enhancing productive capacity and competitiveness.
The IPO 2021-24 could have addressed the issue of the creation of Free Trade Agreement (FTAs) and Preferential Trade Agreement (PTAs). It could address the issue of standard of product, mutual recognition of the standard of different countries, issue related to intellectual property rights and others. The IPO could address these issues as we are already late to initiate these reforms to prepared ourselves for FTA and to face global competition after graduating from LDC.
M S Siddiqui Legal Economist & adviser, Bangladesh
Competition Commission
