In respect of tariff rationalization, Bangladesh is now taking preparation to be ready for LDC graduation. A study group was working in national board of revenue (NBR) with an intention to gradually reduce customs duty taking care of domestic industry and export competitiveness. It studied the challenges in regard to tariff rationalization and its benefits.
The study group has prepared a phase out plan for withdrawing minimum price practiced since several years with an intension to address under invoicing at the import stage. Gradually Bangladesh will enter into the age of custom valuation.
The main objectives of customs valuation is to harmonize and standardization of tariff policy. As per agreement on implementation of article VII of general agreement on tariffs and trade (GATT) 1994 of Uruguay Round, the customs value of imported goods shall be the transaction value, that is the price actually paid or payable for the goods when sold for export to the country of importation adjusted in accordance with the provisions of Article 8 of the agreement.
Harmonization efforts began in the early 20th century, however significant result did come through GATT 1947 followed by convention of valuation of goods for customs process1950 establishing Brussels Definition of Value(BDV), and in 1979 agreement of implementation of Article VII of GATT(ACV) resulting from Tokyo Round. Developing countries can avail technical assistance for implementation of custom valuation system, Bangladesh is not an exception.
The main target of the tariff is to protect local industry, jobs in the domestic market against competition. There are different types of tariff such as; ad valorem, specific, compound and tariff rate quota.
On the other hand, as per WTO there are three types of tariff such as Most Favoured Nation(MFN), preferential tariff and bound tariff. Tariff value is a policy of the government, it can be levied as fixed fee based on the type of the product or ad-valorem tariff can be levied on some specific products meaning on its import value.
While signing any bilateral treaty, FTA tariff is the opening point for negotiations between two countries.
The average MFN tariff rate in Bangladesh is 14%, while average rates for agricultural products are higher than industrial goods. The maximum MFN is 25%, basic raw materials are taxed less. Tax varies from 5-25% for general inputs, intermediate and finished goods. In addition there are regulatory duty, advance income tax(refundable), value added tax from zero to 15%. Some para-tariffs such as supplementary duties, regulatory duties also need to be withdrawn gradually.
Customs Act 1969 in 1975 under section 25(7) instructed to follow tariff value. The valuation regime under Section 25(7) of the 1969 Customs Act empowered the Government to fix tariff values for the purpose of levying customs duty for a number of imported products; that is, wherever tariff values are available, they replaced the lower invoiced price.
The previous provision of Customs Act 1969(Section25(7) mentioned, customs duty is payable by the importer respondent on the basis of tariff value in force on the date of presentation of the bill of entry and not on the basis of invoice or tariff value in force at the time of opening of letter of credit.
In 2000 under section 25(3), the words "or minimum values" has been included. It is written that notwithstanding anything contained in this section, the Government may, by notification in the official Gazette, fix, for the purpose of levying customs duties, tariff values [or minimum values], for any goods imported or exported as chargeable with customs-duty ad valorem.
In 1980 there were tariff value on only 39 items that were textile based raw material (SRO No.164-L/80/552/Cus published on 7th June 1980).Customs valuation (Value fixation of imported Items) rules 2000(SRO No. 57AIN/2000/1821/Customs) was published on 23rd February, 2000 in a view to phase out tariff value of 977 items (HS eight-digit level).
It is well understood that gradually all products under the list of minimum value will be eliminated. Bangladesh is working to align its tariff policy with the need of the WTO, and gradually phasing out the minimum value. The phasing will be done as per provision of the target announced by the NBR followed by a study under the sub-committee of Internal Resource Mobilization working under the Ministry of Finance.
A list of 184 (four-digit) HS item has been prepared to drop from the list, which will be implemented through FY 2024-25 while a new item (Mobile panel bearing HS code; 8525) has been included in tariff value schedule in FY 2022-23.
The explanation in Tariff value and minimum Value SRO(SRO No. 203-AIN/2022/111/Customs) mentioned that prices will not be less that the prices mentioned in some internationally recognized source such as; Platts Market Data (PLATTS) and London Metal Exchange (LME)while taxation is finalized for these type of products.
Tariff situation have gone through a number of changes in our country. Fixation of minimum value was a deviation from the internationally aligned system. Transaction value is a trade friendly system while minimum value is a notional value which can be termed as a revenue friendly system. The decision taken for phasing out the minimum value system is possible now and to switch over to a transactional valuation system NBR has by this time almost ready where ASYCUDA is almost operational.
The process for introduction of transaction value requires transparency in data and information processing so that a competitive price can be fixed for imported goods. Private sector also need to ready to use technology as it is also possible for them to check the prices of the imported goods available online. Rapid modernization of customs policies is one of the priorities now to face challenges of LDC graduation.
Ferdaus Ara Begum, chief executive officer, Business Initiative Leading Development (BUILD)
