NBR withdraws bond facility for yarn import, tightens restrictions

The National Board of Revenue (NBR) has imposed new restrictions on the import of 10 to 30 count cotton yarn under duty-free facilities for export-oriented garment factories. Under the new arrangement, direct import of such yarn under bond facility will no longer be allowed, though import will be possible through bank guarantee.

The NBR issued a general order in this regard on Tuesday (September 8). The order took effect from the day it was issued. According to the new rule, consignments of yarn imported against bank guarantee will only be released once export earnings from products made with that yarn are repatriated to the country.

In addition, at the time of yarn import and release, a certificate from any one of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) or the Bangladesh Textile Mills Association (BTMA) must be submitted to the relevant customs station.

As a result of the new arrangement, bonded export-oriented garment factories will have to follow the bank guarantee process for raw material imports, similar to non-bonded factories. About 60% of the country's total yarn imports fall under the 10 to 30 count category. Yarn worth around Tk 30,000 crore was imported last year. Consequently, concerns have arisen that the new rule, due to the bank guarantee requirement, will increase import costs for garment exporters.

Discussions had been ongoing for a long time to protect local industry and prevent misuse of the bond facility. The Ministry of Commerce and the Bangladesh Trade and Tariff Commission, among other concerned parties, were working on the matter. Earlier, during the interim government's tenure, a recommendation on this issue was sent from the Ministry of Commerce to the NBR but was not implemented. Later, after the BNP government took office, an inter-ministerial committee was formed on the issue, led by the commerce minister. At the committee's first meeting on August 20, a decision was made to impose new conditions on the import of 10 to 30 count yarn under certain HS codes.

Following that decision, the NBR issued the new order. However, the new restrictions will not apply to consignments of yarn that had already been shipped before the order took effect.

Meanwhile, the two top garment sector organizations, BGMEA and BKMEA, have opposed the decision to withdraw the bond facility. In a joint letter sent to the Ministry of Commerce, the two organizations demanded immediate withdrawal of the decision. They alleged that the decision was taken under the influence of a vested interest group aiming to force garment factories to buy yarn from local mills.

BGMEA and BKMEA claimed that the new arrangement was introduced without proper discussion with trade bodies. According to them, the issue was not on the agenda of the inter-ministerial committee meeting. They expressed dissatisfaction that the matter was later included in the meeting minutes outside the agenda. The two organizations fear that a sudden change to the long-standing bond system could send a negative message to foreign buyers and risk harming the country's garment export activities.