Ever since the evolution of bonded warehousing in the country as a substitute for Duty Draw Back in the late eighties, the necessity of the system notwithstanding, there were debates whether it could be made smoothly functional to cater to the country’s bourgeoning exports, especially of readymade garments. In fact, it was mainly to facilitate garment export that the system was put in place– with gears to stop it going haywire.
Bonded warehousing is a service that allows exporters to import and store their raw materials without payment of customs duties for a certain period of time until these are used in the manufacture of exported products. Bonded warehousing in Bangladesh was instrumental in bringing much of the vigour and dynamism that the country’s export sector needed badly. Since the early eighties when garment export began to indicate signs of promise, bonded warehousing was one of the key mechanisms, along with back-to-back letter of credit, that succeeded in materialising much of what the business community was up for. However, there were talks of misuse of the system by unscrupulous exporters. But the mechanism — backed by maintenance of Passbook by Customs officials of imported goods stocked in the bonded warehouses and exported subsequently — was meant to guard against any kind of misdeeds, as well as ensure transparency.
This does not seem to have materialised. The facility offered by the government has often been termed a happy hunting ground for errant players. Although there are apparently stringent rules governing the system, often hailed by the authorities as full-proof against misuse, the allegation that raw and packing materials imported free of duty and warehoused under supervision of the Customs wing of the National Board of Revenue (NBR) are recklessly pilfered is widespread.
Sometime ago it was none but a former NBR chief who alleged that goods imported without paying duties under bond system land up in the wholesale markets. Now, if imported goods — mainly fabrics – make it to the wholesale markets without payment of duties, loss of government revenue is sure to be significantly high. It is inevitable to be so. But the big question that cannot be averted is the manner in which it is practised. For, it is the Customs officials who are the custodians of bonded warehouses. The NBR should look into the matter first, sweep its own backyard before complaining of the dodgy ways of the dishonest business people.
Availability of plentiful imported fabrics in the wholesale markets of the country is well known. But to question that these are all pilfered is to question the very foundation on which the bond mechanism is based. Legally, only a little quantity of fabrics can make its way to the open market, depending on saving of fabrics after completion of export order. A certain tolerance limit is allowed in the utilisation criterion for making various types of garments. But this in no way should constitute any loophole to allow massive quantities of duty-free imported fabrics flooding the market. Worst of all, it leaves a seriously deleterious effect on local fabric production. A calculation of the loss of government revenue, if at all possible, would indeed be shocking.
One of the ways to strictly monitor the system in order to ensure transparency is digitisation or automation. There is no arguing the merit of automation, and the NBR is reportedly working on a project, albeit at snail’s pace. A FE report published recently has come up with a sorry picture of the state of the project implementation. The report says since the launch of the digitisation/automation project in 2017 with a fund of Tk 811.51 million, only seven per cent of allocated money has so far been utilised. The project originally set for completion by June 2021 has been extended till June 2023. Although it is alleged that some vested quarters are responsible for delaying the pace of project work, the FE report quoting NBR sources says that delays in procurement of IT equipment and software package had slowed project activities at the initial stage.
A number of relevant entities, both in public and private sectors, are involved with the project. The stakeholders include exporters, Bangladesh Export-Processing Zones Authority (BEPZA) and Bangladesh Bank (BB). Faruque Hassan, president of Bangladesh Garment Manufacturers and Exporters Association (BGMEA), said they want digitisation to ensure transparency in bond management.
Although the garment sector is the main beneficiary of the bond system, there is no doubt that automated bond management will encourage the NBR to open up the facility to other prospective export sectors which need to import bulk quantities of raw and intermediate materials for export manufacturing. This will help such exporters to substantially save on the cost they incur due to long lead time. It is thus in the interest of efficient export manufacturing that bonded warehousing should be given the priority it deserves, and in so doing, the hurdles to its smooth and transparent functioning should be removed.
