Policy for use of environment-friendly chemicals brooks no delay

Tuesday, 4 October 2016

A chemical use policy is a must. Outdated policies are still in force and some of them do not have rules for implementation. Time has come now to lay emphasis on this issue and inform people of less harmful chemicals, writes Ferdaus Ara Begum

Legislation and policies on use of chemicals in Bangladesh are rather sloppy. A number of organisations are engaged in different types of activities in this field but no one knows who is doing what. The country is lagging behind in respect of preparing a standard aligned with international benchmark in using and discharging hazardous chemicals.
Business Initiative Leading Development (BUILD) organised recently a focus group discussion (FGD) on 'Restriction and Controlled Use of Hazardous and Toxic Substances for Industries.' Responses from the concerned private and public sector representatives were diverse in nature, but the consensus was that hazardous chemicals and substances need to be controlled somehow.
According to the Bangladesh Bank statistics, organic chemicals worth US$594.4 million were imported in 2014-15 fiscal year which was 1.6 per cent of our total imports while miscellaneous chemicals imported were worth US$401 million or 1.1 per cent of the total imports. Import of inorganic chemicals, organic or inorganic compounds of precious rare-earth metals, radioactive elements or isotopes import was worth US$280.7 million or 0.7 per cent of the total imports.  This means that about 3.4 per cent of our total import is chemicals and other related products. Unofficial import of chemicals has not been reflected in official imports.
Contamination by organic and inorganic substances is different in nature; inorganic substances mostly contain water contaminants. The Zero Discharge of Hazardous Chemicals (ZDHC) began in 2011 when a group of major apparel and footwear brands and retailers shared a commitment to help lead the industry towards zero discharge of hazardous chemicals by 2020. The ZDHC members published a roadmap for safe use of chemicals. These are Addidas, C&A, F&F, GAPS, Marks & Spencers, Puma, Jintex, SIWI, BSI, etc. Some footwear and textile industries have voluntarily undertaken steps to stop use of 11 chemicals, which are known as 9+2 chemical group. The list of 166 substances that are affecting global environment and ecosystem through non-soluble micro-pollutant abstracts is available in the internet. These identified hazardous substances are frequently used in textile and leather factories in Bangladesh in enormous volumes. The non-soluble discharge of these substances is affecting environment and causing some chronic diseases like cancer, thyroid breakdown, liver dysfunction, kidney failure and hormone disorders.
These chemicals are banned or restricted in the European Union (EU) and North American countries since 70s of the last century and some other countries are in the process of banning or restricting the level of use of these hazardous substances. In Bangladesh, these hazardous substances are still being used threatening the environment and public health. There should be a policy on use and import of hazardous chemicals so that its harmful impact on human health and environment could be reduced.  
Immediate ban or duty enhancement for import of hazardous chemicals which have safer alternatives accredited by EU and EPA (USA) upon having discussion with the private sector is a must. If the hazardous substances do not have safer alternatives and do not meet the Manufacturer Restricted Substance List (MRSL) requirements through Material Safety Data Sheet (MSDS) screening, additional tax should be imposed on these chemicals (at least 20 per cent may be proposed). Adoption of MRSL in Bangladesh following other countries is a requirement. A pull of dedicated chemists has to be deployed at ports with fully-equipped laboratories so that these hazardous chemicals can be identified easily. The substances which have environment friendly substitutes (nine chemicals of 9+2 chemical group already found)  could be prohibited or restricted through high tariff barriers. All other substitutes should be identified and evaluated by a team of experts.
Export-oriented companies are compliant and are following the international guidelines. The picture is different in respect of small and medium enterprises (SMEs). In order to establish a direct linkage between small and large enterprises, there is a need for raising awareness. For example, a readymade garment (RMG) unit willing to use a washing unit using hazardous chemicals would be really dangerous for export. The Department of Environment can play an important role in respect of enforcement. The Inspectorate of Factories and Establishments (DIFE) and labour laws can also play a big role. Chemical legislations would need to be updated and followed carefully. We have organisations like Fire Brigade governed by their own regulations; building codes are also there. European regulations are followed for buying chemicals in their countries. There are unified guidelines of chemical legislation to be followed by all.
A standard guideline should be prepared for companies engaged in chemical formulation before commercialisation. One positive factor is that none of the hazardous chemicals is produced domestically. As a result, controlling their usage via import policy is clearly the most effective way. There needs to be a discussion on whether fiscal disincentives are more optimal than outright bans. Tax hikes as a market mechanism-based policy for ZDHC banned chemicals and corresponding tax reductions on less hazardous or polluting chemicals could provide some relief.
Overall tax incidence on these chemicals should be increased to levels where it will be unattractive to use these hazardous chemicals. At the same time, tax rates on environmentally acceptable better chemicals may be lowered at the import stage to encourage their adoption by industries. The government also needs to establish an effective monitoring and control mechanism for import and distribution of potentially harmful chemicals. A strong robust database of all authorised importers/distributors of hazardous chemicals as well as of all those manufacturers who procure and use such chemicals in their production process would need to be developed and monitored. Only authorised and registered users should be able to get chemicals from  importers and their distributors, which should be kept to a manageable number through deliberate strict policy regime and requirements.
Some textile and footwear firms have voluntarily undertaken a roadmap on stopping use of 11 selected chemicals and dyes which are harmful for environment. The use of these chemicals and dyes is not banned in Bangladesh. These 11 chemicals do not have their own eight-digit HS codes and are imported under the broad categories of the chemical groups they belong to. One additional point to be noted is that a chemical or a dye may belong to two broader groups of chemicals as can be seen in the case of Brominated and Chlorinated flame retardants,
AlkylPhenolEthoxylates/AlkylPhenolas (APEOS) and per fluorinated chemicals explain why they have two eight digit HS codes assigned to them. This makes 14 rather than 11 chemicals. These chemicals and dyes are subject to various types of taxes at the import stage such as Customs Duty (CD), Supplementary Duty (SD), Regulatory Duty (RD), Value Added Tax (VAT), Advanced Income Tax (AIT) and Advanced Trade Value Addition Tax (ATV). The Customs Duty rates vary between 5 and 25 per cent. Supplementary duty rates are either at 10 per cent or 20 per cent, when applicable, and Regulatory Duty is imposed at the rate of 5 per cent whenever applied. Supplementary and regulatory duties are not imposed on most of these chemicals except for Phthalates and Short-chained Chlorinated Paraffins which are subject to SD at rates of 20 per cent and 10 per cent respectively, and RD rate of 5 per cent. Brominated Chlorinated flame retardants (HS Code 2710.91.00) are subject to RD at the rate of 5 per cent. All these chemicals are subject to VAT at the standard rate of 15 per cent, AIT rate at 5 per cent and ATV rate at 4 per cent. It is found from the NBR statistics that even though duties are increased to some extent, these are quickly reduced, probably because of lobbying of the concerned. Establishing an ethical business practice is the responsibility of all concerned.
Bangladesh can start with either increasing tax rates on these hazardous chemicals to discourage their use or encourage the users to switch over to no or less hazardous chemicals. Increasing the tax rates will not lead to revenue losses for the National Board of Revenue even if tax rates are prohibitively high because in all cases there are better substitutes and firms will replace these hazardous chemicals with a little higher priced but better import substitutes. Industries have readily available option to switch to substitutes which are environmentally friendly. As a matter of fact, there may be revenue gains rather than losses as these substitutes are about 10 per cent more expensive than the hazardous chemicals.
A chemical use policy is a must. Outdated policies are still in force and some of them do not even have rules for implementation. Time has come now to lay emphasis on this issue and inform people of less harmful chemicals.
The writer is CEO of BUILD.
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