Bond facility expands for exporters

One bonded-warehouse licence can now be used for importing duty-free raw materials by three active factories as the government expands the facility for the export-oriented apparel industry to flourish further.

Officials say the measure taken by the revenue board will cut time and cost of doing business by the exporters as they can now serve their three factories with one licence.

The relaxation of rules for the bonded-warehouse facility comes after 14 years of persuasion, now that demand for Bangladeshi apparel products has grown among international buyers.

Last fiscal year, export earnings from knit and woven garments reached US$42.61 billion in an incremental growth from $12.34 billion in 2008-09.

Since 2008, the exporters have used one bond licence (continuous bond) for two export-oriented factories under the limit in place.

Following a longstanding demand of the exporters, the National Board of Revenue (NBR) has now issued a circular granting the exporters extended duty-free facility for their fast-growing business.

The officials said many of the exporting industries could not accommodate duty-free raw materials in one or two warehouses as the volume of exports has increased manifold.

A senior NBR official said they relaxed the bond rules to facilitate trade and expedite the process of exporting goods.

Earlier, the NBR had imposed restrictions on establishing a second unit of export-oriented industry within 60 kilometres.

"Later, the bar has been lifted to facilitate the industry avail continuous bond facility smoothly," the official said.

Now the NBR allows exporters to establish factory anywhere they deem suitable.

"We have observed upward trend in orders for apparel products as well as fast growth of some companies," he said to substantiate the greater support to the export industry.

The NBR got several applications from the exporters that they needed greater space to store duty-free products, the official said.

Executive President of Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) Mohammad Hatem hails the decision and hopes for simplifying export process under the duty-free facility.

"I have pursued the NBR for the facility from my association following problems faced by exporters," he said.

Mr Hatem points out that the existing factories try to increase manufacturing capacity but large exporters are compelled to open another unit under a different name as they cannot enjoy bond facility for more than two units.

Exporters have to face another hassle in obtaining licence, certificate and other papers for a new unit, he said.

Continuous bond for the extension of the second unit was not enough for the fast-growing manufacturing industry, he added.

"We appreciate the NBR for accepting our proposal considering the reality," he added.

Earlier, the BKMEA wrote a letter to the NBR explaining reasons for placing their demand for extension of the bonded-warehouse facility.

Before June 10, 2008, there had been no legal framework for continuous bond.

During the last 14 years, many of the garment industries expanded their businesses. However, businesses of many of the exporting companies such as MM Ispahani, Knit Asia Limited, Pathartali Textile and Hosiery Mills Ltd, Standard Group, City Group etc could not flourish under one continuous bond.

International buyers prefer integrated suppliers or one factory such as composite factory having spinning, knitting, weaving, dyeing, printing, embroidery, and garment segments.

When a factory becomes larger, the exporters have to open multiple units, employ more manpower and need bond facility for more units.

Many of the exporters could not expand their businesses for restricted continuous bond facility, resulting in loss of foreign exchange that the country needs much especially in the prevailing global financial flu.

Following query by the NBR, Bond Commissionerates of Dhaka and Chattogram proposed to allow three production units located in three places to enjoy continuous bond facility.

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