Misuse of bond facility and border haats

Wasi Ahmed | Published: May 22, 2018 22:07:46


A news story, quoting appropriate sources, says abuse of the bonded warehousing and border haat protocol has caused flooding of duty-unpaid yarns and fabrics in the open market prior to the Eid, triggering serious threat to the country's textile mills. The allegation demands enquiry in as much as it is a blatant violation of the norms and practices governing border haats and bonded warehouses.

The allegation came from the key stakeholders -- the textile millers who warned that the textile sector is facing a survival crisis due to smuggling of textile products and misuse of bonded warehouses and border haats arranged with India. According to industry insiders, as much as 40 per cent of their produce, mainly fabrics, has remained unsold since January this year, and they put the blame squarely on grossly irregular activities.

Ahead of the Eid festivals, it is a common sight all over the country that stalls flaunt their collection of new arrivals - dresses and sarees for the most part - from India. Lately, however, Pakistani and Chinese products have also become a big deal for the sellers. How much of these are imported through proper channel has always been a question, though none other than the textile millers hardly ever raises an eye brow. Commercial imports of these products are reportedly negligible because of high import duties. Hence, the only other means for these to reach the retailers in the country is through smuggling. Industry people also blame the border haats which, as they allege, defy the set procedures applicable to selected products and sell huge quantities of textile products, especially sarees ahead of the Eid.  The border haats, they claim, have been highly instrumental in disrupting sales of domestically produced textile products.

As regards allegations levelled against bonded warehouses for export-oriented garment industry, one may find it a bit too knotty to establish. This is because the bond mechanism prevailing in the country for well over two decades is supposed to be full-proof in deterring malpractices-namely, selling off duty-free materials instead of using them in export manufacturing. Backed by maintenance of passbooks by customs officials of imported goods stocked under bond and exported subsequently, the system, if abused, can only be imagined in a situation of vile collusion.

A Bangladesh Textile Mills Association ((BTMA) leader while talking to the media the other day told that smuggling this year is all time high. Dresses, including sarees, three pieces and fabrics in huge quantities have already entered the country illegally.

Usually local power looms, handlooms, spinning mills and weaving mills pass a very busy time ahead of Eid, but this year a good number of mills are passing idle times due to lack of sales as products illegally imported are flooding the local market, the leaders of the trade body claimed. They said more than 50,000 power looms across the country suspended production in recent times.

Reports have it that 300 small, medium and large textile mills have informed the BTMA that their production and sale of fabrics were about to close as fabrics imported through misusing bonded warehouse flooded the market. They sought intervention of the National Board of Revenue and demanded the law enforcement agencies to prevent selling fabrics imported under bond in the open market. If imported goods -- mainly fabrics - find their way to the wholesale markets without payment of duties, loss of government revenue is sure to be substantial besides its ruinous affect on the textile mills. It is inevitable to be so. But the big question that cannot be avoided is the manner in which it is practised-a well orchestrated collusion as already mentioned. 

Availability of plentiful imported fabrics in the wholesale markets of the country is well known. But to question that these are all pilfered, meant for manufacturing for export under bond, is to challenge the very foundation on which the bond mechanism is based.  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 warehouse system in Bangladesh was instrumental in bringing much of the vigour and dynamism that the country's export sector needed badly, and over the decades it did serve the purpose well.  However, talks of misuse of the system by errant exporters often came up in the media.

Every year, the weeks and days ahead of Eid-ul-Fitre set off a strong shopping spree among the people, most of whom spend substantial amounts mainly on dresses and fineries. Many observers believe that this is also the time for cross-border smuggling to gain momentum. The border haats are allegedly playing a part in the foul game.  On the other hand, misuse of the bonded warehouses, if found true, as alleged by the millers is the worst thing conceivable.

Suggesting measures to stop these makes no sense as the authorities are well versed with the mechanism of reining in the malpractices. All it takes is intent -- a well devised intent. 

wasiahmed.bd@gmail.com

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