New bindings for contractual export goods makers

29 October 2021

Al Amin :
The National Board of Revenue (NBR) is going to make mandatory of having bonded warehouse license for sub-contractors of the export-oriented goods producers.
The contract value must have to be paid in foreign currency through back-to-back letter of credits (LCs).  
In this regard, the revenue board is going to issue a 15-point direction for the sub-contractors of the export-oriented goods makers soon, NBR officials said.
Stakeholders, however, said the country's export growth will be hindered and around 1,500 sub-contracting apparel factories will be closed down, if the rule is implemented.
They also said the NBR is going to formulate the rules without discussing with the concern stakeholders. It is illogical.
According to the draft, in case of sub-contracting, the both sides must have updated bonded warehouse license and contract value must have to be paid in foreign currency through back-to-back LCs.
Mohammad Hatem, Executive President of the BKMEA, told The New Nation on Thursday, "The new rules will hamper the country's export growth as several hundred factories have neither bonded licenses nor sufficient bank facility to receive money through back-to-back LCs."
"It is very unfortunate that the NBR is going to impose such sensitive new rules without consulting with the concern stakeholders," the BKMEA leader said.
The country has around 2,400 operational readymade garment factories, those have bonded warehouse license.  Out of this, around 1,500 apparel factories are dependent on sub-contracting as they have no bonded license or have no sufficient bank support.
But, around seven lakh people work in the sub-contracting factories, according to sources at Bangladesh Garment Manufacturers and Exporters Association (BGMEA).    
They said all the seven lakh workers will be unemployed if the new directions are implemented. Side by side, the country's export growth will go down.
Md Shahidullah Azim, Vice-President of the BGMEA, said, "The new rules are not implementable and unrealistic. The country's export will fall drastically, if the NBR impose the rules."
"Rules are being simplified globally for easing of doing business, whereas in our country, these are being harder day by day. It is very unfortunate," Azim said.
He said, "The obligation of having bonded license for sub-contractors must be scrapped. Otherwise, it will be very difficult to run the business."
Among the other rules, the sub-contractors must have to produce goods within the assigned time and to follow the Bangladesh Bank's Guidelines for Foreign Exchange Transactions rules in payment.
The sub-contractors will have to be member of the concern association, which is acknowledged by the government and their memberships will have to be updated, the draft said.
If the firms do not follow the rules, the concern commisionerate will take action, including cancellation of contracts as per the Customs Act 1969, it added.
BGMEA Director Mohiuddin Rubel said, "Any factory can make goods under the sub-contracting system. Sometimes, big factories go for sub-contract due to extra pressure. So, it will be very difficult to maintain the pressure, if the NBR imposes the rules." "The export-oriented sector will suffer from capacity and cost crisis severely for these rules," he added.

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