Chapter 2 Foreign Trade System in Bangladesh

The foreign trading system of Bangladesh is primarily regulated by three Acts:the Imports and Exports（Control）Act 1950, the Foreign Exchange（Regulation）Act 1947, and the Customs Act 1969. These three Acts are complementary and infringement of one may also involve infringement of another and be punishable under more than one Act. The principal responsibility for making trade policy is shared between the Ministry of Commerce and the Ministry of Finance, although a large number of other ministries and agencies are involved in the formulation and implementation of trade and investment policies. The Imports and Exports（Control）Act has empowered the Government to control, restrict and even prohibit the export or import of any product. Section 3 of the Act provides as follows:

“（1）The Government may, by order published in the official Gazette and subject to such conditions and exceptions as may be made by or under the order, prohibit, restrict or otherwise control the import or export of goods of any specified description, or regulate generally all practices（including trade practices）and procedure connected with the import or export of such goods, and such order may provide for applications for licences under this Act, the evidences to be attached to such applications, the grant, use, transfer, sale or cancellation of such licences, and the form and manner in which and the periods within which appeals and applications for review or revision may be preferred and disposed of, and the charging of fees in respect of any such matter as may be provided in such order.

（2）No goods of the specified description shall be imported or exported except in accordance with the conditions of a licence to be issued by the Chief Controller or any other officer authorised in this behalf by the Government.

（3）All goods to which any order under Subsection（1）applies shall be deemed to be goods of which the import or export has been prohibited or restricted under Section 16 of the Customs Act,1969（Ⅳof 1969）, and all the provisions of that Act shall have effect accordingly.

（4）Notwithstanding anything contained in the aforesaid Act the Government may, by order published in the Official Gazette, prohibit, restrict or impose conditions on the clearance whether for home consumption or warehousing or shipment abroad of any imported goods or class of goods. ”

The Import Policy Order（IPO）2012-2015 formulated under the authority of 1950 Act obligates all importers, exporters and“indenters”（e. g. firms, institutions, bodies, organisations, persons or group of persons）to be member of a recognised Chamber of Commerce and Industry and a Bangladeshi“organisation”representing their own trade.

The Government has introduced new export policy for three years（2015-2018）prioritising 12 sectors as the“most potential”while 14 other sectors as“special development”. The 12 highest priority sectors in the new export policy are high value added RMG accessories, software and IT-enabled services and ICT products, pharmaceutical products, shipbuilding, shoe and leather products, jute and jute-based products, plastic products, agro products and agro-processed products, furniture, home textile and terry towel, home furnishing and luggage.

The 14 special development sectors are multifarious jute-based products, electronic and electric products, ceramic products, light engineering, value added frozen fish, printing and packaging, crude diamond and jewellery, paper and paper products, rubber, silk products, handicraft and cottage products, lungi and tent industry products and coconut coir.

The 17 export prohibited products that have been identified in the new export policy are edible oil, wheat, onion, garlic, all sorts of pulses except processed one, general rice except the fragrant rice, jute seed, arms and ammunition-related products, etc.

The 1950 Act has criminalised the violation of its provision with the imposition of penalty or fine or with both. Section 5 provides as follows:“If any person contravenes any provision of this Act or any order made or deemed to have been made under this Act or the rules made thereunder, or makes use of an import or export licence otherwise than in accordance with any condition in that behalf imposed under this Act, he shall without prejudice to any confiscation or penalty to which he may be liable under the provisions of the Customs Act 1969（Ⅳof 1969）, as applied by Sub-section（3）of Section 3 of this Act be punishable with imprisonment for a term which may extend to one year, or with fine, or with both. ”

2.1 Licence system and rules of origin

All industrial consumers, except enterprises located in export processing zones（EPZs）and commercial importers, must register with the Chief Controller of Imports and Exports（CCIE）in the Ministry of Commerce, who issues an import registration certificate（IRC）. Registration with IRC is required only for private importers exempting the public entities. An IRC is generally issued within 10（previously 15）days of receipt of the application.

After fulfilling the initial two requirements, importers are allowed to import with a letter of credit authorisation（LCA）form. Along with the LCA form, importers must submit a number of documents to the executing bank, including an L/C application form, an invoice, and an insurance cover note. In addition, private sector importers must submit a membership certificate from the registered Chamber of Commerce and Industry or any trade association; proof of IRC renewal payment; a declaration of income-tax; Tax Identification Number; and any other documents required by the Import Policy Order or other Public Notice. Public sector importers are required to submit an attested photocopy of the allocation letter issued by the administrative ministry, division or authority.

Some other documents required for imports in Bangladesh include a bill of lading or airway bill, commercial invoice or packing list, and a certificate of origin. In case of importing restricted list products or controlled list products, some other documentation may be required in accordance with the notification issued by the government. The restricted or controlled list is given in Annexure 1 of the Import Policy Order 2012-2015.

Import against an LCA form may be allowed without opening an L/C for:（ⅰ）import of books, journals, magazines, and periodicals;（ⅱ）any permissible item for an amount not exceeding USD 25,000 during each financial year against remittance made from Bangladesh;（ⅲ）import under commodity aid, grant or such other loans for which there are specific procurement procedures for imports of goods without opening an L/C; and（ⅳ）import of“international chemical references”through bank drafts by recognised pharmaceutical（allopathic）firms on approval of the Director, Drug Administration, for the purpose of quality control of their products. Moreover, an L/C is not required for imports of perishable goods valued between USD 10,000 and USD 15,000（Tecknaf Customs Station）or between USD 5,000 and USD 7,500（other land routes）per consignment, or for capital machinery and raw materials for industrial use.

Rules of origin（RO）are the criteria that are used to define where a product was made. The origin of a product is important because it will determine how it is treated at the border of an importing country and the origin may impact the import duty payable and admissibility into the country. These are the criteria needed to determine the source of origin of a product for the purpose of determining what tariff, if any, applies to it. If the rules of origin are relaxed, it might erode competitiveness of the backward linkage industries of Bangladesh.

Although a note on RO as prepared by GATT（General Agreement on Tariffs and Trade）Secretariat in 1981 and ministers of member countries agreed to study the RO used by GATT contracting parties in November 1982, not much work was done on RO until well into the Uruguay Round negotiations. After transforming GATT into World Trade Organisation in 1995, the RO have been frequently used in the trade arena. These rules have been playing a critical role in the export of many countries, especially LDCs like Bangladesh. The trade structure of Bangladesh is unique in nature. The export bundle of the country is mainly composed of garments items. Moreover the export destination is mostly the European Union（EU）. Nearly 79 percent of the total exports of the country comprise of ready-made garments（RMG）of which about 58.73 percent were exported to EU in FY 2010-2011. Therefore,apparel exporters need to know what requirement of RO the EU has fixed for accessing Bangladesh RMG into their apparel market.

Bangladesh has called for a relaxation of stringent rules of origin so that more products from least developed countries can enjoy duty benefits. Rules of origin are used at the port of entry to determine the national source of a product for duty purposes and easing them has been a longstanding demand of less developed countries.

Due to strict rules, many products originating from less developed countries are subject to entry barriers or high duty. Bangladesh became a victim of rigid rules on exports of clothing items to Japan. The apparel items were manufactured from imported cotton or yarn, so they were not considered products originating from Bangladesh. But in April 2016, Japan relaxed its rules of origin, as of result of which Bangladesh is now enjoying duty benefits on export of knitwear items.

2.2 Technical barriers to trade in goods

Bangladesh has notified the WTO of its acceptance of the Code of Good Practice of the WTO Agreement on Technical Barriers to Trade（TBT）; no further notification has been received.

The Ministry of Industries is responsible for leading and facilitating the legal and technical institutional framework for national standards, quality and conformity assessment. The main institutions are the Bangladesh Standards and Testing Institution（BSTI）and the Bangladesh Accreditation Board（BAB）along with a planned new regulatory body to enforce mandatory technical regulations. BSTI works on the implementation of the TBT Agreement.

BSTI has been Bangladesh's WTO TBT national enquiry point since 2002. It has an internal committee on WTO affairs and participates in the working groups on WTO agreements in the Ministry of Industries and Ministry of Agriculture. BSTI is working on the implementation of the TBT and SPS Agreements.

BSTI, the national standardisation body, formulates national standards for all products except pharmaceutical products, enforces compliance with standards, and certifies the quality of products for local consumption, export or import. The BSTI Council, the highest decision-making organ of the institution, consists of representatives from different ministries, business chambers, scientific organisations, and universities. As of 2012, there were 3,498 standards in Bangladesh, of which 155 compulsory standards are in force. Testing and certification procedures for compulsory standards are the same for domestic and imported products. In exercising the power conferred by the Bangladesh Standards and Testing Institution Ordinance 1985, BSTI develops national standards for products and services.

The main policy objectives in the area of standards and technical regulations are the harmonization of national standards with international standards and the adoption of international standards. As of today, international standards adopted by BSTI include 1368 International Standardisation Organisation（ISO）standards and 163 International Electrotechnical Commission（IEC）standards. Bangladesh is a member of the ISO 1974 and in 2001 became an affiliate member of IEC. According to the Government, the standards and quality of manufactured products and exports will be maintained and further improved by enhancing TBT assurance capacities. To that end, the BSTI is being strengthened in the areas of quality assurance, accreditation and certification.

There are many national and international organisations working to maintain quality and safety of a product by issuing certificate in that regard. The International Standard Organisation is such an organisation working globally whereas Bangladesh Standard Testing Institute is working domestically.

The product safety and quality is ensured in Bangladesh through various laws.

The preamble of BSTI Ordinance 1985 declares that it is“an Ordinance to provide for the establishment of an Institution for standardisation, testing, metrology, quality control, grading and marking of goods”. The institution is authorised to grant or revoke licences. Section 20（2）of the Ordinance provides as follows:“The Institution may grant a licence if, after such enquiry as it deems necessary, it is satisfied that:（a）the article or process in respect of which the Standard Mark is to be used conforms to the related Bangladesh Standard; and（b）there is arrangement for routine inspection and testing to ensure that the article or process concerned conforms to the related Bangladesh Standard”.

Bangladesh is upgrading its quality infrastructure to an international level by collaborative efforts with the newly operational Bangladesh Accreditation Board. Under the Bangladesh Accreditation Act 2006, Bangladesh Accreditation Board（BAB）was established as an autonomous organisation and now functions under the administrative control of the Ministry of Industries with the task of developing an accreditation process in Bangladesh.

2.3 Sanitary and phytosanitary measures

The legal framework of sanitary standards in Bangladesh is found in the Pure Food Ordinance 1959, as revised by Food Safety Ordinance 1994, and the Pure Food Rules. Phytosanitary standards in Bangladesh are governed by the Destructive Insects and Pest Rules 1966 and the Plant Quarantine Act 2011. Formulation of rules under the Plant Quarantine Act 2011 is under way. Sanitary and phytosanitary standards are also governed by other legal instruments, notably:Bangladesh Diseases of Animal Act 2005, Bangladesh Diseases of Animal Rules 2008, Bangladesh Animal and Animal Product Act 2005, Bangladesh Fish and Animal Feed Act 2010, and Bangladesh Animal Slaughter and Meat Quality Control Act 2011.

The following acts and rules regulate SPS measures in the fisheries sector for both the export market and for domestic consumption: Fish and Fish Products（Inspection &Quality Control）Ordinance 1983; Fish and Fish Products（Inspection &Quality Control）Rules 1997（amended in 2008）; Fish Feed and Animal Feed Act 2010; Fish Feed Rules 2011; Fish Hatchery Act 2010; Fish Hatchery Rules 2011.

SPS matters are handled by the Ministries of Agriculture, Health, and Fisheries and Livestock. Sanitary certificates and radioactivity test certificates are required for imports of food and edible products. A sanitary certificate issued by the competent authority of the exporting country must indicate that the product is free of injurious insects, pests, and diseases. Foreign certifications of radioactivity tests are also accepted in Bangladesh. In addition, a purity test is conducted by the Bangladesh Council of Scientific and Industrial Research for imports of palm oil, olein, and refined bleached and deodorised（RBD）palm stearin. All expenses incurred for the tests are borne by importers.

According to a 2005 World Bank survey, the infrastructure that deals with sanitary, hygiene and standards-related issues（including environmental issues）is extremely weak. This weakness includes the absence of adequate human resources and technical capacity to address increasingly stringent global demands in standardisation.

In the light of requirements in the WTO Agreements on TBT and SPS measures, a product labelling policy was introduced in 2004, to ensure that no barriers are created for import（and export）of goods and that imported products have proper labels. The policy refers explicitly to international labelling standards to be observed in 13 sectors.

All imports are required to carry a label indicating the country of origin. The label must also indicate quantity, weight, measurements, trade description, component materials, and date of manufacture/expiry. Bangla or English is permissible for labelling. Imported goods, including their containers, must not bear any words or inscription of a religious connotation.

2.4 Anti-dumping and countervailing duties laws

The Finance Act of 1995 introduced regulations and procedures for examining dumping and subsidy complaints, by amending Section 18 of the Customs Act,1969. The legislation was passed to bring the provisions on anti-dumping and countervailing actions into conformity with the WTO Agreements on Implementation of Article VI of the GATT 1994 and on Subsidies and Countervailing Measures. The Bangladesh Tariff Commission（BTC）conducts dumping and subsidies investigations.

An application for an investigation, whether for an anti-dumping or countervailing measure, must be made in writing to the BTC by or on behalf of a domestic industry. The BTC must terminate the investigation within one year of issuing public notice, and submit its findings and recommendations to the Government. Provisional anti-dumping or countervailing duties, no greater than the margin of dumping or of the subsidy rates, may be imposed within 60 days of initiation and applied for a period of six months, extendable by three months.

The final findings must be available within one year of the date of initiation. Imposition of the final duty is made by notification in the Official Gazette. Final measures may be taken for a period of five years from the date of imposition;however, the Government may renew the duty for a further five years, upon review, if it is believed that there would be continued injury. If the initial five-year period expires while a review is in progress, the anti-dumping duty can be extended for a maximum of one year.

Appeals against an anti-dumping or countervailing duty can be made to the Customs, Excise and Appellate Tribunal, under Section 196 of the Customs Act 1969, and must be filed within 90 days of the imposition of the duty.

No investigations have been initiated on anti-dumping or countervailing measures during the review period. The previous TPR report noted that lack of technical expertise and financial resources both by the administration and industries, as well as lack of authenticated data essential for submission of an application, made it difficult to initiate investigations. The authorities note that this is still the case.

The budget for the fiscal year 2015-2016 provided some protection to the domestic industries of Bangladesh. Although most of the local manufacturers and producers are not happy enough as they find that the protection measures mostly through tariffs are limited or inadequate.

It is undoubtedly difficult for the government to continue with such direct protection of the domestic industries for long during a time when the country has significantly liberalised its trade regime and is committed to do more in near future. An analysis prepared by the Policy research Institute reveals that in the fiscal year 2016 budget average nominal protection rate has declined to 25.8 percent from 26.7 percent in fiscal year 2015.

There is a safeguard mechanism since June 2010 when the government of Bangladesh appointed the chairman of the Bangladesh Tariff Commission as the designated safeguard authority. The function of the safeguard authority is to investigate whether a surge in import of a particular product is hurting similar local products and recommend necessary remedial measures through imposition of safeguard duty.

Bangladesh has interesting experience with anti-dumping procedure following the imposition of anti-dumping duty by India on export of lead-acid batteries by the Bangladeshi company, Rahimafrooz, the company took up the matter with the Government. After a long delay of several years, Bangladesh Government finally moved in January 2004 to the Dispute Settlement Body（DSB）of WTO to challenge the Indian anti-dumping measure. WTO took the matter into cognizance and as part of WTO procedure DSB called India and Bangladesh for consultation. This is the first dispute involving an LDC member as a principal party to a dispute. On 28 January 2004, Bangladesh requested consultations with India concerning a certain antidumping measure imposed by India on imports of lead acid batteries from Bangladesh. After the consultation stage, India unilaterally withdrew the anti-dumping duty in January 2005.

Bangladesh textile manufacturers had long been complaining about dumping of Indian textile and fabric in Bangladesh. More than a decade ago, they had taken the initiative and formally lodged a complaint with the tariff commission, but the failure to provide adequate supporting information and documentation left the procedure incomplete.

There is a huge concern regarding information secrecy in spite of the fact that the Bangladesh Tariff Commission assures that no data or information would be disclosed to third parties or any government authority; however, a certain legal complications still do exist. So far, there is no legal protection against the disclosure of information gathered from investigation which could potentially be a big concern for the stakeholders. Without legal provision for keeping business information confidential, the safeguard authority cannot be expected to be functional.

2.5 Regulatory Guidelines for Mobile Financial Services（MFS）in Bangladesh

Bangladesh Bank（BB）has decided in principle to licence new banking companies in the private sector pursuant to Section 31 of the Bangladesh Banking Companies Act,1991 after considering the need and overall strategy congenial to effective monetary and financial sector policy for the country. Terms and conditions for establishment of the new bank are given in the website of Bangladesh Bank.

The financial sector in Bangladesh has undergone tremendous growth in volume and complexity over the recent years. However, despite impressive growth gains in capital base, income, return on equity and other areas, the financial sector remains lagging in reaching out with adequate financial services to large swathes of farm and non-farm economic activities of low income rural and urban population in Bangladesh. Rapid country-wide expansion of mobile phone networks and Bangladesh Bank led modernisation of the country's payments system and financial sector IT infrastructure have opened up opportunities for innovating mobile phone based cost efficient modes of off-branch financial service delivery to the underserved population segments. Bangladesh Bank is issuing these regulatory guidelines for mobilephonebased financial service platforms in Bangladesh with a view to providing an orderly, enabling and competitive environment for utilising this new window of opportunity of innovatively extending the outreach of financial services.

In Bangladesh about 25 million customers use mobile banking, of whom not all are registered customers. It is important to mention that the number of customers and agents has been growing exponentially. Despite the rapid development of mobile finance services, around 60 percent of the population, especially in rural areas, are yet to subscribe to mobile banking services.

The first revolution that happened in MFS was back in 2011 when Bangladesh Bank issued MFS guidelines and later updated this in December 2011 that works mostly as the basis of the whole system. These guidelines gave two ownership structure related model. MFS could work as a wing of the bank and the guideline also allowed the MFS to act as a subsidiary to bank where at least 51 percent is owned by a single bank. And the most predominant model here today is bKash.

Bangladesh Bank is issuing these guidelines in terms of Article 7A（e）of Bangladesh Bank Order 1972, and Section 5 of Bangladesh Payment and Settlement Systems Regulations,2014. These guidelines shall apply to provision of MFS in Bangladesh by scheduled commercial bank-led MFS platforms.

BB shall permit delivery of the following broad categories of financial services by scheduled commercial bank-led MFS platforms in Bangladesh:disbursement of inward foreign remittances; cash in/cash out into Mobile Accounts through agents/bank branches/ATMs/Mobile Network Operator（MNO）outlets; person to business payments, e. g. utility bill payments, merchant payments, deposits into savings accounts/schemes with banks, loan repayments to banks/nonbank financial institutions（NBFIs）/micro-finance institutions（MFIs）, insurance premium payments to insurance companies, and so forth; business to person payments, e. g. salary disbursements, dividend/refund warrant payments; loan disbursements to borrowers, vendor payments, etc; government to person payments, e. g. pension payments, old age allowances, freedom-fighter allowances, input subsidy payments to farmers, and so forth; person to government payments, e. g. tax, fee, levy payments etc; person to person payments（from one mobile account to another mobile account）.

MFS platforms in Bangladesh will be sponsored and led only by the payments system member scheduled commercial banks, with prior BB approval. The scheduled commercial bank-led MFS platforms may have both banks and non-bank entities including mobile network operators（MNOs）as equity holders, subject to:（ⅰ）banks holding majority beneficial ownership in total equity,（ⅱ）no bank or non-bank entity holding more than fifteen percent beneficial ownership in equity, and（ⅲ）beneficial ownership of MNOs in an MFS platform not exceeding thirty percent of its total equity. MFS platforms will be expected to choose non-bank equity partner entities with promise of bringing in innovative dimensions in business model and technology base. Acceptance of an MNO as equity partner in an MFS platform will be conditional on its extending reliable telecommunication access to all licensed MFS platforms at the same effective standard of ease of access and pricing. Before approving equity ownership of an MNO in an MFS, BB will verify the satisfaction level of all operating MFS platforms about the quality of services extended to them by the MNO.

BB reserves the discretion of withholding, suspending or cancelling its approval for operation of an MFS platform if its actions are deemed by BB to be detrimental to public interest; alongside appropriate steps towards protecting legitimate interests of the Mobile Account holders and other stakeholders in the MFS platform concerned.

2.6 Regional and bilateral trade laws

Over the past decade, Bangladesh has successfully negotiated several regional trade and economic agreements, including the South Asian Free Trade Agreement（SAFTA）, the Asia-Pacific Trade Agreement（APTA）, and the Bay of Bengal Initiative for Multi-Sectoral, Technical and Economic Cooperation（BIMSTEC）.Bangladesh has taken steps to strengthen bilateral economic relations with China. As a founding member of the WTO and as an LDC, Bangladesh has been an active advocate for LDC interests in WTO negotiations. Exports to SAFTA and BIMSTEC partner countries have remained limited during the review period, accounting for only three percent of total exports in each case.

The 1975 Bangkok Agreement, the oldest preferential trade agreement in the region aimed at boosting intra-regional trade, was revised in 2005 and renamed the Asia-Pacific Trade Agreement. The Framework Agreement on Trade Preferential System among the Members States of the Organisation of the Islamic Conference（TPS-OIC）was adopted in 1990, but entered into force only in 2002.

Bangladesh is one of the 43 member states of the GSTP. The third round of GSTP negotiations concluded in December 2010, after six years of negotiations, launched at UNCTAD XI in Sao Paulo in 2004.

2.6.1 Bilateral agreements

Bangladesh has bilateral trade agreements with the following countries, namely:Albania, Algeria, Belarus, Bhutan, Brazil, Bulgaria, Cambodia, China, Czech Republic, Egypt, Germany, Hungary, India, Indonesia, Iran, Iraq, Kenya, Democratic People's Republic of Korea, Kuwait, Libya, Malaysia, Mali, Morocco, Myanmar, Nepal, Pakistan, the Philippines, Poland, Romania, Senegal, Sri Lanka, Sudan, Thailand, Turkey, Uganda, Ukraine, the United Arab Emirates, Uzbekistan, Vietnam, Zambia and Zimbabwe. All the agreements are general in nature and aimed at promoting bilateral trade.

2.6.2 Other preferential arrangements

Under the Generalised System of Preferences（GSP）, Bangladeshi products currently receive preferential market access from almost all developed members of the WTO. In addition, Bangladesh is eligible for LDC preferential schemes adopted by emerging countries, including China and India.

Bangladesh could benefit from China's duty-free and quota-free programme（DFQF）for LDC products which was launched on 1 July 2010. Currently, the programme covers products of 4,788 tariff lines（8-digit level）, accounting for 60 percent of all China's tariff lines. China has reiterated its commitment to further open its market to LDCs by expanding the programme's coverage to 97 percent of all tariff lines. The programme was notified to the WTO in 2011. While the rules of origin requirements are not laid out in that notification, the Bangladeshi authorities indicated that the rules of origin criteria associated with China's DFQF programme stipulate a value addition of 40 percent or a change of tariff heading（CTH）. At present, the LDC DFQF programme covers around 92 percent of Bangladesh's current exports to China.