The Bangladesh Textile Mills Association (BTMA) has demanded the withdrawal of duty-free bond facilities on the import of all types of yarn and fabric, proposing instead to allow imports against bank guarantees.
According to the organisation, this measure is required to prevent the abuse of duty-free imports, protect government revenue, and safeguard the local spinning and textile industry from unfair competition.
The organisation, however, proposed simplifying the process of obtaining bank guarantees for genuine export-oriented factories. It demanded that guarantees be provided without irrational cash margins and bank commissions, or at a minimum margin.
Provisions must also be established to swiftly release guarantees upon submitting proof of export completion and the repatriation of the corresponding foreign currency.
The BTMA presented this proposal on Wednesday at a meeting of the inter-ministerial committee of the Commerce Ministry. At the same time, it demanded maintaining the existing bank guarantee system on the import of 10–30 count cotton yarn.
However, the government said that because a lawsuit regarding this issue is pending before the High Court, no new decision can be taken prior to the court’s disposal.
In a letter sent on 11 November to Khandakar Abdul Muktadir, commerce minister and convener of the committee, the BTMA detailed its proposal to introduce bank guarantees instead of bond facilities for importing all types of yarn and fabric.
In the letter, the organisation alleged that a significant portion of yarn and fabric imported duty-free under bond facilities is being illegally sold in the local market rather than being used in export-oriented production.
It claimed that misdeclarations of yarn counts, abuse of bond facilities, and mismatches among import, production, and export data create risks of revenue evasion and market distortion.
According to the BTMA, despite local spinning and weaving mills possessing adequate production capacity, domestic producers are falling behind in competition due to duty-free imports under bond facilities.
This discourages new investment while damaging the production, employment, and debt repayment capabilities of existing factories. The organisation believes the adverse impact extends to local raw material production, supplier firms, the banking sector, and related industries.
The BTMA said its proposal is not aimed at banning imports or imposing additional duties. Rather, it seeks to use bank guarantees as financial security to ensure that imported raw materials are properly used in export-oriented production and that finished goods are exported.
To achieve this, the organisation proposed introducing an effective monitoring and auditing system by reconciling import, production, and export data.
It also demanded uniform and mandatory directives for all scheduled banks through Bangladesh Bank regarding the issuance, renewal, and release of bank guarantees, alongside simplifying complexities surrounding cash margins, bank commissions, and non-funded limits.
The dispute over the bank guarantee system on importing 10–30 count cotton yarn originated on 7 September, when the National Board of Revenue (NBR) withdrew duty-free bond facilities for such yarn and mandated imports against bank guarantees.
Although genuine exporters were permitted to import under this arrangement, a condition was attached to release the guarantee only after proof of exporting finished goods and the repatriation of export earnings.
The NBR later clarified that 10–30 count refers to single-count cotton yarn. The BTMA supported the NBR’s decision.
However, apparel exporters’ bodies – the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) and the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) – opposed the move.
They expressed concern that the bank guarantee requirement would increase financial liability and procedural complexities for importers, potentially hampering raw material procurement and export production.
Following objections from exporters, the Commerce Ministry on 13 September requested the NBR to stay its decision for reconsideration.
Subsequently, following a writ petition filed by several yarn manufacturing companies, the High Court on 29 October stayed the effectiveness of the Commerce Ministry’s letter for three months and issued a rule, leaving the decision on bank guarantees for 10–30 count yarn pending judicial resolution.
At Wednesday’s meeting, BTMA representatives also demanded bringing equity into Export Development Fund (EDF) allocations, expanding the size of the fund, and simplifying the process of issuing party acceptances.
The meeting was attended by Md Shamim Islam, president of the BTMA; Chowdhury Mohammad Hanif Shoeb, vice-president of the BTMA; Md Badsha Mia, director of the BTMA; Hossain Mehmud, former vice-president of the BTMA; and Engr Rajib Haider, former director of the BTMA. Representatives from the BGMEA, BKMEA, NBR, Ministry of Textiles and Jute, and Ministry of Finance were also present.
Following discussions, the government said that as the provision concerning the import of 10–30 count cotton yarn remains sub-judice in the High Court, no new decision can be taken before the court disposes of the matter.
However, decisions will be taken after reviewing other proposals, including EDF allocations and party acceptances.
Meanwhile, last Monday, Tarique Rahman, prime minister, met representatives of the apparel and textile sectors and instructed the inter-ministerial committee to submit a report by 20 November on modernising the bonded warehouse system and reviewing existing policies.
He also directed the committee to formulate recommendations in consultation with industry stakeholders, taking into account the practices of competing countries.
