Customs duty on the import of goods is paid at the time of filing of the Bill of Entry (BoE) for home consumption. However, many countries offer the privilege of deferred payment or zero tax for the import of raw materials or intermediary goods to export-oriented industries, subject to certain conditions.
The Bangladesh government, through the National Board of Revenue (NBR), provides bond facilities for export-oriented industries, particularly the RMG industry. The NBR has issued another policy allowing small-scale exporters without bonded warehouse licences to import raw materials duty-free using a bank guarantee equivalent to the import tax on raw materials.
Initially, the NBR’s customs wing is considering offering the benefit to exporters with annual exports under $5 million. According to the Office of the Chief Controller of Imports and Exports, over 20,000 exporters operate annually, though not all require raw material imports. However, only about 6,000 factories, including those in ready-made garments, plastics and other sectors, are eligible to import raw materials duty-free under the bond facility. The current export volume of factories without bond licences exceeds $8 billion. This volume will increase with support from the bond licence.
The NBR issued an SRO on September 25, 2025 to introduce duty-free import of raw materials for non-bonded exporters, allowing use of the duty-free raw material import facility against a 100 per cent bank guarantee covering the applicable duty.
Once the goods are manufactured and exported using those raw materials, the bank guarantee will be released upon providing proof of foreign exchange inflow, evidenced by the Proceeds Realisation Certificate. However, entrepreneurs must obtain a non-bonded warehouse licence, which involves fulfilling stringent conditions and incurring additional expenses as mentioned in the SRO. Bangladesh authorised the NBR to issue such facilities. The rules and policies of the NBR are often criticised as cumbersome and are likely to increase the cost of doing business. The cost and procedures may become unbearable for small-scale exporters. Experts have suggested a more accessible alternative to the bank guarantee, as it may not be feasible for all exporters.
A similar initiative in India is the Advance Authorisation Scheme (AAS), which forms part of the wider Foreign Trade Policy (FTP) of India and is implemented under the Directorate General of Foreign Trade (DGFT), Ministry of Commerce and Industry. The scheme covers basic raw materials, intermediates, consumables, components, fuels and spares.
The local value addition requirement in Bangladesh has been set at a minimum of 30 per cent, while Indian policy allows only 15 per cent.
The provisions of the Foreign Trade (Development and Regulation) Act, 1992 in India govern the scheme, and details are provided through notifications issued from time to time under the Foreign Trade Policy of the Ministry of Commerce.
Under the AAS, eligibility of inputs is determined by sector-specific norms committees in accordance with the Standard Input Output Norms (SION). By aligning with industry-specific requirements, the scheme ensures exporters have access to necessary inputs without unnecessary burdens or delays. In Bangladesh, authority is vested in the NBR, and there are no visible standard norms.
In India, Customs authorities ask for bank guarantees, but exemptions are granted to certain categories of exporters under the Advance Authorisation Scheme, including Public Sector Undertakings (PSUs), Star House Exporters, exporters with export turnover exceeding Indian Rupees 5 crore in the current or preceding financial year with a good track record, manufacturer exporters registered with Central Excise exporting in the previous two financial years with export turnover exceeding one crore, and manufacturer exporters registered with Central Excise who paid excise duty (pre-Goods and Services Tax era) or GST exceeding one crore in the preceding financial year. All other manufacturers are required to submit a 15 per cent bank guarantee, while others submit 100 per cent. In Bangladesh, all non-bond holders must provide a 100 per cent bank guarantee regardless of exporter category.
In India, authorities issue an Export Obligation Discharge Certificate (EODC) upon submission of documents including export documents, bank statements and copies of the Bill of Entry. In Bangladesh, no specific method for release of the bank guarantee is mentioned in the SRO, although other policies and procedures may apply.
India follows a ‘No-Norm Repeat’ approach, allowing exporters to secure advance authorisation without repeated committee reviews, leading to faster and more streamlined processing. This trade facilitation innovation is expected to reduce processing time, improve user-friendliness of the business environment and reduce administrative complexity. In contrast, in Bangladesh, the non-bond licence is subject to renewal after thorough examination by the NBR every year.
Unlike Bangladesh, India offers multiple pathways to obtain advance authorisation: (1) Standard Input Output Norms, where businesses refer to pre-notified norms for their sector; (2) self-declaration based on procedures in the Handbook of Procedures; (3) application to a norms committee for specific fixation of norms; and (4) the self-ratification scheme prescribed under the Foreign Trade Policy.
Advance authorisation in India can be issued for various purposes, including physical exports, supply to Special Economic Zones (SEZs), intermediate supply and supply to specific categories listed under the FTP. It also applies to supply of stores on board foreign-going vessels and aircraft, subject to applicable Standard Input Output Norms. The scheme covers physical exports, intermediate supply and certain categories of deemed exports.
Such duty exemption procedures help lower production costs, making export goods more competitive in international markets. Streamlined procedures for duty exemption benefit exporters across multiple industries. The scheme supports a wide range of sectors and allows for duty-free replenishment through local sourcing. Overall, the facility enhances global competitiveness by eliminating import duties.
In Bangladesh, banks have no policy to issue bank guarantees without collateral such as fixed assets, including land and buildings, or cash deposits. In many cases, banks require a 110 per cent cash deposit for issuing a bank guarantee. This creates an additional capital burden that is impossible for small exporters to bear.
Duty-free import of raw materials for non-bonded licence holders was originally designed to facilitate exports and enhance the global competitiveness of export products. However, the cumbersome procedures may not serve this purpose in Bangladesh, as highlighted in studies on the cost of doing business and ease of doing business. Consideration should be given to adopting simpler and more flexible procedures followed in other countries.
