Challenges for Bangladeshi exports to India
M S Siddiqui
Bangladesh imported products worth US$48.21 billion and exported $34.85 billion during the year 2016-17. Imports from Bangladesh to India are increasing at faster rate, but Bangladeshi exports to India are declining gradually. Over the past five years, trade between Bangladesh and India increased by 28 per cent, when it increased by 68 per cent with China. The largest bilateral trade partner for Bangladesh is China. In 2016-17 fiscal year, Bangladesh imported 14 per cent more products than previous year, amounting to $6.50 billion and exported only $ $672.4 million worth of goods. This is 1.72 per cent less than the amount exported in 2015-2016 fiscal year. The reduction is mainly due to imposition of anti-dumping duty on jute products.
Bangladesh faces various other Non-Tariff Barriers (NTB) under categories of (1) Sanitary and phytosanitary barriers, (2) Standardisation, (3) Quality, (4) Quantity, (5) Classifications, (6) Understanding of law and regulation of each other country.
After studying the trade in South Asia in 2015, Asian Development Bank (ADB) observed that the share of different trade barriers to SAARC countries are: (1) Sanitary and Phyto-sanitary (SPS), Technical Barrier to Trade (TBT), and Other Related Measures: 86 per cent, (2) Tariff Quota: 9.8 per cent, (3) Anti?Dumping Measures: 7.4 per cent, (4) License requirement: 5.3 per cent, (5) Countervailing measures: 1.2 per cent.
It is difficult to create an exhaustive list of NTBs as they tend to vary from consignment to consignment. Most NTBs are non-transparent and hence are difficult to identify. Some of them are state-mandated impositions or requirements, while others are sheer bureaucratic interference. The most commonly used NTBs are the following:
1) DISPUTE OVER CLASSIFICATION OF GOODS FOR CUSTOMS PURPOSES: The Indian Customs Authority sometimes refuses to accept the H.S. classification declared by Indian importers as per nomenclature rule and Letter of credit opened by Indian Banks. The authority has the propensity to classify the products under those H.S. codes that are subject to higher duties.
2) REQUIREMENT OF CHEMICAL TESTS: Indian Customs demands chemical test for most products. Since there is no testing facility near any land port, chemical tests take a long time forcing goods to be stranded for indefinite periods under the open sky. These requirements not only raise costs for Indian importers, but also results in harassment for Bangladeshi exporters. Problems are more for importers based in northeast India as most labs are located in the western India.
3) CUSTOMS VALUATION: The Indian Customs often refuses to accept the invoice value of the exported items and assesses the consignment on the basis of Retail Sale Price in India, which is higher than the invoice value. This is also against standard customs policy. This practice substantially raises the assessable value of the imported items and the buyers are forced to pay an extra amount as import duty and taxes. As a result, Bangladeshi exports become less competitive in the Indian market.
4) NON-ACCEPTANCE OF CERTIFICATES OF RULES OF ORIGIN: The Indian Customs officials sometimes refuse to accept the country of origin certificate issued by Bangladesh Export Promotion Bureau (EPB). EPB is the government organ, authorised to issue COO. Such refusal causes goods to be stranded indefinitely at the port of entry.
5) ARBITRARY IMPOSITION OF TARIFF VALUES: The fixing of tariff value is done by the revenue department. But Indian customs often impose this arbitrarily and change it without prior notice. The amount of import duty and taxes paid on the products goes up as a result, causing inconvenience for both the importer and exporter.
6) HEALTH AND QUALITY STANDARDS: Imposition of arbitrary health and quality standards favours domestic producers over foreign ones. The process of health and quality standard is very difficult for Bangladeshi products in India. Bangladesh exports medicine to many countries of the world including USA. But such items are not exported to India.
7) PERMITS AND LICENSES: Indian traders require obtaining Import-Export Code No. (IEC Number) from the Director General of Foreign Trade (DGFT) in Kolkata, for cross-border trade along the northeast. There is a distance of about 1,680 kilometres between Kolkata and Agartala. Due to such restrictions, Bangladesh and Tripura cannot take advantage of their geographical proximity to increase bilateral trade.
8) CONDITION FOR OBTAINING ISI CERTIFICATE: Bangladesh exporters of cement and building materials are required to obtain an ISI Certificate from the Bureau of Indian Standard (BIS) in New Delhi, if they intend to export their products to India. The huge cost as well as the complicated procedure for certification makes exporting to India very difficult.
9) REQUIREMENT TO COLLECT HEALTH CERTIFICATE: An Indian importer has to obtain a Health Certificate from the Port Health Officer (PHO) in Kolkata if he wants to import food items from Bangladesh. This is formidable barrier for importers in Northeast India, where the land customs stations are 1,060 km to 1,680 kilometres away from Kolkata.
10) SANITARY AND PHYTOSANITARY MEASURES: In order to import agricultural products in India, an importer has to obtain “Bio-Security” and “Sanitary and Phytosanitary” Import Permit. The process of obtaining this certificate is very complicated, time consuming and non-transparent. As such, this rigid process discourages trade in this sector between the two countries.
11) QUARANTINE REQUIREMENTS: Indian law has provision of obtaining quarantine certificates for importing “living organism”. This is mandatory under the Indian law. But the Indian Customs demands quarantine certificate even for jute and jute goods, though these are not living organisms.
12) TECHNICAL STANDARDS: Quality standard certificate by the Bangladesh Standards and Testing Institution (BSTI) is not accepted by India. India introduced mandatory marking for a number of products stating that these should comply with Indian Quality Standards set by the Bureau of Indian Standards (BIS). This requirement seriously hampers Bangladesh’s exports to India. Mutual recognition of each other’s standards can prevent this problem.
13) INADEQUATE LAND CUSTOMS INFRASTRUCTURE: There is an absence of warehousing facilities for imported goods in most land customs stations on the Indian side. As a result, goods exported by Bangladesh are kept in the open space till customs formalities for clearance are completed. This damages the exported goods and their inconsistent supply to the Indian market.
14) LABELLING AND MARKING PROVISION: The Indian authorities have made it mandatory to print some information such as the name of the country of origin, the maximum retail price etc. on all packaged imported items. Even the low cost jute bags are also included in this list. In July 2002, this requirement was made mandatory for all imported jute bags. At the time, India used to import 90 per cent jute bags from Bangladesh. Due to this requirement, the export of jute bags to India has significantly declined in the past years. Moreover, India has recently imposed new tariffs on the import of this product.
Bangladesh and India are members of the South Asian Free Trade Area (SAFTA), signatories of Asia Pacific Trade Agreement (APTA), signed Framework Agreement on BIMSTEC-FTA (BIMSTEC-Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Co-operation) and are members of IOR-ARC (Indian Ocean Rim-Association for Regional Cooperation). Both countries had agreed on preferential business relationship with reduced tariff and reduction of non-tariff barriers. Bangladesh, India and Nepal recently signed Sub-regional Motor Vehicle Agreement. Bangladesh has given full-fledged transit in the region through all modes of transport, e.g. road, rail and river to seven sisters in India.
According to SAPTA agreement, local content in the exported goods has to be at least 50 per cent of free on board or f.o.b. value of the product in order to receive preferential treatment / tariff concession. On the other hand, India and Bangladesh signed BIMSTEC agreement, which underlines 30 per cent value addition for exported products.
Under SAFTA, Bangladesh has secured a reduced sensitive items list and accelerated duty-free treatment for almost all items. Still Bangladesh experiences a modest level of nontariff barriers, and also a four per cent import tax on the readymade garment products, rebated to domestic traders from different states.
Bangladeshi exports to India are consumer goods like apparels, hosiery products, knitwear, leather shoes, fruit juices, jams and pickles, fish and fish products apart from raw jute and jute products etc. Both countries need to work closely to overcome these barriers to export from Bangladesh to India.
