To resolve this issue, the Ministry of Commerce has formed a committee to look into the matter
Traders have sought amendments to certain sections of the Foreign Exchange Transaction Guideline of the Bangladesh Bank to resolve the problems of non-bonded exporters.
This move was sparked off by the National Board of Revenue (NBR) requesting the Bangladesh Bank to order banks to refrain from opening back-to-back letters of credit (LCs) for factories that do not have a bonded warehouse license.
For a back-to-back LC, an importer issues an LC to an exporter and the exporter can use it as collateral to get another LC issued for sourcing raw materials and accessories on credit. But if the facility is withdrawn, factories will have to make full payments plus VAT in cash for local purchases.
To resolve this issue, the Ministry of Commerce has formed a committee to look into the matter, Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) Senior Vice-President Mohammad Hatem told Dhaka Tribune.
He said the decision has put a stop to exports for those factories that do not have a bonded warehouse license.
“However, the ministry has formed a committee headed by the commerce secretary and relevant officials of the Bangladesh Bank, NBR, BGMEA and BKMEA. We hope that the committee will submit its guidelines in this regard soon,” he added.
Asked about the way to solve such problems, he said, one or more sections of the Foreign Exchange Transaction Guideline of the Bangladesh Bank should be amended.
“However, I hope that the overall situation of the sector will come up in the committee’s report, which will ensure transparency,” he further said.
According to NBR sources, there was ambiguity surrounding the whole issue, but they hope this committee will be able to come up with solutions.
The sources further said that the NBR would not have any objections if back-to-back LCs are allowed for factories without bonded warehouse facilities.
The previous letter could be withdrawn through another letter to Bangladesh Bank, they said.
NBR issued the letter on August 31, after which exporters without bonded warehouse licences in the garment and textile sectors held meetings with the Ministry of Commerce.
After the meetings on Wednesday and Thursday, the ministry decided to form an integrated working committee to resolve the issue.
The number of members without a bonded warehouse license is 500 for the BKMEA, 350 for the BGMEA, and 104 for the Bangladesh Terry Towel and Linen Manufacturers and Exporters Association (BTTLMEA).
These companies export about Tk500 crore worth of goods annually.