Bangladesh has seen a significant increase in cross border transactions over the last decade -- triggering an energized involvement by the customs authority. This expansion of trade necessitates that our regulations are conducive and that systems are upgraded to meet and maintain global standards.
Bangladesh follows the Customs Act 1969 which has seen some occasional amendments. While the customs authority has taken some commendable initiatives, experts still see scope for doing more to smoothen trade and improve ease of doing business.
In line with the agreement on implementation of Article VIII of the General Agreements on Tariff and Trade, 1994 (GATT), National Board of Revenue (NBR) has issued an SRO No-57-AIN/2000/1821/Customs dated Feb 23, 2000 to determine the value of imported goods.
The SRO states that the value of the imported goods will be equivalent to the transaction value. According to Rule, only when the transactional value is not ascertainable, can other valuation processes be followed, which includes transaction value of identical goods; transaction value of similar goods; deductive value; computed value; residual method and to be followed in sequential order.
In practice, however, there are occurrences when this well-defined provision is not followed while determining the value of imported goods, even if the transaction value is available at the time of import and the parties are not related.
In many cases, valuation is done based on database (ASYCUDA) value available with the authority considering identical or similar goods imported into Bangladesh in the recent past. This leads to a violation of the valuation rules and results in a rejection of transaction value. The arbitrary valuation, based on the database value, results in an increase in the cost of imported goods owing to an excess payment of import duties and thus an increased price of the goods in the local market.
An upward arbitrary valuation at the time of import may increase revenue for the government, but the eventual cost is borne by the consumers in the local market. NBR should remove any arbitrary valuation by issuing proper clarification directing the implementing customs wing to abide by the valuation rules issued.
In Bangladesh, Transfer Pricing provisions were introduced in 2014 and the upward valuations by the customs contradicts the objectives of the Transfer Pricing policy. While customs tends to calculate upward valuation, Transfer Pricing leans towards downward valuation. To avoid such contradiction between the different wings of the apex revenue collection authority, NBR may issue a collaborative guideline to consider Transfer Pricing value at the time of import.
It must also be noted that the present classification of customs tariff is based on the 2007 edition of the WCO (World Customs Organization) Harmonized System(HS) Nomenclature. There are currently 7,196 tariff lines classified at the HS eight-digit level, compared to 6,637 in 2006.
The present customs tariff classification is not completely aligned with the HS nomenclature of 2017 edition which was published by WCO under the International Convention on the Harmonized Commodity Description and Coding System, effective January 1, 2017. As a result, in many instances, the HS code provided by the exporting countries following the WCO HS nomenclature does not match the corresponding HS code available under the Bangladesh Customs tariff.
Owing to the disparity in corresponding HS code published under the Bangladesh Customs Tariff, importers face difficulties in classifying their imported goods, which leads to disputes with the authority. The difference of tariff classification also creates disagreements regarding eligibility of various benefits available under different Free Trade Agreements like SAFTA, AFTA etc.
It is essential that Bangladesh Customs tariff aligns with the WCO published HS nomenclature, used worldwide for the uniform classification of goods traded internationally, and that has been accepted by all contracting parties to the Harmonized System Convention. A new WCO Harmonized System Nomenclature will be implemented from 2022. It is high time that Bangladesh Customs Authority take the opportunity and be aligned with the global HS nomenclature to be introduced in 2022.
Moreover, Section 219A of the Customs Act, 1969, provides the opportunity of advance ruling with respect to classification of goods, duty rates, and valuation of goods. In 2016, customs authority issued Customs Rulings (Advance) Rules, 2016, notified vide SRO No.188-AIN/ 2016/ 37/ Customs dated June 2, 2016, which opens the opportunity of advance ruling relating to classification of goods and country of origin.
It does not provide scope of advance ruling in relation to valuation of goods even if the Act provides such scope. While the advance ruling on classification of goods is available since June 2, 2016, the NBR is yet to introduce the facility of advance ruling relating to valuation of goods, resulting in unnecessary dispute in the valuation of goods.
Import from a related party requires special valuation for which a Special Valuation Bench (SVB) exists in many countries. In the absence of such SVB and facility to seek advance ruling with respect to the valuation of goods imported from related parties, the importers face challenges of arbitrary valuation by the authority.
We hope the customs authority, in line with the government manifesto of improving ease of doing business to bring in foreign investment into Bangladesh, will make necessary modification to existing practice and rules to remove the unnecessary problems faced by the importer at the time of import of goods.
The NBR has taken some commendable steps to smoothen trade. As a part of customs modernization and trade facilitation project, it will roll out the National Single Window in Bangladesh to ensure all foreign trade related customs procedures through a single window.
The project will transform international trading operations by adopting a user-friendly system that streamlines and automates procedures for all international trade related permits, licenses, and customs declaration, resulting in significant reduction of time and cost of trade.
The World Trade Organization (WTO) continues to suggest changes to customs regulations. Amidst that changing landscape, Bangladesh must maintain a balanced, uniform, and forward-looking approach. Complexities in trading patterns are the norm nowadays with shipments traveling to and from multiple locations and changing hands multiple times. This reflects the globalized nature of modern corporations, which run different operations in various countries.
By working smarter, being cognizant of WTO suggestions and globally accepted procedures, and using technology, we can better serve our local and global companies to tackle new challenges in an ever-evolving horizon and help trade move smoothly.
Our country’s reputation of having an effective and un-obstructive system relies on customs regulations simplification and stems from our ability to establish Bangladesh as a secure and trusted node in the global supply chain, so that others will want to trade with us.
Mamun Rashid is a partner and Shahadat Hossain is a Manager with Tax and Regulatory Services (TRS) at PwC Bangladesh. This article is the excerpt of a PwC webinar on ‘key issues in Bangladesh Customs and its rationalization in line with the global system’.
