Home ›› 16 Nov 2022 ›› Editorial
Bangladesh Bank has issued a policy on merchanting trade (Re-export & Entrepôt) so far, the foreign currency transaction is concern through a FE circular no: 22 dated 14th September 2022. Under the policy, traders are now free to purchase goods or services from another country and re-export to a third country without needing to submit both export-and import-declaration forms to the authorities concerned. The circular claimed that from now on, local traders are eligible for merchant trade, like Singapore and Hong Kong. Bangladesh defined merchant trade as a trade for which goods or services procured from a country are shipped or delivered directly to a third country. Unfortunately, the export policy order 2021-24 has imposed some conditions for re-export and Entrepot trade by any trader, which will create obstacle to merchant trade as mentioned in the circular of BB.
Most of the countries are in trade of products from third counties. It includes inward processing, manufacturing under bond, export-processing zones, temporary admission for re-export in the same state, and Customs warehousing. Another method is drawback duties/ taxes to be paid at the time of importation and then refunded after the finished goods are re-exported. The other options are free zone for manufacturing and trading, temporary admission, transit and corridors etc.
Re-exports consist of foreign goods exported in the same state as previously imported, from the free circulation area, premises for inward processing or industrial free zones, directly to the rest of the world and from premises for customs warehousing or commercial free zones, to the rest of the world.
The United Nations International Merchandise Trade Statistics: Concepts and Definitions (IMTS) Paragraph 78 (e) and (f) describes re-exports as foreign goods in the same state as previously imported. The goods may be exported from the free circulation area, premises for inward processing or industrial free zones. They may also be exported from premises for customs warehouses or commercial free zones.
Re‐export is sending back goods imported for specific purposes like jobbing, execution of a contract, servicing/repairing of machineries, display in fair/exhibition etc. It also happens when indigenously manufactured goods were returned back after export and re-imported for repairing/reprocessing etc. due to reasons such as defective, not meeting buyer’s requirement etc.
Singapore was traditionally a re-export economy by virtue of her historical role as an entrepot for Southeast Asia. Singapore's imports included goods for re-exports. The Netherlands in another country in Europe is another trading nation. A large share of goods imported from China is destined for other countries. Exporting partners often declare the Netherlands as the destination of goods intended for re-export.
Jebel Ali Free Zone in Dubai, UAE, is probably the most successful zone in the world. Created in 1985, this free zone has no taxation. The restrictions are minimal, and there is no obligation to have a local partner. Staff can be recruited from anywhere. There are offering excellent port facilities, warehouses, office space, and factories already built and ready for lease. The port is the busiest in the Middle East and now the 10th busiest in the world.
Vietnam has introduced temporary entry of goods and transit provisions, temporary import for re-export and transit of goods. The ASEAN nations are exploring trade and investment opportunities in Malaysia under seamless trade, utilising the country as a gateway to emerging markets in South Asia and the Middle East under the ASEAN Free Trade Agreement (AFTA).
The position of Bangladesh within the global map makes it a natural candidate to become a regional hub of economy. However, the globe wouldn't come to it unless it aligns itself to become a hub. Re-export has a big promise for the economic development of Bangladesh. It also has the potential to facilitate trades for China, India and other regional countries.
Bangladesh has allowed transit to India for re-entry of their goods to 7 sisters in eastern part of Bangladesh. There is a criticism of agreed transit fees. India wins in negotiation with Bangladesh.
Bangladesh already has six export processing zones (EPZs) and provide manufacturing facilities only. It has also declared to set up 100 FTZs both in public and private sector. But in India, the terms Free Trade Zones and Export Processing Zones are synonymous. India has 10 Free Trade Zones (FTZs) for local and foreign investment.
There is a wonderful policy decision of Bangladesh Government for re-export of LPG. According to report of a Daily newspaper on 16th February 2017, The Energy and Mineral Resources Division (EMRD) under the Ministry of Power, Energy and Mineral Resources (MPEMR) has already published a gazette notification of the policy styled 'LP Gas Operational Licensing Policy 2017. The licensees under this policy would hold the authority to supply LPG to households, auto-gas stations, and to commercial and industrial clients through engaging dealers or franchises. They can also export bottled LPG or LPG in bulk quantity after attaining no- objection certificate (NOC) from the EMRD and necessary approval from the commerce ministry.
There are often occasions where imported goods may have to be re-exported such as when the import goods are found defective after Customs clearance or are not found as per specifications or requirements. Various machinery items imported for use in certain projects or otherwise are also often to be re-exported by the original owner. Re-exports can be made by sea, air, baggage or post.
India has allowed manufacturing and trading of foreign products for re-export. Because of this Indian policy, Bangladesh is now importing products of other origins from India through FTZs. These FTZs are new challenge to Singapore, Dubai FTZs. If India can re-export to Bangladesh, why should Bangladesh voluntarily restrict (under bureaucratic process) re-export to India and other countries? We can adapt same policy as India.
Re-export creates opportunities of development of trading centres and diversified economic bases. Trade, service, industry, banking, etc. are free. Vendors and shipping forwarders, shipping agents and customs brokers, exporters and importers, manufacturers and investors have free entry to free zones without much formality.
An entrepôt or transshipment port is a port, city, or trading post where merchandise may be imported, stored, or traded, usually to be exported again. Entrepôt also means 'warehouse' in modern French. The export policy order 2021-24 in Clause 3.7 has defined as Entrepôt is re-export without change any quality, quantity, shape etc but export adding value of 5 per cent for export to a third country. Bangladesh will not even allow entry into the land without permission of the Ministry of Commerce. The policy also defines re-export in clause no 3.9 that re-export is modification of quality and shape of the product and export to third country adding 10 per cent value. It is simply impossible to obtain permission from Ministry of Commerce to bring each consignment to bring into the land from the port. No other country has such rule except in Bangladesh. Such condition of mandatory addition of certain profit is regressive and may hold beck to gain from the liberal foreign exchange policy of central Bank circular.
The writer is Non-Government Adviser, Bangladesh Competition Commission. He can be contacted at [email protected]
