Exporters oppose Indian proposal for factory visits

Exporters oppose Indian proposal for factory visits

SYFUL ISLAM | The Financial Express September 28, 2019

Bangladeshi exporters have expressed reservations about an Indian proposal for onsite visit of factories linked to the duty-free access of goods under a regional free trade pact, officials said.

They said Bangladeshi goods meet the 30 per cent value addition criteria to enjoy benefit under South Asian Free Trade Area deal in India, but letting Delhi inspect factories will encourage other members of the bloc to follow suit.

Bangladesh’s edible oil exports to India in bulk form have remained suspended during the last couple of months due to the dispute over value addition requirement.

India is asking for bank guarantee, equivalent to applicable duty and taxes to get Bangladeshi edible oil released from the ports.

India is sceptical about whether Bangladeshi exporters add required value before the shipment to India, for which it recently sought permission for the factory inspection.

Officials said the Indian proposal for onsite visit came against the backdrop of Bangladesh’s rising edible oil export to the neighbouring country of over $100 million during fiscal year 2018-19.

During the last fiscal, Bangladesh’s total export to India jumped by 42.91 per cent to $1.25 billion, from $873.27 million the year before.

A meeting on this issue held on Tuesday at the commerce ministry decided to request India to convene a joint meeting to resolve the issue under the Safta rules.

At the same time, the ministry will also request India to allow Bangladeshi edible oil exporters to enjoy the Safta benefit until the dispute is resolved.

The meeting also decided to request the foreign ministry to make arrangement for raising the matter officially during Prime Minister Sheikh Hasina’s India trip next week.

“There is no set guideline for conducting such an onsite visit and how far the inspectors will get access,” a senior commerce ministry official told the FE.

He said once India tried to frame a guideline over the factory inspection at a Safta meeting, but that initiative did not progress much due to opposition from other member states.

“So we cannot accept such onsite inspection without a guideline or determining a criterion,” he said.

At the meeting, a representative of the Federation of Bangladesh Chambers of Commerce and Industry said presently India is seeking onsite visit for edible oil.

If India is given permission for this factory inspection, in future they will demand similar scrutiny in case of other exportable items, he said.

Bangladeshi businesses consider the Indian latest move another non-tariff barrier to curb the entry of goods to its market.

In November 2011, India granted duty and quota-free market access to all but tobacco and alcohol under the Safta deal for poorer members of the regional trade group.

But Bangladesh’s exports to India did not grow much despite the trade benefits, and the non-tariff and para-tariff barriers, imposed by Delhi, were seen as the binding constraints.

In contrast, Indian exports to Bangladesh exploded to over $8.0 billion.

In May this year, the Indian high commission in Dhaka requested Bangladesh to check 24 sets of country of origin certificates of various goods under Rules of Origin of the pact.

Research director of the Centre for Policy Dialogue Dr Khondaker Golam Moazzem earlier told the FE that the Delhi administration might have come up with the new measures after Indian entrepreneurs had raised the objection that Bangladeshi exporters were grabbing their shares.

He said the Indian economy is slowing down and due to various new regulations local businesses are facing troubles.

“The increase in Bangladesh’s exports to India caused a major concern for them,” he said, adding India is trying to curtail the benefits offered to Bangladesh.

He said the rationale of the proposed onsite visit is in question and it is an additional requirement.



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