Bond licence renewal delay hurting export industries

Easy and quick, that is how renewing licences and certificates should be for businesses to run smoothly. But that's not the case apparently for this composite textile mill that is stuck at the National Board of Revenue, trying to get its utility permission (UP) certificate for over a month and a half.

Now, the company that exports about Tk700 crore worth of apparel items annually,   cannot get customs clearance for its raw materials imported under the bond facility. The company has been trying since the beginning of August to get delivery of about 2,000 tonnes of chemicals from the Chattogram port but the customs bond commissionerate would not allow it as its UP certificate is expired.

In this situation, the company sought a temporary permit certificate on 14 July, but as of 8 August, the company is still waiting. 

In the meantime, its production has virtually come to a halt with its vital raw materials stuck at the port. 

The textile mill is not alone, many exporters are now facing disruption with their factory operations remaining suspended because of the time-consuming and complicated process in renewing bond licences and UP certificates.

Businesses say about 13,000 licenced companies face this 'harassment' as they have to renew bond licences and UP certificates every year. 

They also need to pay huge demurrage as raw materials get stuck at the port for a long time owing to the lengthy renewal process, they add.

Seeking anonymity, the textile mill's managing director told The Business Standard, "We have borrowed some raw materials from other factories to continue production. All factories import and stock raw materials according to their needs. But it is not possible to continue production by borrowing. As a result, we had to reduce production as we could not have our UP certificate renewed."

"We have repeatedly reached out to the bond commissionerate but there has been nothing positive. The commissionerate is running with limited manpower in the pandemic time," he added.

On 14 July, a tanner in Savar leather industrial park imported 230 tonnes of chemicals from China. The chemicals were imported to process rawhides collected during Eid-ul-Adha, but the company could not take delivery of from the port in due time as the company's bond licence had expired just three days before the chemical consignment arrived at the port.

As a result, the tanner had to limit its rawhide collection to only 15,000 during the Eid instead of the 50,000 pieces target.

An official of the company said, "The bond commissionerate did not issue us a temporary licence either, resulting in a loss of our entire Eid business."

Md Shakawat Ullah, general secretary of the Bangladesh Tanners Association, said, "The bond office does not renew licence without an audit and it often takes 2-3 months to renew a licence. Almost all the exporters get into trouble importing raw materials when renewal time comes."

Bond licensing is an opportunity to import duty-free raw materials on the condition of using imported materials in manufacturing export goods. Traders need to renew their UP certificates every year to keep the imported raw materials in the bonded warehouse before using them for production.

Annual fee, audit report and required documents have to be submitted to the bond office before the expiration of a bond licence, according to the NBR's Bond Licencing Policy. 

Bond officials visit a factory and renew its licence after auditing the proper use of previously imported raw materials. They provide a three-year bond licence for garment factories, while other companies get a one-year licence. But, all the businesses have to renew their UP certificates every year.

Businesses said if all the documents are correct, they are supposed to get a bond licence in seven working days, but it takes longer. 

A temporary licence is supposed to be issued if the audit process is lengthy. But they have to suffer a lot of harassment to get it, they complained.

A Gazipur-based apparel exporter told TBS, "The port charge increases while we have to wait for temporary certificates to release goods."

"Temporary permit certificate related costs have increased at least 200% during the pandemic," he added.

The exporter said as bond licences of almost all the factories have expired, their expiry dates can be extended by three months (August-October). The mandatory audit can be done after renewing the licences, considering the pandemic situation.

An official of a Chattogram-based Dutch joint venture company said they are also facing the same problem as the company's bond licence expired a year ago.

Bangladesh Garment Manufacturers and Exporters Association (BGMEA) President Faruque Hassan said, "We have talked with the NBR chairman to make the licence renewal easier and issue temporary permit certificates."

"We receive a lot of calls from our members who face problems in getting temporary certificates. We hope the issues will be resolved as soon as possible to make the export-import process smoother," he added.

However, NBR officials claim if the term of an UP certificate is extended to more than one year or traders are given an opportunity to use it without renewal, there is a possibility of misusing the facility.

An official at the Dhaka bond commissionerate, said, "Some factories sell raw materials in the open market by importing those under the duty-free facility. They do not submit raw material usage reports unless there is an obligation to renew the UP certificate. That is why annual renewal is required.

Getting a new licence troublesome too

In February 2020, a digital accessories company applied for a licence to the Chattogram bond commissionerate, but it got the licence six months later in July. The law says that it should be provided within 30 days.

Traders complained that they have to move from one table to another in government offices even after paying the licence fee.

Taslimuddin Chowdhury, first vice-president of Bangladesh Garments Accessories & Packaging Manufacturers & Exporters Association, said, "As per the policy, a bond licence is supposed to be renewed within 30 days after the submission of 19 documents. But in reality, even after submitting these documents, one has to wait for several months."

Khandakar Aminur Rahman, member (Customs, Export, Bond & IT) of the NBR, said, "I have not received any formal complaint from businesses after I took over the responsibility. But, we are taking steps for a quick renewal of bond licence and UP certificate. The issues will be resolved by discussion with business organisations."

Economists ‍suggest that the bond licence be given for 3-5 years instead of one year to all export-oriented industries. 

They also say the NBR should conduct their audit before bond licences expire.

Dr Ahsan H Mansur, executive director of the Policy Research Institute, said such a licence needs to be given for a longer term. The NBR can strengthen audit activities to prevent the misuse of bond benefits.