CMT manufacturing: Central bank clarifies terms of incentives for apparel exports

The Bangladesh Bank has clarified the conditions for getting export incentives for garment products manufactured under the cut-make-trim (CMT) process.

From now on, local value addition on the export of garment products made under CMT manufacturing will have to be calculated using a new method to be eligible for incentives, the central bank's Foreign Exchange Policy Department (FEPD) said in a new guideline issued Sunday (23 July).

Under the CMT manufacturing process, foreign buyers purchase the raw materials of garment products and send those to Bangladesh for the local exporters do the tailor work, according to central bank officials.

They said in many cases the tailor work includes adding some new materials to the product, such as buttons.

Exporters used to face problems to get incentives for such exports due to ambiguity in the related central bank guidelines.

"Now that the issue of getting incentives is clarified in the new guidelines, the problem will be solved," a senior central bank official said on condition of anonymity.

The Bangladesh Bank's previous guidelines stated that exporters were eligible for incentives if the local value addition of the exported product is 20%.

However, from now on, while determining the export price of goods manufactured using the CMT process, the value of raw materials sent by importers must be calculated in order to get incentives, said central bank officials, 

Besides, the cost of newly added raw materials and tailoring of products also need to be included in the final price. However, this calculation is to be done excluding shipping charges, foreign currency payment commission, and insurance.

After all calculations, if the local value addition is equal to or more than 20% of the total export value, exporters can apply for incentives, officials of the Bangladesh Bank said.