Kabir Ahmed, President, Bangladesh Freight Forwarders Association (BAFA)
The freight forwarding sector is the backbone of global trade, ensuring the smooth movement of goods across borders. The sector is crucial for facilitating the export of garments, seafood, pharmaceuticals, agricultural products, leather, non-perishable items and many more products in Bangladesh. Despite its importance, freight forwarders in the country constantly face challenges, which hamper their ability to operate efficiently and contribute optimally to trade facilitation.
Lack of recognition of the role of freight forwarders:
Stakeholders such as manufacturers, exporters and importers often underestimate the role of freight forwarders. They are considered as mere service providers rather than strategic partners. This results in a lack of mutual cooperation and trust.
In Bangladesh, policy formulation rarely involves consultation with freight forwarders or other key stakeholders. This results in policies that fail to address the needs and create complexity. Freight forwarders often face problems with the National Board of Revenue (NBR), customs authorities, government agencies, port authorities and banks. Regulators and facilitators are yet to fully recognize the strategic importance of freight forwarders in facilitating trade.
Licensing and Regulatory Issues: The licensing regulations set by the NBR are outdated and urgently need to be revised. Freight forwarders have to obtain separate licenses for each port, which only adds to the operational complexity. A unified license system across Bangladesh would streamline this process.
Inefficiency in Customs Operations:
Freight forwarders often face unnecessary delays due to inefficiency in customs operations. Long lines and slow processing of daily formalities are the main reasons for these delays. Arbitrary decisions and complex procedures surrounding the Import General Manifest (IGM) and Export General Manifest (EGM) further reduce the efficiency and competitiveness of freight forwarders.
Customs decisions often result in delays, fines, and unnecessary complications. Freight forwarders often struggle to reach the appropriate customs officials to resolve disputes. Lack of timely communication also adds to these delays and increases uncertainty.
Ambiguities in existing regulations create opportunities for misapplication. Freight forwarders are often subject to subjective judgments by officials rather than the correct rules, resulting in delays in cargo clearance and increased costs.
Excessive Taxes and Banking Policies:
Freight forwarders in Bangladesh face high taxes on international transactions, such as payments to shipping lines and foreign agents. This includes Value Added Tax (VAT) and Advance Income Tax (AIT), which significantly increase costs. Foreign exchange transactions through formal banking channels are also subject to high taxes, further increasing the financial burden.
Central bank policies further complicate the operation. For example, bills of lading (B/L) (a document required for international shipping) remain invalid due to the mandatory expiry and manual verification process of Bangladesh Bank. This delay disrupts the supply chain and increases operational costs.
Another challenge is making payments to foreign service providers. Freight forwarders face lengthy approval processes and excessive document requirements, which strain relationships with international partners. Delays in payment transfers also result in penalties and loss of opportunities for mutual goodwill.
Unregulated practices by shipping lines:
Shipping lines in Bangladesh often impose arbitrary charges without prior notice or justification. Detention charges for delayed container returns, often due to port congestion or customs inefficiency, are a prime example of the unfair costs borne by freight forwarders.
Additional charges, such as non-scheduled fees and unexpected late fees, further increase this burden. The absence of effective regulation has allowed monopolistic behavior within shipping lines, where dominant players dictate terms for freight forwarders and their clients. This mismanagement increases costs, creates an unethical trading environment, and threatens the competitiveness of the country’s trade sector.
Challenges in Bonded Warehousing and Cargo Villages:
Bonded warehouses are essential for trade facilitation, but inefficiencies and outdated regulations hinder their effectiveness. Freight forwarders have called for some reforms, including merging bonded warehouse licenses with freight forwarding licenses, which would ease the way for operations.
The cargo village at Hazrat Shahjalal International Airport is another area of concern. Freight forwarders face arbitrary charges, inadequate facilities and problems with key performance indicators (KPIs). Single Explosive Detection System (EDS) at the airport creates bottlenecks
This results in delays in screening of goods. Insufficient space leads to congestion and mismanagement of goods, along with inadequate security measures, raising concerns about theft.
Complications at Chittagong Port:
Chittagong Port, the main gateway for imports and exports of Bangladesh, is facing mismanagement and infrastructure challenges. Inadequate berths, cranes and container storage difficulties cause significant delays due to congestion, especially for fast-moving goods.
Undelivered containers compound the problem. Freight forwarders report backlogs of unclaimed shipments, resulting in high fines and blacklisting by shipping lines. This disrupts local operations and international supply chains. The crisis is attributed to the failure of the customs authorities to enforce Section 82 of the Customs Act, 1969, which mandates timely auction of unclaimed goods.
Solutions and Recommendations:
A number of immediate steps and extensive reforms are required to address these challenges. Some of the recommendations include:
Streamlining Licensing-
Implement a unified licensing system across Bangladesh and digitalize the application process.
Customs Reform-
Simplify and digitalize customs operations to reduce delays and improve efficiency.
Enhance Regulation-
Establish monitoring mechanisms to prevent monopolistic practices by shipping lines.
Infrastructure Modernization-
Expand bonded warehouse and port facilities, remove space constraints, and invest in advanced screening technology.
Banking Policy Improvement-
Update central bank regulations to facilitate easy handling of bills of lading and foreign exchange transactions.
Stakeholder Engagement-
Involve freight forwarders and other stakeholders in policy formulation to ensure solutions to problems encountered at every stage.
The freight forwarding sector in Bangladesh is essential to its trade-driven economy but faces a number of systemic challenges. Customs inefficiency, shipping line monopolies, outdated regulations, and inadequate infrastructure have held back the sector’s potential.
Urgent reforms, including policy modernization, increased oversight of regulators, and investment in infrastructure, are essential to improve the business environment. Collaboration between government, regulators, and private stakeholders is critical to addressing these challenges.
By implementing these changes, Bangladesh can unlock the full potential of its freight forwarding sector, boost export growth, and enhance its competitiveness as a global trading partner. A reform committee should be immediately formed to drive these initiatives and ensure sustainable economic growth.
Kabir Ahmed, President,
Bangladesh Freight Forwarders Association (BAFA)
