Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) has written to the National Board of Revenue (NBR) to block the possibility of import of raw materials without LC or Free of Cost (FOC). The letter signed by the chairman of the organization Mohammad Hatem has been sent to the NBR chairman recently.

In the letter, the association said, usually export-oriented non-bonded ready-made garment factories procure yarn/cloth/accessories locally through back-to-back letters of credit or LC. Besides, bonded factories import yarn/cloth/accessories locally and abroad through back-to-back letters of credit.

Currently, due to the policy of Bangladesh Bank, the amount of raw material imported from abroad is increasing gradually instead of being procured from domestic sources. In continuation of this, the amount of raw material imported without LC or free of cost (FOC) is increasing along with back to back. In the case of such exports, the value added is 100 percent, that is, the entire foreign exchange earned remains in the country.

The letter further states that this facility is safe for the exporter, as a result of which the exporter does not need any limit or security mortgage in the bank to make back to back LC. The buyer supplies all types of raw materials at his own expense. As a result, there is no possibility of the exporter being harmed by canceling such purchase orders, discounting or air shipment.

The organization said that the system needs to be unblocked, but some rules of the Ministry of Commerce and the National Board of Revenue have complicated this system. As a result, the country’s exports are being affected, and the country’s exporting companies are being affected.

The letter said that some restrictions have been imposed on the two SROs. Which include the company being able to import raw materials and ancillary products required for six months only against the agreement of the buyer without back-to-back letters of credit. In addition, if an industrial company has received almost all the raw materials used in the production of its export products (more than 80 percent of the total raw materials required) free of charge from its foreign buyer or a foreign agent nominated by the buyer and only cutting, making trimming (CMT) is received as export price, those companies will be able to import raw materials for not more than six months on a revolving basis.

The letter stated that exports are being hampered due to these conditions, and that exporters are losing foreign buyers. In such a situation, the letter requested the government to maintain the growth trend of the ready-made garment industry in the larger interest of the country’s exports.

When asked about this, BKMEA Chairman Mohammad Hatim said that the purchase orders increase as a result of taking this facility. Exporters benefit. Due to NBR’s SRO, exporters do not get level playing field.