Apparel manufacturers in Bangladesh expect an additional $5 billion from high-end garment exports in the first year after the government scraps the 50-per cent ceiling on free-of-charge (FoC) imports, according to Mohammad Shehab Udduza Chowdhury, vice president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA).

Under this arrangement, the buyer supplies raw materials like fabrics and accessories. Manufacturers receive only the cutting and making charges.

Bangladesh apparel manufacturers expect an additional $5 billion from high-end garment exports in the first year after the government scraps the 50-per cent ceiling on free-of-charge (FoC) imports, trade body BGMEA said.
Under this arrangement, the buyer supplies raw materials.
The additional earnings could cross $10 billion in the second year once the FoC quota is fully abolished, BGMEA noted.

The additional earnings could cross $10 billion in the second year once the FoC quota is fully abolished, Chowdhury said.

The country’s Ministry of Commerce has decided to amend the Import Policy Order within the next two weeks, allowing garment exporters to source all raw materials from overseas buyers, process them and ship the finished products back, the Chief Adviser’s Office said.

Exporters now are permitted to import only half of the required raw materials under the FoC arrangement.

A few years ago, FoC imports were capped at 33 per cent of total raw materials. This was raised to 50 per cent later.

Bangladesh’s apparel exporters use FoC for less than 5 per cent of total shipments now due to restrictive conditions and reported complications at the Chattogram customs department.

As FoC is straightforward, less risky and faster, garment exporters feel without any quota on FoC import, global brands will place more orders with Bangladesh.

Manufacturers say orders for high-end man-made fibre and polyester garments are shifting from China to Bangladesh as the United States has imposed higher tariffs on Chinese goods.

Many Bangladeshi factories, however, cannot take full advantage of this as these are barred from importing more than half of raw materials under the current FoC regulations.

Chowdhury said FoC reduces risk as buyers cover raw material costs and cannot abruptly cancel orders, according to domestic media outlets.

However, Showkat Aziz Russell, president of the Bangladesh Textile Mills Association (BTMA), said the government should consult all stakeholders before taking any decision. He believes higher import of raw materials could harm the domestic textile industry by reducing demand for local yarn, fabrics and accessories, and lowering local value addition.

Fibre2Fashion News Desk (DS)