BB issues new terms on cash incentive for RMG exporters

Staff Reporter :
The Bangladesh Bank (BB) has issued new instructions to avail cash incentive for RMG exports 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 on Sunday.

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.
The Bangladesh Bank’s previous guidelines stated that exporters were eligible for incentives if the local value addition of the exported product is 20 percent.
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 percent of the total export value, exporters can apply for incentives, officials of the Bangladesh Bank said.