Increased import benefits put domestic cosmetics industry in trouble

Business Report :

In the proposed budget for the fiscal year 2025-26, Bangladesh’s interim government has sparked concern among local cosmetics manufacturers by introducing measures that effectively encourage the import of foreign skincare and beauty products. Industry insiders argue that these policies undermine the domestic cosmetics sector, discourage new investments, and pose a significant threat to employment opportunities in a rapidly growing industry with untapped potential.
According to the Association of Skincare and Beauty Products Manufacturers and Exporters of Bangladesh, the proposed budget continues a long-standing policy imbalance. One key issue lies in the stark contrast between the treatment of packaging materials for imported versus locally manufactured cosmetics. While imported finished products face no duty on their packaging, domestic producers importing similar packaging materials-such as tubes, bottles, and plastic containers-under HS Code 3923.10.00 are subject to a massive 127.72% duty. This has created what many local manufacturers describe as a “discriminatory double standard,” severely affecting cost competitiveness.
Additionally, the minimum tariff value set by the government for imported cosmetics is criticized for being artificially low. Entrepreneurs claim that importers are clearing goods through customs at values far below the actual purchase price. This not only distorts market pricing but also results in substantial revenue losses for the government.
To illustrate, lipstick imports are taxed based on net weight at $40 per kilogram. Given that an average lipstick weighs around 4 grams, approximately 250 pieces comprise one kilogram. Thus, the assessed tariff value per lipstick is only about 20 Taka, while the actual landed cost is around 51 Taka. However, these products are sold in the local market at prices ranging from 500 to 1,500 Taka, indicating massive markups and an environment ripe for undervaluation and revenue leakage.
In the global market, quality lipsticks range from $1 to $10 per unit, but Bangladesh’s customs valuation remains fixed at a bulk weight metric of $20 to $40 per kilogram, which bears no resemblance to international retail norms. This loophole allows importers to evade fair tax liabilities, gain an undue market advantage, and enjoy windfall profits-while domestic producers are forced to compete on an uneven playing field.
Jamal Uddin, General Secretary of the Association, emphasized the damaging impact of these policies: “Due to discriminatory regulations, the cosmetics industry hasn’t been able to flourish in Bangladesh. If investment in this sector is encouraged, not only will it boost government revenues, but it will also generate significant employment for the country’s youth.”
Despite these structural challenges, Bangladesh’s cosmetics industry holds significant promise. With a young, urbanizing population increasingly conscious of personal grooming, the demand for beauty and skincare products is growing rapidly. Industry research suggests that Bangladesh’s beauty and personal care market could reach $3 billion by 2030, driven by rising disposable income, greater consumer awareness, and social media influence.
Several local brands have already begun manufacturing products that meet international standards. These include skincare, herbal cosmetics, and color cosmetics that are seeing growing interest in Middle Eastern and South Asian markets. Some exporters are also making inroads into countries such as Sri Lanka, Thailand, and the Philippines, indicating that “Made in Bangladesh” cosmetic products can find a strong foothold abroad.
With proper policy support, this sector could not only reduce dependence on imports but also contribute to foreign exchange earnings, much like the country’s thriving apparel industry. Moreover, the cosmetics value chain-from raw material processing to packaging, branding, and distribution-has the potential to create thousands of jobs, especially for women and youth.
To ensure fair competition and sustainable industry growth, local manufacturers have put forward a set of demands to the government:
o Align the minimum tariff value of imported cosmetics with actual international market prices to prevent undervaluation.
o Use gross weight instead of net weight during customs valuation to reflect real shipping and packaging costs.
o Implement a unified tariff policy for packaging materials, regardless of whether they are imported as part of a finished product or separately for local manufacturing.
o Recognize cosmetic containers as part of the product, so that local manufacturers are not penalized for importing necessary packaging.
o Establish policies that protect local industry from unfair competition and foster new investments in domestic production facilities.
With strategic policy adjustments and a more equitable tariff structure, the cosmetics industry in Bangladesh can become a pillar of economic diversification, providing employment, increasing export earnings, and enhancing the country’s global reputation in manufacturing quality consumer goods.