NBR begins crackdown on $5b bond warehouse misuse
Muhammad Ayub Ali :
The National Board of Revenue (NBR) has launched a major drive to uncover irregularities amid widespread allegations of misuse and smuggling through the bonded warehouse facility.
Each year, garments and apparel worth an estimated five billion dollars reportedly enter the country’s open market by abusing this system. To curb such practices, the NBR has begun scrutinizing the bank transactions of leading exporting companies.
According to NBR sources, banking records of major exporters from the past five years are being collected amid suspicions that duty-free raw materials imported under the bonded warehouse facility were diverted to the open market instead of being used for exports.
The data will be cross-checked with import-export records, including the ASYCUDA system. As part of tighter oversight of bond management, all forms of manual utility permission (UP) in bond operations were scrapped from January 1 this year.
Mohammad Naziur Rahman Miah, First Secretary (Customs: Export & Bond), told The New Nation that automation software has been introduced to curb such irregularities, adding that once full automation is implemented, all illegal activities will be effectively prevented
From now, all bond-related services, including raw material availability, will be processed exclusively through the Customs Bond Management System. A senior NBR official, speaking on condition of anonymity, said full automation has been made mandatory to prevent abuse of the bonded warehouse system. Regular stock inspections will now be carried out at bonded warehouses, and any irregularities detected will result in immediate legal action. Meanwhile, entrepreneurs in the textile sector say misuse of the bond facility and smuggling have caused them significant financial losses.
Industry stakeholders claim that products worth around five billion dollars are being diverted to the local market each year through such practices, resulting in massive revenue losses for the government and putting domestic manufacturers at a competitive disadvantage. They also allege that irregularities have increased following a weakening of the NBR’s field-level monitoring after the political changes in August 2024.
A senior official of Dhaka Tax Zone-8 said banking records from the past five years have been sought from seven institutions and will be cross-checked with import-export data.
If discrepancies are found and explanations prove unsatisfactory, it will be assumed that duty-free raw materials were sold in the open market.
Sources added that Tax Zone-15 has also requested banking information from eight institutions, and the number of firms under scrutiny could eventually reach the hundreds nationwide, though company names were not disclosed.
BTMA Standing Committee Chairman Khorshed Alam said the domestic market demands about $12 billion worth of fabrics and garments annually, of which local mills supply around $7 billion, while the remainder comes through bond abuse or smuggling.
BGMEA President Mahmud Hasan Khan Babu cautioned against blaming the entire business community for the irregularities of a few.
Under the bonded warehouse facility, duty-free raw materials must be exported after processing in approved warehouses, with local sales requiring customs approval. While this system has boosted the garment industry since the 1980s, some exporters allegedly divert materials to the local market, causing revenue losses and discouraging domestic investment.