The government is reportedly losing millions of dollars in revenue each year due to the misuse of bonded-warehouse facilities in the textile sector, industry insiders say.
According to stakeholders, weak monitoring and widespread abuse of the bonded system are not only causing massive revenue losses but also creating unfair competition for local textile mills that comply with regulations.
Originally introduced to support export-oriented industries by allowing duty-free imports of raw materials, bonded-warehouse facilities are now allegedly being misused through misdeclaration, illegal sales, and unauthorised marketing in the domestic market.
Established in 1983, the Bangladesh Textile Mills Association (BTMA) represents spinning, weaving, and dyeing-printing-finishing mills. The association currently has 1,869 member mills, with total investment in the sector estimated at around US$23 billion.
The textile and apparel sector contributes more than 20 percent to the country's GDP and accounts for 80-86 percent of total export earnings. Nearly 70 percent of raw material demand for the garment sector is met by local textile mills, while the sector retains about 30 percent of foreign currency earnings.
At present, BTMA member mills supply almost 100 percent of the yarn required for knitwear exports and around 60 percent for woven fabrics. Domestic mills also meet nearly all local clothing demand and supply substantial quantities to the armed forces, police, Rapid Action Battalion (RAB), and Ansar. Industry experts warn that any weakening of the local textile sector would increase fabric imports, putting further pressure on foreign exchange reserves.
Sources say imported yarn and fabrics brought in under bonded facilities are being sold openly in the domestic market, often through misdeclaration. Illegal sales are reportedly widespread in areas such as Narayanganj, Araihazar, Madhabdi, Baburhat, Narsingdi, Pabna, Sirajganj, and Belkuchi.
In many cases, importers declare low-count yarn but bring in higher-count yarn. Some even allegedly use bonded facilities to import fabrics under the name of non-existent mills, which are then sold directly in the market-creating serious competition challenges for compliant local spinning and weaving mills.
According to the National Board of Revenue (NBR), Bangladesh imported yarn worth US$2.18 billion during the 2024-25 fiscal year. Stakeholders claim that a large portion of potential revenue is being lost due to misuse of bonded facilities. NBR data show that total duties on yarn imports range from 33.63 percent to 39.75 percent.
Aside from bonded facility abuse, textile mills are also grappling with rising gas and electricity prices, dollar shortages, higher bank interest rates, currency depreciation, and reduced export cash incentives, especially amid preparations for the country's LDC graduation.
BTMA President Showkat Aziz Russell said the textile sector is going through a severe crisis. "We have sought government support repeatedly over the past year, but received none. Even though the commerce ministry recommended withdrawing bonded facilities for yarn imports, the NBR has yet to issue any order, reportedly due to pressure from vested interests," he said.
He added that mills are closing almost daily as they struggle to remain competitive. "If the government does not act to resolve these issues, we have decided to keep mills closed from February 1. This decision will remain in place because no mill owner can afford to operate at a loss. Many owners are leaving the business entirely due to loan repayment pressures," Russell said.
He also criticised flawed policies, saying yarn wastage has risen from 15 percent in the 1980s to 32 percent despite modern machinery that should reduce losses. "While bonded yarn is being sold in the local market, cotton imports face duties, but finished yarn is exempt. Corporate tax, turnover tax, and VAT burdens also remain high," he added.
Badsha Mia, managing director of Badsha Mia Textile, said bonded facilities have been in place for 46 years.
"How long will this continue? Because of this system, backward-linkage industries cannot survive. Maintaining the bonded facility as it is will destroy existing backward-linkage industries," he said.
He warned that Indian yarn is being dumped at low prices as a result a group people misuses this facility.
"If local spinning mills shut down, India will monopolise the market and hike prices, just as it did during the Covid period by halting cotton exports," he added.
He also criticised the government for focusing on low-value cutting and making rather than value-added textile production.
Former BTMA director Engineer Razib Haider said Bangladesh's apparel sector faces serious long-term risks. "Initially, bonded yarn misuse and Indian competition could force textile mills to close. Once that happens, India could stop supplying yarn, crippling Bangladesh's garment sector," he warned.
He added that US countervailing duties and GSP Plus requirements would further strain the sector. "If local value addition cannot increase, Bangladesh risks losing tariff benefits in the US and Europe, which could push the garment sector out of global markets," he said.
Haider also noted that the Bangladesh Tariff Commission had recommended excluding 10-30 count yarn from bonded facilities after reviewing import data, calling the measure practical. "But red tape has delayed implementation. Whether the government truly prioritises industrial development remains uncertain," he added.
Meanwhile, BKMEA Executive President Fazlee Shamim Ehsan told FE that while some misuse of bonded facilities occurs, claims about widespread abuse are exaggerated.
"Customs, bonded authorities, intelligence units, VAT officials, and police are all monitoring. Large-scale irregularities bypassing all these agencies are not easy," he said.
However, he added: "Anyone involved in wrongdoing must face strict action. We want to see exemplary punishment for those abusing the bonded system."
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