The government is set to revise the Free of Cost (FoC) raw material-import ceiling in the upcoming amendments to the Import Policy Order 2021-2024, aiming to safeguard local industries, strengthen domestic value addition, and support to investment in backward linkage industries, according to ministry sources.
Officials said revised FoC benefits may vary across sectors depending on the capacity of backward-linkage industries and the level of local value addition in export goods. The revised proposals will soon be placed before the advisory board for approval.
Apparel exporters, however, argue that relaxing or fully opening the FoC limit could bring significant benefits.
They estimate that lifting the ceiling could generate an additional $5.0 billion in export earnings in the first year alone, with the potential to double within two years -- particularly boosting Bangladesh's global capacity in the man-made fibre (MMF) apparel segment.
Earlier, the government had allowed 100 per cent export-oriented industries to import raw materials on a FoC basis, enabling buyers to supply all required fabrics, accessories, and other inputs directly to local garment manufacturers.
This move faced strong objections from local textile mills and garment accessories makers, who warned that unrestricted FoC imports could undermine domestic value addition, strain existing investments, and make local industries more vulnerable.
Currently, FoC imports are capped at 50 per cent of a manufacturer's export value from the previous year.
On Monday, the commerce ministry held a stakeholder consultation on the proposed FoC revisions.
Commerce Adviser Sk Bashir Uddin and Commerce Secretary Md Mahbubur Rahman presided over the meeting, attended by representatives from the National Board of Revenue (NBR), Bangladesh Garment Manufacturers and Exporters Association (BGMEA), Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), Bangladesh Textile Mills Association (BTMA), Bangladesh Garments Accessories and Packaging Manufacturers and Exporters Association (BGAPMEA) and leaders from the leather, footwear, furniture, and shipbuilding sectors.
Commerce Adviser Sk Bashir Uddin assured stakeholders that the government would prioritise safeguarding domestic investments and production capacities when reviewing FoC provisions.
He noted that the extent of FoC benefits might differ across sectors based on their value-addition capabilities.
Textile millers warned that unrestricted FoC imports could pose severe risks to local industries.
BGAPMEA President Md Sharier said the accessories and packaging sector already meets nearly 100 per cent of industry demand, and opening FoC fully could destabilise their investments.
Full FoC imports, he added, would reduce local value addition to mere sewing, minimum 30 per cent mandatory threshold required for export recognition.
BTMA President Showkat Aziz Russell questioned why the government should allow exports based largely on foreign raw materials, leaving local resources underutilised. "If these exports occur, exporters will earn only sewing charges -- no more than 10 per cent of product value -- and the government earns no revenue," he said.
Mr Russell also warned that such a move could push textile entrepreneurs to relocate to India, where millers enjoy substantial subsidies and incentives.
With rising interest rates, energy shortages, and currency depreciation, he said, expanding the FoC regime could further strain Bangladesh's textile sector, threatening investments and creating risks for banks and financial institutions.
Despite these concerns, apparel exporters insist that the FoC mechanism is essential for tapping opportunities in the fast-growing MMF apparel market, where Bangladesh currently lags behind regional competitors.
BGMEA Vice-President Md Shehab Udduza Chowdhury said FoC imports mainly involve MMF fabrics not produced domestically, meaning local manufacturers would not be harmed.
He noted that buyers supply specialised MMF inputs to ensure global compliance and quality standards.
He added that easing FoC restrictions could raise non-cotton apparel exports from $29.5 billion to $35 billion by 2032. Removing the ceiling could immediately contribute an additional $5 billion, potentially doubling in two years, while also attracting technology transfer and foreign direct investment.
BKMEA President Mohammad Hatem echoed the view, saying FoC is the safest business model for exporters, as buyers cover 60-65 per cent of raw material costs.
The scheme, he added, could help revive several closed factories with direct buyer support. Hatem cautioned that barriers or quotas on FoC imports would hinder industry growth and undermine efforts to diversify Bangladesh's export basket.
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