Bangladesh-India trade: Handicap of non-tariff measures

Based on information contained in recent Trade Policy Reviews (TPRs) of South Asian countries, a WTO assessment states that, in general, SPS and TBT measures in South Asia did not always adhere to WTO obligations. The report noted that some countries made more progress than others in the degree of harmonisation between national and international standards, though clearly there was a lot missing in the matter of mandatory notifications of stringent SPS measures that go beyond requirements of the SPS Agreement. The major concern with regard to these NTMs (Non-Tariff Measures) is their potential of becoming NTBs (Non-Tariff Barriers) in intra-regional trade, in which case transaction costs (sometimes referred to as trade costs) become significant enough to impede trade growth. Banik and Gilbert (2008) have attributed high trade costs in South Asia to (a) poor infrastructure, (b) stifling regulations, (c) port inefficiency, (d) corrupt practices, etc. Drawing from recent empirical research, De (2011) argues that a 10 per cent reduction in transaction costs at the border could raise intra-regional exports in South Asia by 2.0 per cent. Getting a bit more ambitious, Wilson and Otsuki (2007) present the case that if South Asian countries were to raise their capacities to 50 per cent of East Asian levels, that would raise intra-regional trade by some $2.6 billion which is about 60 per cent of total intra-regional trade in South Asia. NTB reforms have therefore become a regional imperative and have moved in two tracks: one track addresses policy-induced NTMs in the form of SPS and TBT measures, and the other seeks to address the deficiencies in technical capacities in customs administration and trade infrastructure through the provision of Aid for Trade. The results will only become visible in the medium- to long-term.
Listed below are some of the key products exported from Bangladesh to India and imported from India to Bangladesh along with the distribution of SPS (Sanitary & Phytosanitary Measures) and TBT (Technical Barriers to Trade) measures associated with each traded product:
SPS:    Agro-Food Processing firms - exports subject to 20 SPS measures
TBT:    Jute Bag exporting firms - exports are subject to 11 TBT measures
TBT:    RMG exporting firms - exports are subject to 17 TBT measures
TBT:    Pharma importing firms - imports must comply with 11 TBT measures
Exports in the agro-food processed category are subject to the most comprehensive coverage of SPS measures as these edible products have to meet very stringent food safety and health standards laid down under India's Food Safety and Standards (Packaging and labelling) Regulations of 2011.  The law is administered by the Food Safety and Standards Authority of India (FSSAI), under the Ministry of Health and Family Welfare. It may be noted that while these regulations appear to be WTO compliant, the process and procedures are cumbersome, which unsurprisingly raises transaction costs and causes delay such that only large firms can engage in exporting activity while small firms are left out.  
RMG exporters also find themselves held to very high standards with 17 TBT measures applied on their exports. However, thanks to their international experience in exporting to EU and North America, the RMG exporters are quite at ease with much of the regulatory requirements by Indian authorities. Jute bag exporters and pharmaceutical importers are subject to 11 TBT measures each. While jute bag exporters face limited but manageable competition in India, they have occasionally complained about importers insisting on unnecessary labeling requirement not mandated by TBT rules. Pharma imports, which are tightly controlled by the DGDA (Director General, Drug Administration), are subject to several approval processes, from list of drugs permissible for import to registration and certification requirements. But importers by and large have come to terms with some delays and transaction costs arising from the cumbersome processes involved. The sum total of all import regulations subjected to pharma imports constitute a ban on import of pharmaceuticals, except for APIs (active pharmaceutical ingredients).
With respect to the trade of agro-processed goods some of the key problems that emerge are:
(a) Indian rules are different from international standards creating additional requirements for exporters;
(b) Restricted use of certain substances such as preservatives;
(c) Labeling and marking requirements are discriminatory and not always WTO-consistent. National treatment agreement required;
(d) Testing and certification; as BSTI certification or Bangladeshi standards are not accepted. Lengthy retesting done at port costing exporters. It may be stated further that BSTI certification is not recognised by the Indian Customs as BSTI's accreditation has not been officially acknowledged by the relevant Indian authorities. This creates close to a month's delay as samples are sent to BIS (Bureau of Indian Standards) laboratories in Delhi or Kolkata by normal post for retesting.
With regards to trade in jute bags, a key problem that holds for Bangladeshi exporters to India is the labeling requirement. On the Indian side, it is mandatory that every imported jute bag and bale to be sealed with the label, 'Made in Bangladesh', as notified by the Office of the Indian Jute Commissioner. However, it has been found in a survey that Indian buyers do not want any labeling on the bags. This is because these bags are used to pack Indian products for export with the seal of the Indian company being labeled on the bag. This discrepancy between Indian Customs' and buyers' terms can cause hassle at the port during consignment clearance.
In the area of RMG (Readymade Garments), Bangladeshi exporters to India are comfortable with high standards as they are used to the standards and regulations in Europe and North America. It is in the administration of standards in India that create problems: (a) Restricted use of certain substances, such as azo dyes. Accreditation of internationally recognised testing facilities in Bangladesh is needed. (b) Mandatory certification and testing for RMG products at Indian ports often cause delays and extra costs. (c) Port infrastructure and capacity constraints (e.g. in Petrapole). (d) In the application of standards and regulations, exporters have complained of discriminatory treatment between local production and imports.
Finally, in the area of trade in pharmaceuticals raw materials, the key problems are (as highlighted by a PRI survey): (a) Block List meeting not held on time; (b) Special permission for acid, narcotics, ethyl and methyl requiring a separate set of laws; (c) Certification from DGDA (Director General of Drug Administration).
Pharmaceutical firms also face restrictions (under a TBT regulation) when importing certain substances such as acid, narcotics and specific alcoholic groups such as ethyl and methyl as raw materials. In such instances special authorisation is required from the Department of Narcotics Control under the Narcotics Control Act 1990 as such substances are deemed harmful for human health.
BANGLADESH TRADE REGULATIONS COVERING IMPORTS-EXPORTS: Although Bangladesh had witnessed significant trade liberalisation since the 1990s, the procedures for export-import cargo clearance remains cumbersome and dogged by various issues arising from stiff paperwork requirements (alongside fees, taxes and levies) to multiple process steps done manually, all of which increase time and costs and serve to inhibit trade. Although there has been some progress in customs clearance processes, there remain serious candidates (i.e. documents and formalities that need to be completed/observed) for removal to save time and transaction cost to importers and exporters.
The clearance for import-export cargo, i.e. Customs control, comes under Section 197 of Customs Act 1969, and thus the documents required to be submitted to Customs are actually necessary to facilitate clearance of such goods.  These documents and formalities involved in import and export trade are divided into two broad headings: documents required for imports and those required for export cargo. These broad headings are further segregated as follows: (i) documents mandatory with every consignment, (ii) eligible for tax exemption and rebate purposes, (iii) related to particular requirements under Import Policy Order (IPO), (iv) Export Policy (EP) conditions and specifications, and finally (v) documents needed for classification of items, customs valuation and other purposes.
Imports: With regards to mandatory documents for clearance of imports, from the 10 stated documents, the first seven are mandatory, while in actual practice the number of documents should be taken to be five only. For purposes of establishing duty exemption claims, duty rebate or drawback, amongst the listed documents, some of them in fact appear redundant (e.g. item no. (h) of NBR's Order in Appendix B). For example, importers need not produce any document to prove their entitlement to duty exemption or duty rebate or drawback. On the other hand, the Import Policy Order calls for submission of additional documents for specific goods for different purposes such as public health, social safety, protection of animal and plant life, etc.  For example, for select food imports, a Radiation Certificate issued from the exporting country is necessary, alongside another post-importation certificate from the Bangladesh Atomic Energy Commission to ensure the products' safety. Regarding documents needed for items classification, customs valuation and other purposes, it should be mentioned that many of the documents mentioned Item Nos. (i) and (j) of the Order of the NBR aren't required to be submitted to Customs for clearance. For example, while PSI Certification is required for proper identification of goods prior to shipment, valuation certificate may be redundant, if the item does not come under those HScodes listed for mandatory PSI certification. Thus it can be stated that that only five documents as listed in paragraph 5 of the Order of the NBR, are mandatorily required to be submitted with the Bill of Entry for assessment and clearance of all imported goods. Although additional documents are required for certain specified goods for specific purposes, the number of actual documents should not exceed 9-10 (as compared to 66 total officially listed documents), even if a particular good is subject to qualifications under conditional import.
Thus the problem in this regard is not the multiplicity or number of customs documents, but rather it is the various steps in the clearance process, and these are particularly compounded when such steps for clearance of imports are distributed across clearance agencies which are often geographically distant from each other, contributing to time delays. Other important challenges may be infrastructural constraints at port and/or behind-the-border, inadequacies in transport (which results in long transport times for goods to and from factories/ports).
For example, at Benapole land port, there is zero containerised cargo handling, and cargo is downloaded from one truck and uploaded on to another across the border. Thus pilferage and losses are significant at Benapole.
Introduction of electronic forms (when clearance of various agencies other than customs is necessary, e.g. clearance from Drug Administration or Chief Inspector of Explosives) can also contribute to streamlining of clearance procedures. Customs clearance facilitated by an electronic system can save time and transaction costs to importers.
Exports: For Customs clearance of exports, the process starts with submission of Bill of Export by the exporter. Bill of Entry and Bill of Export are delivered to Customs respectively under section 79 and section 131 of the Customs Act. Paragraph 6 of Order of NBR lists the documents for export clearance. These are for assessment and clearance of goods from customs control. Paragraph 6 of Prescribed Bill of Entry and Bill of Export Form Order, 2001 (dated August 08, 2001), lists the documents for export clearance (See Appendix B for document list). The majority of the documents are the same as in case for imports. Thus each export consignment requires the Bill of Lading, Packing List, Freight Certificate, Insurance Bill, Invoice, Certificate of Origin, Purchase Order, Value Slip, Bill of Exchange, Bangladesh Bank NOC Letter of Credit Authority, VAT and TIN number and finally ERC (Export Registration Certificate).
Furthermore export consignments require 2 more mandatory papers: Bank EXP, which allows Bangladesh Bank to keep track of export payments and Sight Draft, which document serves as immediate payment for goods upon delivery.
Regarding documents required for tax purposes a key document is the Utilization Permission, which is issued by the BGMEA and is required for raw material import clearance by export-oriented RMG industries. As relating to documentation for Export Policy related purposes, documents of interest include the Fisheries Directorate Certificate, put in place following the presence of nitro furan, which is used to inhibit bacterial growth in foodstuffs etc; Quarantine Certificate, required with export consignment related to live animals, plant and plant products in line with Quarantine Act of the GATT Law and Radiation-Free Certificate, necessary for food exports. With regards to documentation required for Item Classification, Customs Valuation and Other Purposes, the documents are similar to those required for import clearance.
When compared to the situation facing import clearance, the roadblocks (in form of NTMs) are much less significant when it comes to export clearance. As an example, compared to import clearance procedures at Benapole land port, the clearance is much faster and consequently damage/losses to export cargo are less, as export cargo remains in the port area for fewer hours and, that too, loaded in the carrying truck. However, some of the difficulties as explained earlier concerning import clearance also hold true for export clearance. One may be the bottlenecks in communications/transport infrastructure of Bangladesh, which in the form of additional transport time of goods (from port to factory or vice versa) could be detrimental to export competitiveness.

Dr. Zaidi Sattar is Chairman of the Policy Research Institute of Bangladesh.
 [email protected]