BKMEA for easy FOC facility to spur exports

The country's knitwear exporters have demanded steps to resolve complexities related to the import of raw materials and exports of finished goods under the FOC (free of cost) facility.
They also urged the government to extend the facility to all exporters by removing the existing conditions, terming it 'risk- free' and 'beneficial' and saying it ensures 100 cent per cent value addition.
The Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) in a recent letter to the National Board of Revenue made the pleas.

According to the letter signed by its President Mohammad Hatem last month, export-oriented non-bonded readymade garment factories generally procure yarn, fabric and accessories locally through back-to-back letters of credit (L/C). Besides, bonded factories import raw materials locally and from abroad through back-to-back L/Cs.
Currently, due to the policy of the central bank, import of raw materials has increased significantly instead of sourcing those from local sources, Mr Hatem said, adding that import of raw materials under FOC facility has also been rising.
Retention of such exports is 100 per cent, he said, explaining that buyers bear the costs of raw materials sourced from other destinations outside the country and exporters are paid for cutting and making while the earned foreign currency remain within the country.
He described the FOC facility as 'safe' for exporters as buyers supply all the required raw materials at their own expense. Exporters do not require limits or security mortgages for L/C opening.
As a result, exporters have no possibility of facing work order cancelation, discount or air shipments, he said. He, however, said that they are now facing challenges due to certain rules and regulations from the commerce ministry and the NBR that have complicated the process of import and export under the FOC facility. As a result, both the exporting companies and the country have adversely been affected, he added.
Talking to the FE, Fazlee Shamim Ehsan, managing director of Fatullah Apparels Ltd, said exporters who import raw materials under both systems--L/C and FOC-- have been facing difficulties as they cannot avail the revolving system of FOC and thus hampering exports and causing loss of buyers.
He said exporters are allowed to import up to 50 per cent raw materials under FOC facility of their previous year's exports and they can avail of the revolving system once they make shipments of finished goods using those raw materials.
But recently customs has created obstacles issuing another circular that mentions that exporters can use the revolving facility only if 80 per cent of their total raw materials are imported under FOC and charged for cutting, making and trimming (CMT), he said.
"We have both types of buyers-one who pay for all the raw materials and others who don't and manufacturers have to source them either locally or from foreign destinations," he said, adding that there are also new buyers who want the FOC system.
Mr Ehsan, also the executive president of BKMEA, said they want no obstacles in importing raw materials or exporting goods under the FOC facility. He called for allowing raw material imports for all exporters under the revolving system.
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