Cotton import from Uzbekistan triggers row over warehouse

The National Board of Revenue (NBR) is in a dilemma over allowing bonded warehouse facility on imported cotton from Uzbekistan as it found local buyers not in favour of the authorities monopolising import destination.
  Local entrepreneurs want the import destinations to be open so as to negotiate lower prices of cotton.
The issue remained pending for long as the authorities concerned are yet to reach a consensus over the issue.
Sources concerned said there are complexities on government-to-government agreement on the issue as the government cannot force the private sector to import cotton from any specific destination.
The fate of proposed cotton import agreement between Bangladesh and Uzbekistan has now become quite uncertain following unwillingness of the private sector users of cotton, they added.
A committee of the NBR, comprising tax officials, experts and representatives, is now studying the issue as it has found reservation of the main consumers of imported cotton grouped under the Bangladesh Textile Mills Association (BTMA).
The issue came under scrutiny of the Customs authority following a proposal of the Ministry of Commerce (MoC) seeking the NBR decision on 'free warehouse' on import of cotton from Uzbekistan.
Talking to the FE, Commerce Secretary Mahbub Ahmed said the issue is now waiting for the NBR's opinion as bonded warehouse facility is related to the Customs wing.
"We have talked with the stakeholders on cotton import deal with Uzbekistan but are yet to reach a consensus," he said.
There is a proposal of the Sena Kalyan Sangstha regarding import of cotton from Uzbekistan pending for the last one year, he added.
On July 2 last, the Ministry of Foreign Affairs sent the draft Memorandum of Understanding (MoU) to the MoC with the latest proposal of the Uzbek authority.
According to the draft MoU, some 200,000 tonnes of cotton will be imported from Uzbekistan to Bangladesh.
Warehouse facility is a privilege for exporters that the Customs authorities provide for import of duty-free raw materials on condition of export of finished products.
Cotton is a duty-free item as the country is completely dependent on imported cotton for producing textiles.
In the draft MoU, the Uzbekistan government made the proposal of allowing its exporters to use bonded warehouse. The Sena Kalyan Sangstha pledged to import cotton from Uzbekistan and store it in the warehouse. Local industries are supposed to procure the imported cotton from the warehouse.
BTMA president Jahangir Alamin said the local industry is not in favour of the facility as it will monopolise the cotton import destination.
Being the user of imported cotton, the association leaders want to keep its cotton import sources open so that they could buy the prime raw materials for textile from other countries at lower prices, he said.
"We have expressed our views to the NBR," Mr Alamin said. Customs officials said they had submitted a report earlier by declining to accept the proposal on warehouse facility.
The higher authority has given instruction to scrutinise the matter further, sources concerned said.   
Free warehouse means a warehouse where imported cotton will be stored. Once the deal is signed, importers will have to release the cotton from the warehouse through opening letters of credit (L/Cs).
Sources concerned said the local industry needs different types of cotton for different categories of textile products. Although some 33 per cent cotton comes from Uzbekistan, the industries import cotton from Australia, India, the US and other countries too.
Bangladesh imports the prime raw material for readymade garments (RMG) from the Commonwealth of Independent States (CIS) countries.
Currently, only four to five companies are the major importers of cotton.