Export on paper to exploit agri incentive

Some unscrupulous businesses have been orchestrating fake export schemes to pocket 20% government incentive on the export of agricultural products illegally; it has come under the Export Promotion Bureau's (EPB) radar prompting them to freeze a few fraudulent export earnings.

Although these fake exports bring in export proceeds, in reality no products are shipped as the exports are done only on papers, which the exporters say happens in collusion with the customs officials and C&F agents.   

Three such companies MR Trading International, Tasha World BD Expo and Ahnaf Corporation schemed fake exports of potatoes worth nearly $1 million to the United Arab Emirates (UAE) and Malaysia. No trace of these companies was found at the addresses found in paperwork.    

MR Trading International made a fake export worth $50,000 to the UAE in 2020-21. Tasha World BD Expo, during the same period, 'exported' $4 lakh worth of potatoes to Malaysia through 8 EXPs, while the Ahnaf Corporation showed potatoes-export worth $5.50 lakh through 11 EXPs to Malaysia.

Exporters said many exporters are showing fake exports under the guise of exporting agricultural products and availing the incentives of the government.

They also said only some of these fake export attempts get caught.

These corrupt traders, according to the exporters, have their people on both sides of the so-called trade.    

They are taking more dollars out of the country through over invoicing while the money being brought to the country by showing fake exports. In between they are exploiting the government's incentive initiative.

The government provides assistance to various sectors to boost export earnings and to increase the export of new products. Of these products, agricultural and processed food products receive the highest 20% incentive – for every Tk100 export earning, the government gives a subsidy of Tk20.

The EPB on 19 June last year asked the Commissioner of the Chattogram Custom House to verify invoices of potato exports. Following a review, the custom house found that the potato exports by MR Trading International, Tasha World BD Expo and Ahnaf Corporation were fake.

"In the middle of last year, we saw a large number of requests seeking incentives against potato exports. The Chattogram Custom House found that the exports were fake and we subsequently asked the Bangladesh Bank about these companies," EPB Director General Mahbubur Rahman told The Business Standard.

"I also requested the central bank to take action against them," he added.

The EPB wrote to the central bank on 6 December seeking information about the three companies.

The letter mentioned that the bill of exports issued by the customs house against the goods shipped by the exported are inspected and 20 bills of export were found certified by the concerned customs officials.

The EPB recommends incentive cash disbursement only after verifying the Bill of Export, Commercial Invoice, EXP, Bill of Lading, Proceed Realisation Certificate and Bangladesh Bank's Online Export Monitoring System (OMES) against the exported consignments, it added.

Although the customs authority said no export took place, the EPB wanted to know how export data is presented in the central bank's database.

A senior official of Bangladesh Bank said due to the high export incentives in the agricultural sector, some companies are looking for opportunities to grab government funds by showing fake exports.

"The number of such companies is not many but those who are doing it must have good contacts in all sectors," added the official.

According to the central bank sources, recently, Tk6.10 crore was deducted from the Uttara Bank against fake exports. Earlier through another bank fake export of betel nut and mahogany tree seeds were shown.

The quantity of the mahogany seed, said to have been exported, is not even produced annually in the country.

President of Bangladesh Potato Association, Abdul Quader told TBS that such defrauding is unacceptable.

"I have not heard the names of the companies you mentioned. If they were in our association, we would have expelled them," he added.

As per rules, in case of export of agricultural and processed food products, the goods have to be cleared at designated depots before loaded to the ship. There are 19 private depots for customs clearance of goods exported through the Chattogram Customs House. Customs investigation found that the goods mentioned in the fraudulent export never reached the depot.

A senior EPB official said, "The goods did not go to the depot but the customs clearance was done. It is done by colluding with C&F agents or by stealing company ID-passwords. The Online Bill of Export form was filled and submitted."

The official pointed out that since there is no tax for exports, approval is often given without visiting in person. Besides, one officer is responsible for verifying many invoices. As a result, in-person inspection is not always possible.

"Then there are also allegations of irregularities and the ring takes this opportunity," added the official.

Explaining how export proceeds are transacted for exports that never took place, the EPB official said, "Those who are involved with fake export must have companies in those countries as well that places the fake import orders. They take the country's dollars abroad through over invoicing while they bring it home this way and also get 20% additional incentive."

In the last fiscal year 2021-22, the government provided Tk103 crore subsidy on the export of agricultural products. Apart from this, incentives of Tk678 crore were given to agricultural processed products –of this only Tk37 crore were paid for potato export.

In February 2022 the Chattogram Custom House revealed that the Dhaka-based Doe Empex Ltd embezzled Tk4.21 crore incentive against agro-food exports in three years until 2021 that really never took place.

The inquiry by the Chattogram customs found that the firm logged 30 bills of export during the time to claim the government stimulus with forged and faked export documents. Five clearing and forwarding agents, three dummy shipping companies and a few customs officials were found involved in the scam.

The investigation against Doe Empex exposed 872 such faked exports of food items by 18 firms, who had skimmed more than Tk33 crore export incentive in five years since 2017.

The faked consignments include 191 shipments of potatoes and 681 shipments of foodstuff.

This fraud is happening in agricultural and processed agricultural products including pulses, spices, potatoes, oilseeds. Most of the consignments detected as fraudulent were destined for the United Arab Emirates and Malaysia. Analysing hundreds of invoices, it was seen that each contains an average of $50,000 worth of goods, the cash intensive for which at the rate of 20% stands at Tk8.5 lakh.