China offers zero-tariff access for 98% Bangladeshi products

China, the largest economy in Asia, has decided to grant duty-free access to 98% of Bangladeshi products through the inclusion of 383 new products, especially leather and leather goods, in the zero-treatment list.

In this way, the number of products enjoying the duty holiday will stand at 8,930.

Commerce Secretary Tapan Kanti Ghosh confirmed it to The Business Standard.

To bring this extra facility into effect, Bangladesh and China will sign a letter of exchange. 

Chinese Ambassador to Bangladesh Li Jiming has already signed the document on behalf of his government. On the other hand, Bangladesh's commerce ministry has started the signing process, according to sources familiar with the matter. 

The Chinese embassy in a note verbale forwarded to the commerce ministry on Wednesday said the Chinese government will grant the duty-free treatment for imported goods originating from Bangladesh with a view to promoting the economic development of China and Bangladesh, as well as to strengthen the economic and trade relations between the two countries.

"It would be appreciated if the Bangladesh government could complete the signing of the letter of exchange as soon as possible, so as to facilitate the enterprises and people of Bangladesh to benefit from the special tariff treatment soon," the letter said.

In 2020, China offered 97% of Bangladeshi products duty-free access to its market and 8,547 Bangladeshi products came under such treatment. But some leather goods, a major exportable to China, were left out of the facility.

This time these left-out items have made it to the list, according to sources at the commerce ministry.

"We have got a new list of products granted duty-free access to the Chinese market today [Wednesday] from the Chinese embassy," Noor Md Mahbubul Haq, additional secretary to the commerce ministry (FTA), told TBS.

They are analysing harmonised system codes of products in the list written in Chinese. So, they cannot say names of the products right now, he added.

The leather and leather goods are included in chapter 46 of the HS code list. Earlier, six of such products were given the duty-free facility. The number of products will go up in the new list, Noor noted.

Seeking anonymity, a commerce ministry official said Bangladesh exports its local leather and leather goods mainly to China. And, the items it exports to European countries are produced after importing leathers from abroad.

So, the duty-free treatment for Bangladeshi leather and leather goods in China will help boost exports, the official added.

Mohiuddin Ahmed Mahin, president of Bangladesh Finished Leather, Leather Goods and Footwear Exporters Association, told TBS that China's decision to include leather and leather goods in the list of duty-free products was a positive move.

"The increased duty-free access to the Chinese market will be a blessing for us at a time when China's imports are declining because of the pandemic," he added.

Dr Mostafa Abid Khan, former member of Bangladesh Tariff and Trade Commission, said 99% of export products, including all RMG items, have been covered under the 97% duty-free facility provided by China. But some items of leather and leather goods were left out.

Bangladesh will now get 100% benefit if these are included in the list, he added.

As a single country, Bangladesh imports the most from China, while its exports to the Chinese market are very low. The country's duty-free export facility increased from the first day of the last fiscal year, but exports to the destination have not gone up much. 

According to the Bangladesh Bank, Bangladesh's imports from China in FY21 amounted to about $13 billion, which is one-fourth of the country's import expenditure. At the same time, it exported $681 million worth of goods, up by 13.42% over the preceding year.

In July-December of the current fiscal year, Bangladesh's exports to China amounted to $357 million. The export items included woven garments, knitwear, home textiles, leather and leather products, footwear, jute and jute products and plastic products.

However, businesses believe that there are opportunities to increase exports of readymade garments, leather and leather goods, jute and jute products, frozen fish and other products to China.

Shafiul Islam Mohiuddin, former president at the Bangladesh Garment Manufacturers and Exporters Association, told TBS that the cost of manufacturing garment products in Bangladesh is lower than in China. With China tending to produce high-value products, Bangladesh's apparel exports to the former are likely to increase in the coming days.

ATM Azizul Akil, senior vice-president of the Bangladesh-China Chamber of Commerce and Industry, said, "China is now not only the world's largest exporter, but also at the top in terms of imports. Therefore, if we can increase our capacity, Bangladesh will be able to fetch billions of dollars cashing in on the duty-free facility provided by China."

To capitalise on the zero-tariff treatment, the country needs to diversify export products alongside ensuring standards, ATM Azizul Akil pointed out.

There is also a huge potential for exports of freshwater fish and poultry items to China. For that, Bangladesh must strictly maintain product quality, he added.