Ambiguous HS codes make businesses suffer

When it comes to importing a new type of raw material beyond the National Board of Revenue's (NBR) list of harmonised system codes, buractrcatic tangles get in the way, forcing exporters with bond licences to make the rounds for its enlistment.

A job of merely seven days takes even up to two months for harmonised coding of new items – a case in point.

On top of it, NBR officials' rigidity in giving approval to plug misuses of bond facilities by a section of unscrupulous businesses leads to further delays for those who are actually in need.

There is no margin even for a minor discrepancy in HS codes they come across – when customs officials deem a shipment of goods not matching HS codes, they immediately scrap its duty-free facility and impose a regular duty under another HS code.

For example, two weeks ago, Fatullah Apparels, a readymade garment factory based in Narayanganj, was compelled to go for an "underhand way" to have its imported laces, a garment accessory, released from the Shahjalal International Airport. The customs had found the width of the laces slightly different from what was mentioned in the HS code.  

"I had to bribe Tk70,000 through a C&F agent for the delivery of my goods," Fazlee Shamim Ehsan, managing director of Fatullah Apparels, told The Business Standard.

Allegations run rife that to avoid a lengthy process in securing permission for using HS codes for new products, exporters often bob and weave, and prefer giving bribes in exchange for it.

Seeking to be unmanned, a senior official of a garment factory based in Chattogram said they need to spend Tk2.5 lakh to Tk6 lakh to add an HS code in the bond licence.

HS Code is a common standard worldwide for classifying traded goods. Customs use it to identify products while assessing duties. The system was created by the World Customs Organisation to categorise goods into approximately 5,000 commodity groups, which is accepted and being implemented by more than 200 countries worldwide

Industry insiders say they need to import new types of raw materials that are not on the NBR's harmonised list owing to a constantly changing market.

They demand release of the imported raw materials without any bank guarantee or duty if HS codes of the product are mentioned in utilisation declaration certificates issued by the BGMEA or the BKMEA.

Md Shahidullah Azim, vice president of BGMEA, told The Business Standard, "We will not be able to reach that goal if we are disturbed by a fault-finding attitude. We often run out of export lead time to settle the HS code issues and get the orders cancelled eventually. We want business to be easy."

Four years ago, Fatullah Apparels failed to take orders from a French company for exporting 1.80 lakh T-shirts with colour pencils for kids – for the same reason.

Fazlee Shamim Ehsan said, "The T-shirts were meant for kids, and the buyer wanted a shirt to have three colour pencils on it. But I had to cancel the order as the colour pencil was not included in the HS code of my bond licence. It would take time for the enlistment. As a result, I missed the order."

Many companies are facing such problems in importing raw materials owing to HS code related complexities, caused by many loose threads in approving HS codes.

Mohammad Hatem, executive president of the BKMEA, said more than 50% of 8,500 bond licence holders are having to go through hassles in securing HS codes for new raw materials that they need because of a constantly changing market demand.

At a recent meeting with the NBR, the BGMEA proposed issuing bond licences and providing HS codes for items – except for prohibited goods – upon an application by the exporter and their associations concerned.

On the other hand, in October last year, Bangladesh Export Processing Zone Authority (Bepza) sent a letter to the NBR to include 922 machinery and spare parts  in the list of HS codes. However, the NBR has not taken any action in this regard. 

Factories under Bepza enjoy the bond facility.

Mohammad Hatem, executive president of the BKMEA, said, "We have to include new raw materials and accessories in the HS code list owing to a constant change in demand and taste of buyers for clothing." 

But getting HS codes for new raw materials is very challenging, he added.

"Sometimes, it takes more than two months to take deliveries of raw materials in the port, mainly for HS code related problems, resulting in a delay in production, Mohammad Hatem noted.

"For this, we sometimes have to ship goods by air freight that cost extra. In some cases, our orders get cancelled for such an unexpected delay," he added.

Random approval to create chance for misusing HS codes

However, officials at the customs department said if they give wholesale approval for the use of HS codes for all raw materials they demand, there will be misuses, such as local market sales of goods made with raw materials imported without duty.

Mohammad Fyzur Rahman, commissioner at Dhaka Customs House, said, "If someone imports goods using a wrong HS code, we have to stop that."

In case of any mistake by customs officials regarding HS codes, he said, "If any officer makes a mistake, senior officials have to check and assess it."

"Around 90% of the bill of entries at Dhaka Customs House are done in 24 hours. There can be delay only if any allegations come from the intelligence department or any other authorities," he added.

Dr Ahsan H Mansur, executive director of the Policy Research Institute , told TBS, "The power that custom officials enjoy is another reason behind the problems."

Ali Ahmed, former member at NBR, said, "There is no easy way to resolve HS code related problems. Automation of customs operations, simplification of legal framework and a more honest and cooperative attitude on the part of officials can minimise the problems."

"Corruption is more prevalent among lower-level officials," he alleged.

Meanwhile, the NBR has recently set a time limit for an official to deal with an application, especially for an approval for HS codes.