Sweater exporters in sourcing trouble as NBR tightens grip

Small sweater-exporters in big trouble

• 60 non-bonded sweater-makers face raw material sourcing issue
• The materials include yarn, packing, carton, clothes hangers, accessories
• Two factories closed; others struggle causing concern over 30,000 jobs   
• BGMEA seeks NBR's support, joint working committee formed  

With only 200 workers, Kashpean Sweater in river port township Narayanganj had been exporting knitwear to western markets. As Kashpean does not have a bond licence on its own, the small-scale exporter would source raw materials such as yarn and accessories from third parties that had bonds to import those.

But the knitwear-maker has been facing a sourcing hiccup for the last eight months as the National Board of Revenue (NBR) obstructs the third parties – often called deemed exporters – in selling the imported items to exporting sweater-makers.

"We somehow managed the production units in the last couple of months. There would be no option in hand except factory closure if the revenue board restriction continues," SM Kamruzzaman, managing director of Kashpean, told The Business Standard.

Like Kashpean, the sourcing issue has been hampering production of at least 60 non-bonded sweater exporters, according to owners, while Narayanganj's Allure Knitwear and Green Stone Sweater have already shuttered production thanks to raw material crunch including yarn, packing, carton, clothes hangers, plastic items and other accessories.

The non-bonded sweater-makers employ around 30,000 workers. The factories say obtaining a bond licence for small-scale factories like them is expensive and often quite impossible.   

After a series of inconclusive negotiations with the revenue board last year, the Bangladesh Garment Manufacturer & Exporters Association (BGMEA) again raised the issue during a meeting with NBR Thursday.

Kazi Mostafizur Rahman, commissioner of the Dhaka Customs Bond Commissionerate, said it is illegal to sell raw materials brought under bond facility   even to non-bonded exporters.

"We cannot allow them to continue sourcing by flouting the laws. They should go for obtaining the bond licence in the first place to avert the supply crunch," he told The Business Standard.    

But Kashpean's Managing Director Kamruzzaman said many direct exporters do not qualify for bond licence thanks to complicated requirements. "The licence could cost you a few lakh Taka. I know an entrepreneur who tried for around a year and bribed more than Tk20 lakh, but to no avail," he commented.  

Mohammad Hatem, executive president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), pointed the finger at the complicated and lengthy process.

"They are direct exporters, and for them it should not matter whether they have a bond licence or not. I don't understand why the exporters are being pulled back," questioned the BKMEA executive president.

Readymade garments amount to 80%, or more than $30 billion, of the country's total export. At present, there are 3,500 export-oriented garment factories in the country, while more than 300 of them knit sweaters. Sweater exports fetched the country more than $4 billion in the 2020-21 fiscal year.

Apart from non-bonded sweater firms, BGMEA President Faruque Hassan noted seven more issues seeking revenue board's intervention, according to sources who also commented that a joint working committee has been formed to oversee the issues.        

Major issues raised by the BGMEA include easing HS code related issues for apparel export, reintroducing metre or yard as a measurement unit instead of kilogram for yarn and fabric import-export and easing the issuance of VAT exemption certificate for readymade garment related services.

"We argued in favour of the revenue board's stance about the demands placed by BGMEA. However, a joint working committee has been formed," said a NBR official while talking on condition of anonymity.