Customs complexity hits edible oil exports to India

Bangladesh is likely to miss out on the opportunity of edible oil export to India under the duty-free facility of the South Asian Free Trade Area (Safta) agreement. This is because the authorities concerned have been procrastinating in addressing the breadth and complexity of customs-related issues between the two countries.

Indian customs officials want to inspect the edible oil companies in Bangladesh as Delhi is suspicious about the country of origin certificates issued by the Export Promotion Bureau (EPB) for edible oil and packaging materials to be exported.

Bangladesh does not agree with India's proposal. As a result, the export of edible oil, which has been virtually suspended for two years due to non-tariff barriers imposed by the Indian government, is unlikely to resume soon.

Under the South Asian Free Trade Area (Safta) agreement, Bangladesh will get duty-free access to soybean and palm oil exports to India subject to 30% value addition locally.

Bangladesh's edible oil exporters produce edible oil by crushing soybeans, imported crude oil and imported soybeans. The value addition rate is more than 30%.

When Bangladesh started exporting edible oil to India three years ago, the Export Promotion Bureau (EPB) issued country of origin certificates for some shipments, branding them with the tag 'locally produced'.

Then India raised the question that when Bangladesh itself met local demand through imports, how did it export its own oil to India?

Officials at the Ministry of Commerce and Agriculture said despite the fact that Bangladesh was importing crude oil and soybeans to meet local demand for edible oil, soybean production in the country had been increasing day by day.

According to the US Department of Agriculture, Bangladesh produced 3.25 lakh tonnes of soybeans in 2019.

The Commerce Ministry officials said India had requested Bangladesh to verify the country of origin certificates issued by the EPB when edible oil exports started increasing, but Bangladesh did not entertain the request even though it was supposed to respond within three months. As a result, India's suspicions deepened.

In this context, Indian customs officials have proposed inspections of Bangladesh's edible oil companies, verification of import-related information of edible oil and packaging material and their value-added rates.

Apart from Bangladesh, edible oil exports to India from several countries, including Nepal, have continued to rise while India's edible oil millers' association filed an application with the country's Directorate General of Foreign Trade alleging dumping.

India revoked the licence to import refined palm oil in May last year. At the time, 12,000 tonnes of palm oil exports from Bangladesh were stopped. Since then, palm oil exports have remained suspended.

Although tinned or bottled soybeans are currently being exported, India is skeptical about the value-added rate of tin or plastic bottles in which edible oil is being exported. Some country of origin certificates mention that the tin was produced in Bangladesh. India also wants to verify this information.

Commerce Ministry officials say India has a separate agreement with Bangladesh outside the Safta agreement.

Duty-free export facilities should be given only if 20% value is added to the product. Refined soybean oil, plastic bottles and tins -- each has more than 30% value added to them in Bangladesh.

According to the Safta agreement, if an importing country thinks that the goods are being exported from a third country in the name of the exporting country, then there is an opportunity to visit the exporting company with the consent of the exporting country. But Bangladesh has objections to the way India wants to inspect the edible oil companies in Bangladesh.

Commerce Secretary Md ZafarUddin told The Business Standard, "The Indian proposal to come to Bangladesh and inspect the factory is insulting for us. So, we will not allow Indian customs officials to inspect our edible oil companies."

He said India had also questioned the accuracy of the country of origin certificate data on new alloy steel scrap and manganese steel melting scrap exports. It had sent a verification request but Bangladesh also had objections in this regard.

According to India's new customs policy, the country will collect varied business information from exporters, which is a violation of the Safta agreement, the commerce secretary said. He added that comprehensive trade issues, including this one, would be discussed at the next commerce secretary-level meeting in Dhaka on March 3. 

After India increased tariffs on edible oil imports in 2017, Bangladeshi mills started exporting edible oil to the northeastern states of India with special permission from the Ministry of Commerce.

The commerce ministry has given permission to Meghna Group, City Group, TK Group, Bashundhara Group and Sena Kalyan Sangstha to export edible oil.

Edible oil exports to India witnessed a rise within a short span of time due to duty-free access under the Safta agrement. During the July-September of fiscal year 2018-19, edible oil exports to India stood to the tune of $43.40 million.

In this situation, India has stipulated that no crude or refined edible oil can be imported from Bangladesh without a 'No Objection Certificate' from the Directorate of Revenue Intelligence to curb the export of edible oil. Since then, bulk exports of edible oil to India have stopped, slipping to $3.85 million in the next quarter.

Now refined soybean oil is being exported in tins or bottles. Indian High Commissioner to Dhaka Vikram Doraiswamy sent a letter in January on the verification of the value-added rate mentioned in the country of origin certificate issued by the EPB in favour of these exports.

In the letter, he mentioned that in the case of soybean exports from Bangladesh to India, it was necessary to verify the authenticity of the information cited in the country of origin certificate issued by the EPB.

The Indian High Commissioner also asked for a reply by attaching a questionnaire to the letter. At the same time, in the case of exports of edible oil, the price of imported tin has also been sought.

Biswajit Saha, director of City Group, told TBS that although Bangladesh was eligible for duty-free access under the Safta agreement, India was not interested in providing the facility for edible oil exports.

Meanwhile, thecommerce ministry has written to the National Board of Revenue seeking information on the number of shipments from Bangladesh to India and the number of shipments from India to Bangladesh in the last three financial years.

Before the information secretary-level meeting is held between two countries, the Ministry of Commerce has sought information on how many consignments were exported to Bangladesh from India between FY2017-18 and the last fiscal year under the duty-free facility and how many country of origin certificates Bangladesh had sent to India for verification.

Mostafa Abid Khan, a member of the Bangladesh Trade and Tariff Commission, told TBS India had made it mandatory for its importers to obtain licences in order to get edible oil from Bangladesh, but the country was not issuing any licences in favour of importers. That was why export of edible oil to India was being hampered.

It would, however, be possible to solve these problems on the basis of bilateral talks, he said.