Dhaka has written to the Indian government, urging it not to apply new customs rules on goods exported from Bangladesh.
The government has also requested the Indian authorities to conform to the conditions set in regional agreements, including Safta, under which Bangladeshi goods are granted duty-free access to India.
In the letter sent through the Ministry of Foreign Affairs on Thursday, the government said the three regional agreements have clear instructions as to who will issue the certificate of rules of origin and how it will be verified.
Mentioning that Bangladesh is not granted duty-free access to India under any bilateral trade agreement, Dhaka requested the Indian government to adhere to the terms of these multilateral agreements in providing duty-free access to goods exported from Bangladesh.
Under the Saarc Preferential Trading Agreement (Sapta), South Asian Free Trade Area (Safta) and Asia Pacific Trade Agreement (Apta), Bangladesh avails duty-free benefits on all products, except 25 liquor and tobacco products.
According to the Safta agreement, the Export Promotion Bureau (EPB) issues certificates of origin to Bangladeshi goods that enjoy duty-free access to India. In the event that any verification is required in case of discharge of goods, the Customs Authority of India verifies the same through the EPB.
As per India's new customs rules, which came into force on 21 September, the power of verification rests with the country's customs officials. They will decide whether or not to grant duty-free facility by collecting information about the goods in question from Bangladeshi exporters (via importers in India).
Md Shahidul Islam, additional secretary (FTA) to the commerce ministry, said, "We have sent a letter through the foreign ministry on Thursday urging India to abide by the multilateral regional agreements. We've also proposed that India call a Safta meeting to discuss this issue with the member countries.
According to the new customs rules of India, during the verification process, customs officials in India are within their rights to release goods without granting duty-free facility, should they wish to do so. They can also cancel the duty-free facility if an importer does not provide detailed information about the product within 60 days of the issuance of the verification notice.
If an exporter does not receive duty-free facility for any of its products, India will not release that particular exported product under duty-free facility.
Officials from the Ministry of Commerce, Bangladesh Trade and Tariff Commission, the EPB and exporters fear that the new rules will hamper Bangladesh's exports to India.
On 18 November, the EPB and the Tariff Commission met with stakeholders, including the Federation of Bangladesh Chamber of Commerce and Industries (FBCCI), Bangladesh-India Chamber, Bangladesh Garment Manufacturers and Exporters Association and Bangladesh Knitwear Manufacturers (BGMEA) and Exporters Association (BKMEA).
The letter sent to India also mentioned that Bangladesh has been enjoying duty-free access to the Indian market under the Safta agreement signed among the eight South Asian countries, which categorically states how these countries will verify the certificates of rules of origin.
"Member countries should clear any doubts through dialogue. Therefore, prior to enforcing new customs rules on Bangladeshi export products, India must discuss this in Safta. The issue must be resolved through discussion.
Seven South Asian countries signed Safta at the 12th Saarc Summit in Islamabad in 2004. Afghanistan joined Safta later.
A commerce ministry official, speaking on condition of anonymity, told The Business Standard, "We have used diplomatic channels to inform India about the difficulties Bangladesh will face following the enforcement of the new set of rules. The steps to be taken by Bangladesh in this regard will be directly informed by what India decides to do next.
He said the Safta, Apta, Sapta agreements have laid out clear provisions outlining who will issue the Certificate of Rules of Origin, and how it will be verified. As a signatory country, India cannot unilaterally impose any new rules by violating these multilateral agreements, he added.
Mohammad Hatem, senior vice-president of the BKMEA – an organisation of the owners of export-oriented knitwear industries, told The Business Standard that Bangladesh's exports to India have been increasing under Safta for the last two-three years, which is why India has made these rules to impose non-tariff barriers.
According to the EPB, exports from Bangladesh to India amounted to $1.09 billion in the FY20. Jute and jute products, leather and leather goods, vegetables and readymade garments are Bangladesh's main export products. On the other hand, Bangladesh's imports from India amounted to $5.77 billion. In other words, Bangladesh's trade deficit with India is $4.68 billion.