Chapter 1 Customs System and Laws of Bangladesh

1.1 Customs laws and procedures

The principle Act regulating customs procedure in Bangladesh is the Customs Act 1969, and the Act was amended several times after its adoption. It is pertinent to mention that Bangladesh is a founding member state of WTO and the organisation adopted Customs Valuation Agreement in 1995 as part of WTO multilateral agreements which is known as the Agreement on Implementation of ArticleⅦof the General Agreement on Tariffs and Trade 1994.

The WTO Agreement on Customs Valuation aims for a fair, uniform and neutral system for the valuation of goods for customs purposes—a system that conforms to commercial realities, and which outlaws the use of arbitrary or fictitious customs values. The Committee on Customs Valuation of the Council for Trade in Goods（CTG）carries out work in the WTO on customs valuation.

Bangladesh adopted the WTO Agreement on Customs Valuation in February 2000, as scheduled. Section 25 of the Customs Act 1969 was amended to reflect this change. The Customs Act 1969 was also amended in 2001 in line with the Revised Kyoto Convention in order to harmonise customs procedures. Risk-based clearance has been introduced on a limited scale in customs houses through green, yellow and red channels. In particular, customs clearance of passenger baggage in airports has been simplified, and more than 95 percent of passengers pass through the green channel without any intervention and delays by customs. In addition to that, Bangladesh Customs works under the umbrella of the National Board of Revenue（NBR）, the apex body for direct and indirect tax revenue in Bangladesh and is part of the Internal Resources Division（IRD）under the Ministry of Finance. The customs wing of the NBR formulates policy concerning levy and collection of customs duty and customs-related taxes/charges, and administration.

Since the beginning of the 1990s Bangladesh emphasised on the simplified process for both export and import and the current Export Policy Order 2012-2015 and Import Policy Order 2012-2015 and 2015-2018 endeavoured to remove all possible barriers to international trade. NBR is performing a key role in modernising customs procedures of Bangladesh mainly to introduce speedy customs clearance through automation of the process; ensure transparency in the customs clearance process as well as in revenue collection activities; and extend the maximum possible facilities to the trade communities. Significant progress in computerisation of customs procedures has been made in recent times. The latest version of ASYCUDA, i. e. ASYCUDA+ +, has been put in place in Dhaka Customs House, Chittagong Customs House（CCH）, Benapole Customs House, Mongla Customs House and the Export Processing Zone.

In countries like Bangladesh, regulatory issues and preparation of documents occupy most of the time for trading, while lack of infrastructure and operational inefficiency keeps the system weak. As per the World Bank Doing Business（DB）report 2016 a trader in Bangladesh required 35 days for import and 25 days for export costing USD 1,470 and USD 1,075 respectively whereas the East Asian average is 22 days（USD 884）and 21 days（USD 856）respectively.

Reducing the time and cost are important to ensure economic growth in Bangladesh since an extra day in the trading process can reduce exports by at least 1.0 percent（OECD&WTO）and a 10 percent reduction in export time is expected to result in 5.8 percent increase in exports for South Asian countries. According to UNCTAD, for a country's GDP（gross domestic product）to grow by 2-5 percent, trade needs to grow by 7-12 percent. If all countries reduced supply chain barriers halfway to global best practice（like Singapore）, global GDP could increase by 4.7 percent or USD 2.6 trillion and world trade by 14.5 percent or USD 1.6 trillion, far outweighing the benefits from the elimination of all import tariffs（WEF）.

The first ever Time Release Studies（in FY14）by the National Board of Revenue on Chittagong, the largest seaport and on Benapole, the largest land port of Bangladesh, reveals that:In Chittagong, it takes about 11 days 9 hours and 45 minutes from arrival of vessel to release of goods, i. e. import, and 4 days 22 hours and 38 minutes from arrival of cargo to release of goods, i. e. , export. In Benapole, it takes about 5 days 18 hours 24 minutes for import on an average and 4 days 5 hours 26 minutes for export. A further analysis on Chittagong port, which deals with around 92 percent of the merchandise trade in Bangladesh, reflects that customs clearance takes reasonably short time（around five days for import and less than half a day for export）. The remaining time is spent for“other government agencies”including port, food safety and standards, plant quarantine and other certifying authorities. The small traders suffer the most from such bottlenecks.

Over the last decade, measures have been taken to simplify import and export procedures by reducing the number of signatures needed for clearance of consignments and frequency of inspection of the goods being traded. While 25 signatures were required for clearance of import and export consignments in 1999, in 2002 the number was reduced to five and customs is trying to further reduce the procedure and release time by automation. Since 2002, customs officials physically inspect only 10 percent of import consignments, before which date 100 percent were inspected. As a result of the introduction of automation, the average processing time for clearance of goods from customs has been reduced to one day for about 70 percent of consignments for import and three to four hours or less for export. It may be noted here that apart from a very small number of entrepreneurs, almost all the exporters and importers rely on clearing and forwarding agents（CFAs）to deal with customs clearance. The Customs Act has been modified to reduce the discretionary powers of officials and tariff rationalization, and HS code simplification at the 8-digit level, which have helped to reduce misdeclaration.

With the introduction of PSI physical inspection of consignments have been reduced from 100 percent in 1999 to around 10 percent now. Numbers of preclearance signatures have gone down to five from 25 and export clearance times for 95 percent of consignments have been reduced from 72 hours in 1999 to three hours now. Bangladesh has also appointed Tax Ombudsman to facilitate good governance in Tax &Tariff measures.

The Bangladesh Land Port Authority signed agreements with four private operators, awarding them rights to operate four land ports（Hilli, Sona Masjid, Banglabandha and Bibir Bazar）under build-own-operate system. Signing of four agreements was part of handing over 12 of the country's 13 land ports to private operators under the BOT system. According to the agreements, the operators will develop necessary infrastructures at the respective land ports and will provide logistic facilities for the importers, sharing a portion of the revenue earned through selling such services to the port users.

Documents generally required in Bangladesh for importation comprise:bill of lading, cargo release order, certificate of origin, commercial invoice, customs import declaration, packing list. The import process is mostly automated for the four major customs houses in the country that cover 90 percent of import cargo, with some degrees of manual processing at the rest.

Bangladesh has adopted a Strategic Development Plan（SDP）and initiated the Modernization and Automation Project（MAP）of National Board of Revenue envisaging greater transparency and accountability from both tax payers &officials. The strategies are:strengthening organisational structure, improving human resource management, strengthening the legal and regulatory framework and effectiveness of the Large Taxpayers Units（LTU）, national implementation of tax administration functions/procedures, customs modernization and trade facilitation and computerisation of the NBR.

In a rapidly modernizing and globalising world, connectivity is the key to more regional trade and cooperation. Bangladesh enjoys a strategic geographical location and can be the bridge between South Asia and South East Asia. It can be the regional hub of transportation for eastern India, North East India, Nepal, Bhutan and ASEAN countries, if it can capitalise its location advantages.

1.2 WTO Trade Facilitation Agreement and Bangladesh

On 7 December 2013 at the Bali Ministerial Conference, the 159 WTO member countries approved the Trade Facilitation Agreement（TFA）, the first new WTO multilateral agreement since the establishment of the WTO in 1995. After more than nine years of negotiations, WTO members finally reached consensus on a Trade Facilitation Agreement. The Trade Facilitation Agreement is a major accomplishment for the international trading community, a significant milestone for the WTO, and stands to regulate an area of trade that until now has been largely ignored. The Trade Facilitation Agreement has addressed developing country concerns in considerable detail, using novel measures to empower developing countries in their implementation of TFA measures. Turning to the text of the TFA, Section II of the two-part Agreement contains the special and differential treatment provisions. Over the various drafts, the TFA has evolved from only perfunctorily addressing the genuine concerns of developing country members to recognizing the need to provide structured and mandated support in relation to capacity building and implementation of trade facilitation rules by means of conditional obligations which will only become mandatory when or if certain conditions are met. Developed country members, acting as donors, agree to help developing and least developed country members by providing assistance and support for capacity building, including promotion of regional and sub-regional integration. With regards to least developed countries, targeted assistance and support is to be provided by the donors. In addition, many of the amended provisions involve lengthening the time available to developing and least developed member countries to implement various provisions relating to trade facilitation. The implementation of the TFA has the potential to increase global merchandise exports by up to USD 1 trillion a year, according to WTO's flagship World Trade Report（WTR）released on October 26 in Geneva. The report said developing countries will benefit significantly from the TFA, capturing more than half of the available gains.

If the TFA is implemented properly, export from the developing countries is estimated to increase between USD 170 billion and USD 730 billion, and developed economies' exports to increase between USD 310 billion and USD 580 billion in a year, according to the WTR. Fuller and faster implementation of the TFA will also increase overall world export growth by up to 2.7 percent and global GDP growth by 0.5 percent, the report added. The TFA is expected to help developing countries diversify their exports, the WTR said.

Bangladesh will soon ratify the Trade Facilitation Agreement of the World Trade Organisation as more than 50 nations have already approved the deal to simplify their trade rules. National Board of Revenue has formed a 19 members committee under the chairmanship of Member（Customs）comprising officials/representatives of relevant ministries/ departments / trade bodies. In order to achieve the goal of TFA, the committee was given responsibility to lead the implementation of the TFA and also to undertake appropriate means to improve trading environment in Bangladesh. This committee is working as a forum for the concerned stakeholders to develop new ideas and to raise issues regarding trade facilitation.

Bangladesh has already undertaken step to reform the existing customs laws of the country to comply with WTO standard under TFA 2013. The draft of new Customs Act 2014 has been approved by the Cabinet and will soon be placed in National Parliament for approval.

With assistance from development partners, a number of reform initiatives have been undertaken such as SASEC Trade and Transport facilitation.

The government of Bangladesh and development partners have already initiated a number of significant reforms which are consistent with TFA objectives. Some key initiatives include: introduction of ASYCUDA World in a number of customs stations, electronic data exchange between Chittagong port and Customs, initial approval of the Cabinet on the draft new Customs Act 2014 setting the legal foundation for border modernisation and related TFA reforms, proposed connectivity between customs and banks, introduction of an electronic payment of customs duties and taxes and rolling out of a National Trade Portal initiative by the Ministry of Commerce. Apart from customs reforms, Bangladesh Standards and Testing Institute（BSTI）and Plant Quarantine Wing have taken up initiatives for automation, capacity building and business process reengineering to simplify clearance process.

These are important steps to establish the modernised and facilitative border environment intended by the Trade Facilitation Agreement. As customs and other border agencies reform their policies, procedures and operations to implement the TFA, the needs and priorities of the private sector—the main beneficiaries of these efforts—must be taken into account. To that end, NBR is hosting a trade facilitation committee comprising all key public and private sector stakeholders, which meets periodically to exchange views. However, the collaboration has to be ramped up to undertake reform initiatives not just through improvement in infrastructure but also through changes in policies, procedures and day-to-day operations.