Bangladesh Trade Policy 2024-2025: Tariff and Regulatory Changes

Bangladesh Trade Policy 2024-2025: Key Developments

Bangladesh's trade policy landscape has undergone significant changes in the 2024-2025 period, driven by the approaching LDC graduation, global supply chain realignments, and the government's strategic objective to diversify the export base beyond ready-made garments. Understanding these policy shifts is essential for Korean businesses engaged in or considering trade and investment in Bangladesh.

The Import Policy Order 2024-2027 and the Export Policy 2024-2027, issued by the Ministry of Commerce, provide the overarching framework for trade regulation. These policies set out the controlled and restricted items lists, import licensing requirements, export incentive structures, and sector-specific regulatory provisions. Key themes of the latest policy cycle include trade facilitation improvement, strategic import substitution in select sectors, and enhanced export diversification incentives.

Bangladesh's trade regime is characterized by a relatively liberal import framework with notable exceptions for certain sensitive sectors, combined with strong export promotion measures. However, the effective protection level remains high when factoring in supplementary duties, regulatory duties, and para-tariffs that complement the base customs duty rates.

Tariff Rate Changes and Customs Duty Structure

Bangladesh's customs tariff structure has been revised in the FY2024-2025 national budget, with several notable changes affecting Korean exporters:

Base Tariff Structure

The four-band tariff system remains in place, with base customs duty rates of 0%, 5%, 15%, and 25%. However, the effective duty rate for most imported goods is significantly higher when additional duties are factored in:

Customs Duty (CD): 0-25% based on HS code classification. Raw materials and capital machinery generally attract lower rates (0-5%), while consumer goods face higher rates (15-25%).
Supplementary Duty (SD): An additional duty ranging from 10% to 500%, applied to luxury goods, non-essential imports, and products where the government seeks to encourage domestic production. Automobiles, cosmetics, and certain electronics carry particularly high supplementary duties.
Regulatory Duty (RD): A 3% regulatory duty applies to most imports, introduced as a revenue measure. Certain essential items and capital machinery are exempt.
Advance Income Tax (AIT): A 5% advance income tax at source on import value, adjustable against the importer's annual income tax liability.
Advance Trade VAT (ATVAT): A 5% advance trade VAT applicable to commercial imports, adjustable against subsequent VAT liability in the supply chain.
Value Added Tax (VAT): A standard 15% VAT applies at the import stage, assessed on the cumulative value including customs duty and supplementary duty.

Notable Tariff Changes in 2024-2025

Machinery and Equipment: Reduced customs duty on industrial machinery, particularly for textile, garment, and pharmaceutical manufacturing (1-5%). This benefits Korean machinery exporters supplying equipment to Bangladesh's manufacturing sector.
Electronics and Components: Increased duties on finished consumer electronics (smartphones, televisions, refrigerators) to encourage domestic assembly, while maintaining lower rates on components and sub-assemblies. Korean electronics companies may consider CKD/SKD assembly operations in Bangladesh.
Automobiles: Total duty incidence on imported automobiles remains prohibitively high (150-300%+ depending on engine capacity and type). Hybrid and electric vehicles receive preferential treatment with reduced supplementary duties as part of the green transition incentive.
Steel and Iron Products: Adjusted duties to balance domestic industry protection with the needs of downstream manufacturing. Korean steel exporters should monitor product-specific tariff schedules closely.
Agricultural Products: Maintained high protection for rice, sugar, and other staples. Reduced duties on certain agricultural inputs including seeds, fertilizer raw materials, and agricultural machinery.

Free Trade Agreement (FTA) Landscape

Bangladesh's FTA strategy is at an inflection point as the country prepares for LDC graduation. Currently, Bangladesh's trade agreement portfolio is limited compared to regional peers:

Existing Agreements

SAFTA (South Asian Free Trade Area): Provides preferential market access to SAARC member states including India, Pakistan, Sri Lanka, and Nepal. Bangladesh benefits from a Sensitive List mechanism that protects approximately 900 tariff lines from liberalization.
APTA (Asia-Pacific Trade Agreement): A preferential trade agreement with South Korea, China, India, Laos, Mongolia, and Sri Lanka. APTA provides margin of preference (typically 30-70% tariff reduction) on agreed product lines. Korean traders should leverage APTA preferences where applicable, particularly for textile inputs and industrial goods.
BIMSTEC FTA (Under Negotiation): The Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation free trade agreement involving Bangladesh, India, Myanmar, Sri Lanka, Thailand, Nepal, and Bhutan has been under negotiation since 2004 with slow progress.
D-8 PTA: Preferential Trade Agreement among D-8 developing countries (Bangladesh, Turkey, Iran, Malaysia, Indonesia, Pakistan, Nigeria, Egypt), covering limited product scope with modest tariff concessions.

FTA Pipeline and Strategic Direction

With LDC graduation expected in 2026, Bangladesh is accelerating FTA negotiations to secure continued market access:

Bangladesh-China FTA: Feasibility study completed; formal negotiations expected to commence. This is considered a high-priority initiative given China's position as Bangladesh's largest import source.
Bangladesh-Japan CEPA: Discussions at the joint study level, covering trade in goods, services, and investment. Japan's significant economic presence in Bangladesh (including the Matarbari Port project and Araihazar Economic Zone) provides a strong foundation.
Bangladesh-EU Enhanced Partnership: Post-LDC graduation, Bangladesh will lose Everything But Arms (EBA) duty-free access to the EU. Negotiations for a successor arrangement are critical given that the EU accounts for over 50% of Bangladesh's garment exports.
RCEP Consideration: Bangladesh has expressed interest in joining the Regional Comprehensive Economic Partnership (RCEP), which would provide preferential access to the ASEAN+5 market.

For Korea-Bangladesh trade specifically, there is no bilateral FTA currently in force or under active negotiation. The APTA preferential margins represent the primary available tariff concession mechanism. Korean trade associations have advocated for deeper bilateral trade arrangements, and the evolving FTA landscape post-LDC graduation may create momentum for such discussions.

Import Regulations and Non-Tariff Measures

Beyond tariffs, Korean exporters must navigate Bangladesh's regulatory framework for imported goods:

Import Registration Certificate (IRC): All commercial importers must hold a valid IRC issued by the CCI&E. IRCs are category-specific (commercial, industrial, or government) and must be renewed annually. Korean exporters should verify their Bangladeshi buyers' IRC validity before shipping.
Controlled and Restricted Items: The Import Policy Order classifies items as freely importable, controlled (requiring specific approval), restricted (banned or conditionally permitted), or requiring import licenses. Categories of concern for Korean exporters include used machinery (restricted with exceptions), certain chemicals, and defense-related items.
Standards and Conformity Assessment: The Bangladesh Standards and Testing Institution (BSTI) sets mandatory standards for 181 product categories including food products, electrical goods, construction materials, and consumer chemicals. Products must obtain BSTI certification before market release. Korean exporters should verify BSTI requirements early in the export planning process.
Halal Certification: For food products, cosmetics, and pharmaceuticals, halal certification is increasingly important in Bangladesh's predominantly Muslim market. While not always legally mandated for all categories, halal certification significantly enhances market acceptance.
Foreign Exchange Regulations: Bangladesh Bank maintains controls on foreign exchange transactions. Import payments must be routed through authorized dealer banks, and L/C opening requires compliance with margin and cash deposit requirements that vary by product category and import volume.

Export Incentives and Support Programs

Bangladesh offers several incentive programs that benefit Korean companies with manufacturing operations in the country:

Cash Incentives: Export cash incentives (subsidies) ranging from 4% to 20% of FOB value are available for priority sectors. Current rates include 15-20% for agricultural products, 4% for garments, 10% for leather goods, 10-15% for light engineering products, and 10% for ICT services.
Bonded Warehouse Facility: Duty-free import of raw materials for export production through the bonded warehouse system. This is extensively used by garment manufacturers and is available to other export-oriented sectors.
Duty Drawback: Refund of customs duties paid on imported inputs used in export production. Available for non-bonded warehouse exporters who import inputs through commercial channels.
Export Credit: Bangladesh Bank provides concessional refinancing facilities for export-oriented lending by commercial banks. Pre-shipment and post-shipment credit are available at subsidized interest rates.
Export Development Fund (EDF): A revolving fund providing USD- denominated loans to exporters for raw material imports at competitive interest rates. Maximum facility size is USD 5 million per exporter.

Korean companies with manufacturing operations in Bangladesh should work with their local financial advisors and industry associations to maximize the utilization of available export incentives. The incentive structure is reviewed annually in the national budget, and changes can significantly affect the economics of export operations.