Overview of the Garment Tariff Structure
Bangladesh is the world's second-largest garment exporter, with the RMG (ready-made garments) industry accounting for 84% of total exports. The tariff structure supporting the garment industry is built around a dual-benefit system: "low-tariff or duty-free imports for raw materials, and preferential tariffs for finished-goods exports."
For Korean companies, this structure has two direct implications. First, Korean raw materials such as fabrics, dyes, and accessories can be exported to Bangladesh at low tariff rates. Second, garments produced in Bangladesh can be imported into Korea under GSP preferential tariff treatment. However, meaningful changes are expected after Bangladesh's LDC graduation in 2026.
Import Tariff Structure
Bangladesh applies a four-tier import tariff system of 0%, 5%, 15%, and 25%. Raw materials generally face tariffs of 0-5%, intermediate goods 5-15%, and finished goods 15-25%. For RMG export production, however, imported materials can be exempted from duties through the Bonded Warehouse system.
| Item | HS Code | Base Tariff | Protective Duty | Bond Exemption | Effective Rate |
|---|---|---|---|---|---|
| Synthetic woven fabrics | 5407 | 25% | 3% | Applied | 0% (for exports) |
| Cotton fabrics | 5208-5212 | 25% | 3% | Applied | 0% (for exports) |
| Knitted fabrics | 6001-6006 | 25% | 3% | Applied | 0% (for exports) |
| Dyes and pigments | 3204 | 5% | 0% | Applied | 0% (for exports) |
| Buttons and zippers | 9606-9607 | 15% | 3% | Applied | 0% (for exports) |
| Sewing thread | 5401-5406 | 10% | 3% | Applied | 0% (for exports) |
| Packaging materials | 4819 | 15% | 3% | Applied | 0% (for exports) |
| Sewing machinery | 8452 | 5% | 0% | Partial | 5% |
| Finished garments | 6101-6211 | 25% | 20% | - | 45%+ |
Bonded Warehouse System
The bonded warehouse regime is the core tariff incentive for Bangladesh's RMG industry. It grants full exemption from customs duty, VAT, and protective duty on imported materials used to manufacture export-oriented garments. Companies operating as 100% exporters can obtain a bond license and import inputs duty-free.
Preferential Tariffs for Exports
Bangladeshi garments benefit from LDC-based preferential market access in major export destinations. The EU's Everything But Arms (EBA) scheme, Korea's GSP, and Japan's GSP are among the most important programs. These tariff advantages are expected to be scaled back gradually after LDC graduation in November 2026.
| Market | Current Scheme | Garment Tariff | After LDC Graduation | Transition | Impact |
|---|---|---|---|---|---|
| EU | EBA (duty-free) | 0% | GSP+ (8-12%) | 3 years | Highest impact |
| Korea | GSP (preferential) | 0-8% | MFN tariff (13%) | TBD | Moderate impact |
| Japan | GSP (preferential) | 0% | Reduced GSP access | 3 years | Moderate impact |
| Canada | LDC preference | 0% | MFN tariff (17%) | 3 years | Major impact |
| Australia | LDC preference | 0% | MFN tariff (5%) | TBD | Limited impact |
| United States | MFN (non-preferential) | 15-32% | No change | - | No impact |
| China | LDC preference | 0% | TBD | TBD | Moderate impact |
Impact of LDC Graduation
Bangladesh will graduate from LDC status in November 2026. Although transition periods of three years, and in some cases five years, are expected, preferential tariff treatment will ultimately narrow. This could impose an additional tariff burden of roughly USD 3-5 billion on Bangladesh's RMG exports and alter the structure of Korea-Bangladesh trade.
Bangladesh's garment tariff system, built on the principle of "duty-free input imports and preferential treatment for exports," helped establish the country as the world's second-largest garment exporter. Korean companies have benefited from this structure by exporting raw materials at effectively zero duty for bonded use and importing finished garments under preferential tariffs. LDC graduation in 2026 will reshape this system, but the impact can be moderated through a Korea-Bangladesh CEPA, a shift toward higher-value products, and earlier preparation for stricter origin requirements.