A commerce ministry-led committee made no decision on easing the bank guarantee requirement for yarn imports after learning that a textile mill had filed a court case over the issue, leaving garment exporters facing the existing cash-flow burden.
Representational image. Photo: Pixabay
“>
Representational image. Photo: Pixabay
The government is unlikely to ease the bank guarantee requirement for yarn imports soon, leaving garment exporters struggling with a cash-flow burden as a court case stalls efforts to resolve the dispute.
A commerce minister-led committee met yesterday (11 November) to discuss the issue but made no decision after learning that a yarn producer had filed a case, making the matter sub judice.
“The committee did not make any decision as it is now a sub judice matter,” Shamim Islam, president of the Bangladesh Textile Mills Association (BTMA), told TBS.
Under existing rules, garment exporters must provide bank guarantees equivalent to the value of imported yarn. The guarantees are released only after exporters prove that garments made from the yarn have been shipped and export proceeds repatriated.
The requirement was introduced largely in response to demands from local yarn producers, who allege that some exporters misuse bonded warehouse facilities by diverting duty-free yarn to the domestic market instead of using it to manufacture export-oriented garments.
Such diversion, they argue, puts local textile mills at a competitive disadvantage.
Garment manufacturers, however, say the requirement ties up substantial working capital, putting small and medium-sized factories under particular pressure.
Representatives of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) and BTMA attended the meeting.
BGMEA First Vice-President Salim Rahman said another meeting would be held, as the issue was also subject to the prime minister’s directives.
He warned that a 100% bank guarantee requirement for yarn imports could threaten factories of all sizes. “This will lock up working capital,” he said.
Meanwhile, BTMA has written to the ministry seeking cancellation of existing bond facilities for all types of yarn and fabric imports and the introduction of a bank guarantee system.
The association also proposed that Bangladesh Bank issue uniform, mandatory instructions to all scheduled banks governing the issuance, renewal and release of bank guarantees.
About The Author
