Duty on yarn import: BGMEA, BKMEA warn of strict measures if decision not withdrawn
BGMEA and BKMEA said the sector would come under severe strain if the decision takes effect, as the withdrawal of the facility could raise total import taxes to around 37%.
Two major garment exporters' organisations today (19 January) warned that they would be forced to take strict measures if the government proceeds with scrapping the duty-free import facility for yarn, a move they say would sharply increase costs for garment exporters.
Leaders of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) and the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) said the sector would come under severe strain if the decision takes effect, as the withdrawal of the facility could raise total import taxes to around 37%.
At a joint press conference in the capital, BGMEA Acting President Salim Rahman described the move as illogical and warned that the industry's survival would be at risk.
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"If this illogical decision is not withdrawn, we will be forced to take strict measures to protect the existence of our industry," he said.
He termed the government's position "suicidal", arguing that while the measure may be intended to support the domestic spinning industry, it would push the garment and knitwear sectors towards closure. Neither association specified what type of strict measures they might take.
BKMEA Executive President Fazlee Shamim Ehsan said international buyers had already expressed concern over the policy shift.
"Buyers are frightened due to the imposition of the new duty. I have spoken with a representative of one of Bangladesh's leading markets… they have not taken this matter well," he said.
The briefing followed the commerce ministry's 12 January request to the National Board of Revenue to suspend duty-free yarn imports under the bonded warehouse facility. The change, aimed at protecting domestic spinners, would compel exporters to source more yarn locally.
Industry leaders said that if import options are restricted, they may have to pay an additional $0.30 to $0.60 (approximately Tk37–Tk73) per kilogram of yarn, significantly increasing their production costs. They warned that the sector is not in a position to absorb such increases in the current challenging global market.
Senior leaders of both organisations, including BKMEA President Mohammad Hatem, were present at the press conference.
BGMEA Acting President Salim Rahman said the industry was facing an "extreme existential crisis", as the proposed suspension of duty-free yarn imports would place further strain on a sector already dealing with global recessionary pressures, geopolitical uncertainty and domestic energy constraints.
"However, it is a matter of great regret that while [these challenges] are cornering our industry, a suicidal decision like the imposition of duty on yarn import has come before us," he said.
Salim stated that garment exporters are the primary buyers of yarn produced by local spinning mills, yet their concerns were not reflected in the government's approach.
He alleged that the Trade and Tariff Commission made a "unilateral decision" while discussions with exporters were still underway.
"It is surprising that the interests of the garment industry have been completely ignored in making such a sensitive and far-reaching decision," he said.
He further claimed that the process violated Clause 344 of the World Trade Organisation's Safeguard Agreement.
"According to international policies, before imposing any such conservative duty on imports, the issue of 'serious injury' to the local industry must be undisputedly proven through a transparent and impartial investigation. But this was not done here," Rahman said.
Terming the move "disastrous" for both the sector and the wider economy, he said the knitwear segment alone accounts for 55% of total garment export earnings, or $27 billion, and provides employment to millions.
He said the expansion of the sector over the decades had been made possible by the ability to import raw materials duty-free.
Salim argued that the increase in yarn imports in recent years reflects market demand linked to export growth. He noted that yarn import prices in a neighbouring country had fallen from Tk428.37 per kg in FY2022–23 to Tk389.18 in FY2024–25, meaning buyers were sourcing competitively.
"Yet, it is extremely unfortunate that this normal picture of yarn import has been presented negatively to talk about the withdrawal of bond facilities," he said, adding that such misinterpretation puts $27 billion in knitwear exports at risk.
The press conference followed a significant policy shift in which the commerce ministry formally requested the National Board of Revenue on 12 January to suspend duty-free yarn imports under the bonded warehouse facility.
The change, aimed at protecting the domestic spinning industry, could raise import taxes to about 37%.
While the NBR has not implemented the directive as of 18 January, the proposal has triggered strong resistance from garment manufacturers and widened the divide between textile millers and exporters.
Salim said the proposed duty would push the country's main export-earning sector into "extreme risk" in an "attempt to hide the systemic inefficiency of a specific sector."
He referred to reports of Tk12,000 crore worth of unsold yarn in local spinning mills and said the reason "does not require much depth to investigate".
"While the price of one kilogram of 30 cotton carded yarn in the international market is $2.50 to $2.60, our domestic mills want to supply the same yarn at $3. That is, the difference per kg is nearly $0.40 or more than Tk46," he said.
"In the intense competition of the global market, where we lose orders over a fluctuation of just a cent or two, spending an extra $0.40 per kg on raw materials is not realistic at all; in a word, it is knowingly stepping onto the path of self-destruction."
He said domestic spinning mills claim they can supply a large share of the yarn required for knit garments, adding, "The reality is that they are using only 60% of their production capacity and are incurring losses due to various reasons".
According to him, the argument that local mills need protection would instead "create a monopoly market" because they are not able to supply the full range of counts and premium yarns—such as Pima, Supima or Suvin—required for higher-value products.
"If the alternative path of import is blocked, local suppliers will determine the timing and price as they wish, which will completely shatter our global production schedule," he said.
Salim referred to difficulties during the pandemic period, saying exporters had faced long delays even for Proforma Invoice validation against back-to-back letters of credit. "Do we want a repetition of that horrific situation again?" he asked.
He said the question for policymakers is whether they want the garment sector to grow further or allow its progress to stall. He added that exporters would prefer to source locally if mills could supply on time and at competitive prices.
"If domestic spinning mills can supply quality yarn simply in consistency with the international market, then there is no need for us to look abroad; we are even willing to purchase yarn from them by spending an additional $0.10–$0.12," he said.
Salim said textile mill owners are "an inseparable part" of the garment industry and deserve recognition for their investments, but said growth must be balanced across the chain.
"We believe that at this moment, what the spinning mills need is not artificial 'protection' through duties, but rather their own capacity building and the modernisation of productivity," he said.
"To protect the textile sector, the government can provide them with direct incentives or ensure uninterrupted energy, rather than artificial protection through duties."
Salim warned that exports had already declined by 2.63% year-on-year between July and December of FY2024–25, with a sharper drop of 14.23% in December alone. He said further increases in yarn costs would lead buyers to reduce orders, also affecting deemed exporters.
He concluded with three demands: an immediate withdrawal of the move to impose duty on yarn imports; direct cash assistance or special incentives for the spinning sector instead of duty barriers; and measures to reduce production costs through improved energy supply and financial support.
He reiterated that if the decision is not withdrawn, BGMEA and BKMEA would be "forced to take strict measures to protect the existence of the industry."
