Customs' arbitrary valuation adds Tk30,000cr burden on importers

Customs authorities are increasingly disregarding importers' declared values in favour of arbitrary "load" assessments – a practice businesses say has intensified over the past two years. The result: higher import costs, rising consumer prices, and potential risks of money laundering.

Infographic: TBS

A new report, "Tax Policy for Development: A Reform Agenda for Restructuring the Tax System", prepared by the National Task Force for Tax Reforms, finds that overall import values were raised by up to 15% in FY24 and FY25 compared with importers' declared transaction values.

The report notes that the routine "loading" of invoice values has increased fivefold in four years, directly contributing to inflationary pressure. It warns that the practice contravenes the World Trade Organization's Customs Valuation Agreement, which requires duties to be assessed primarily on transaction value.

"Resolving the valuation problem must be given highest priority," the report states, adding that it has already been submitted to the government.

Extra burden on businesses

The report does not quantify the additional revenue collected through loading, but importers estimate they paid up to Tk15,000 crore extra per year – roughly Tk30,000 crore over two years. According to data from the National Board of Revenue, more than Tk2 lakh crore in import taxes was collected in each of the two fiscal years.

In FY25, Customs assessed imports at Tk6.67 lakh crore against declared invoice values of Tk5.81 lakh crore, a gap of Tk86,000 crore. The previous year's gap was Tk78,000 crore.

Zaidi Sattar, chairman of the Policy Research Institute and head of the task force, said the practice violates WTO rules. "Product prices are increasing and industrial production costs are rising," he noted, adding that depreciation of the taka has already raised import costs by 30% in three years. "Adding another 15% through inflated assessments is fuelling inflation."

Bangladesh Bureau of Statistics data show inflation has hovered around 10% since 2023 – the highest in South Asia during this period.

Importers cite arbitrary assessments

While customs authorities often justify stricter scrutiny as a safeguard against under-invoicing, global norms prescribe assessment based on transaction value, with penalties imposed in proven cases of misdeclaration.

Businesses argue that Customs relies on "reference values" rather than transaction values, imposing inflated tax burdens. Examples abound:

• Fruits: Sirajul Islam, head of Old Dhaka-based Shathi Fresh Fruits Limited and president of the Bangladesh Fruits Importers Association, said his company imported dates at $1,200 per tonne before Ramadan, but Customs assessed them at $2,100 per tonne.

"Import tax per kilogramme should have been around Tk70, but Customs charged Tk150," he said, blaming the higher valuation for sharp price rises in the market.

• Elevators: A managing director of a Mirpur-based lift importing firm, speaking on condition of anonymity, said that elevators imported from China at a transaction value of $12,000 per unit were assessed by Chattogram Custom House at $18,000.

He argued that the authorities could easily cross-reference prices in the country of origin and impose fines where discrepancies are proven. "Instead," he remarked, "they are applying arbitrary loads to valuations, forcing us to bear an inflated tax burden."

With a total tax incidence of 46.5%, he said the tax payable per unit should have been $5,580, but rose to $8,370 due to the higher assessment – an additional $2,790, or approximately Tk3,35,000, per unit.

"This additional cost has no option but to be passed on to customers," he said.

• Cement: Md Shahidullah, managing director of Metrocem Cement, said Customs is increasing assessment values of five types of imported raw materials, including clinker, by 10-15% above invoice value.

"Prices rose once three years ago. Even after international prices declined, Customs continues to assess at the earlier higher rates," he said, adding that VAT and income tax audits subsequently rely on these inflated values, resulting in further tax demands.

"This is nothing short of anarchy," he said.

Importers of electrical and electronic goods have raised similar grievances.

Risk of capital flight

Business leaders also argue that overvaluation may create opportunities for capital flight.

Sirajul Islam said if a product imported at $100 is assessed at $120, the importer can legally remit $120, creating scope to transfer an additional $20 abroad.

Revenue incentives questioned

Md Farid Uddin, a former NBR member (Customs), said discretionary assessment persists because they generate additional revenue.

"We once calculated that Tk8,500 crore in additional revenue was collected in six months through higher loading," he said. "No commissionerate wants to risk losing that revenue."

Sharif Mohammad Al Amin, spokesperson for Chattogram Custom House, insists they follow WTO Valuation standards and note that importers have the right to appeal.

At a recent event, NBR Chairman Md Abdur Rahman Khan said steps had been taken to ensure assessment at actual value including subscribing to international valuation publications. Attempts to contact the NBR chairman for comments were unsuccessful.

Sources, however, said approval for the Tk1 crore subscription fee remains pending.