How termination of USDA-funded trade facilitation project will affect Bangladesh

Highlights:

• Bangladesh Trade Facilitation (BTF) project was terminated effective 13 June
• Termination halts ongoing sub-projects, wasting both Bangladesh, US investments
• It also threatens the implementation of TFA measures vital for trade, FDI

The Bangladesh Trade Facilitation (BTF) project, funded by the United States Department of Agriculture (USDA), was terminated effective 13 June, raising concerns among government agencies and private sector stakeholders. This will hamper the implementation of Trade Facilitation Agreement (TFA) measures aimed at streamlining trade and attracting foreign investment.

The project implementation agency, Land O'Lakes Venture37, which has been providing technical assistance for trade facilitation since 2020, has notified all the government agencies about the termination through email.

The abrupt termination brought all ongoing development projects to a halt, resulting in wasted investment for both the Bangladesh government and the US.

The government signed the USDA-funded project under TFA, but the termination came before the project's scheduled expiry in March 2028.

Through partnerships with eight government bodies, the BTF project has been working to strengthen Bangladesh's trade-related capacities in line with its obligations under the WTO's Trade Facilitation Agreement.

Meanwhile, several government agencies and trade bodies have written to the US ambassador in Bangladesh, urging a reconsideration of the termination.

Government agencies and private sector stakeholders also requested a meeting with the US ambassador to discuss the project's significance and its broader importance to Bangladesh.

"The sudden halt of the project will make the fate of those nationally significant efforts uncertain, undermining the efforts and investments made by the project, the Government agencies, as well as the private sector stakeholders," according to a letter sent to the US Ambassador by different trade agencies.

The National Board of Revenue (NBR) also sought government intervention, as at least 10 development projects have been running with BTF support.

Meanwhile, the commerce ministry, which had initiated the BTF project to expedite the implementation of TFA measures, held a meeting with all relevant government agencies following the termination. The meeting was chaired by Commerce Adviser Sk Bashir Uddin.

"We will take initiative to continue the USDA funding to complete the undone trade facilitation projects to meet TFA measures," Bashir told The Business Standard.

The Business Standard also contacted the US Embassy for an official comment on the termination, but did not get any response till Wednesday.

Why BTF is important for Bangladesh to smooth int'l trade

The WTO Trade Facilitation Agreement (TFA) aims to simplify and expedite international trade by streamlining customs procedures, improving transparency, and reducing administrative burdens. It entered into force in 2017.

Under the TFA, Bangladesh has identified Category C measures, which are those requiring technical assistance from development partners for implementation. While Category "C" measures are not mandatory for Bangladesh, the Ministry of Commerce has been actively working with the Bangladesh Trade Facilitation Project to accelerate their implementation.

The commerce ministry recognises the importance of faster implementation of TFA measures to strengthen Bangladesh's position in terms of trade facilitation.

The National Board of Revenue (NBR) has also been undertaking initiatives to implement Category "C" measures to facilitate trade and attract foreign investment.

BTF project and the USDA are supporting the capacity building of Bangladesh's trade agencies to meet WTO TFA measures.

As a signatory of the TFA, it is mandatory for Bangladesh to introduce a risk-based product clearance system by June 2026 for risk management in international trade. Government controlling agencies have been taking structural support from BTF to meet the TFA requirement.

Why govt agencies, trade bodies concerned

Raising deep concern over termination, the Federation of Bangladesh Chamber of Commerce and Industry (FBCCI) in a letter to the US ambassador said, "BTF played a key role in advancing legislative and procedural improvements in trade facilitation, with several policy recommendations already acknowledged by relevant ministries. One of the most notable ones includes the major reforms proposed for the upcoming Import Policy Order (IPO), the overarching legislative tool that guides the import procedure of the country. FBCCI collaborated closely with BTF in formulating and submitting assessment and evidence-based recommendations to the commerce ministry for incorporation in the next IPO."

"FBCCI, jointly with the USDA-BTF, organised a national dialogue on adopting a risk-based clearance system to reduce import time and cost. FBCCI remains hopeful that these vital reforms will be reflected in the forthcoming Import Policy Order to address current procedural inefficiencies. FBCCI also plans to work with the project for the smooth implementation of these amendments," the organisation said.

"The project has also been supporting the agro-trade regulatory agencies to develop end-to-end automation of trade-related services, a long-standing demand of the private sector to ensure transparency and accountability. Many of the automated projects are near completion and implementation. Additionally, the project is also supporting the expansion and promotion of agricultural exports by supporting compliance with importing country requirements through digitisation and structured documentation. A significant rise in agro-export is expected by these very targeted and action-oriented activities of the project," said the letter.

"The sudden halt of the project will make the fate of those nationally significant efforts uncertain, undermining the efforts and investments made by the project, the Government agencies, as well as the private sector stakeholders," it stated.

The trade body requested to reconsider the termination, considering the direct impact on the private sector and the government agencies.

"FBCCI will also welcome the opportunity to meet and discuss the project's significance to the organisation and its broader importance to Bangladesh," the letter added.

BSTI seeks USDA funds for at least 3 months

In a letter to the US ambassador, the industries ministry said Bangladesh Standards and Testing Institution (BSTI) and BTF signed a Memorandum of Understanding (MoU) on 7 June 2023 on the overall strengthening of BSTI and international trade facilitation.

"Under this project, some important activities like automation of all BSTI services and online issuance of licenses, certificates, permits etc. [e-Applications System development and implementation], establishment of an international standard National Halal Laboratory and standardisation of its certification, ISO Accreditation of divisional and district-level labs of BSTI etc. are progressing in an expedited manner," the letter said.

"In addition, following the obligation of adopting risk management by June 2026 under the Trade facilitation Agreement of World Trade Organization, introducing risk-based clearance processed and for that developing an Automated Risk Management System, making reforms in different legislations of BSTI in line with international best practices, implementing the standards of Codex Alimentarius and strengthening Bangladesh's position in the Codex forum, activating the TBT Enquiry Point and developing the capacity to sign Mutual Recognition Agreement (MRA) with different countries etc. are also running efficiently," it stated.

"The development of the e-Applications system has been 70% completed and will be ready for pilot operations by July 2025," it stated.

"However, closing the project abruptly without any prior notice or notifications will adversely impact the ongoing and near-completion nationally important initiatives. Without the technical and financial assistance of USDA USDA-funded BTF project or any external support, continuing and implementing these initiatives will not be possible for BSTI, and hence, the trade facilitation objective of the Government will be severely impacted," it mentioned.

"As a signatory of the Trade Facilitation Agreement of the World Trade Organisation, Bangladesh expects to receive development assistance to implement Category C measures, and BTF's activities were progressing based on those requirements. Closure of this project will undermine the initiatives of BSTI to implement the activities to strengthen the capacities of government agencies. In addition, the investment made by the US Government will also be wasted without yielding any positive results. Hence, continuing the project is crucial, or at least three more months will help complete some of the ongoing and near-completion activities and ensure results of the investments made so far," the letter added.

NBR seeks urgent govt intervention BTF continuation 

In a letter to the Economic Relations Division yesterday, the NBR said, "Since May 2022, the BTF project has played a pivotal role in supporting the modernisation and trade facilitation agenda of the National Board of Revenue (NBR), particularly in areas aligned with the Government of Bangladesh's commitments under the WTO Trade Facilitation Agreement (TFA)."

The letter also mentioned the 10 initiatives supported by the BTF – Development of an HS Code-wise regulatory compliance repository; Design and launch of the Import Export Hub (Chapters 1—24); Formulation of the Customs Inspection and Sample Management Rules; Creation of tariff specification codes for Chapters 6—10 of the Bangladesh Customs Tariff(BCT); Completion of the Agro-based Time Release Study; Drafting of the Sample Sending Standing Order; Specialised maritime logistics training; Development of an Electronic Document Repository System (EDRS) to automate current semi-manual customs clearance procedures; Expansion of the Import Export Hub to include Chapters 25-97 of the Bangladesh Customs Tariff (BCT); Development of a Laboratory Report Sharing System (LRSS).

The NBR said that this abrupt termination jeopardises several critical and ongoing initiatives, particularly those related to system automation and inter-agency integration, that are essential for Bangladesh to meet its international obligations and enhance its trade competitiveness.

"In light of the above, we respectfully urge the Economic Relations Division to initiate appropriate diplomatic and programmatic engagement to explore possible options for the continuation of the BTF project and advocate for sustained technical assistance by the BTF project," the letter added.