Bar on back-to-back LC for non-bonded exporters likely to go

A commerce ministry meeting on Thursday decided to continue allowing the back-to-back letter of credit (LC) facility to non-bonded apparel exporters.

The meeting led by Commerce Minister Tipu Munshi also decided to form a review committee to settle the stalemate between the apparel-makers and revenue board officials. The committee comprising the stakeholders will scrutinise the legal issues and take measures for amendment.

Sources who were at the meeting said business leaders and revenue board officials presented their arguments on non-bonded exports through the back-to-back letter LC facility. Then the meeting talked about postponing the revenue board's request it sent to the central bank.

The revenue board in a letter on 31 August requested the Bangladesh Bank not to allow non-bonded apparel factories to enjoy back-to-back LC as "it contradicts the central bank's guidelines".

The revenue board move put knitwear and home textile exporters without a bond licence in a limbo. Industry people say if the back-to-back LC benefit goes, more than 500 RMG and home textile factories will no longer be able to procure raw materials and accessories from local and foreign sources on credit.

At the ministry meeting, top revenue board officials said they would inform the revenue board chairman about the issue. Besides, commerce ministry officials would contact the revenue board chairman too.

"I hope the revenue board letter to the central bank on back-to-back LC facility to non-bonded export would be withdrawn," Mohammad Hatem, senior vice-president of the Bangladesh Knitwear Manufacturer and Exporters Association (BKMEA), told The Business Standard.

Siddiqur Rahman, former president at the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), said, "The letter must be withdrawn for the sake of export. There are more than 1,000 non-bonded readymade garments and textile manufacturers who account for $5 billion annual export."

Salman F Rahman, adviser to the prime minister on private industries and investment, Shafiul Islam Mohiuddun, business leader and a Member of Parliament, Siddiqur Rahman, industries and trade affairs secretary of the central Awami League, business leader Mohammad Hatem and top revenue board officials were present at Thursday's meeting.