NBR scans bank transactions of 100 exporters to crack down on bond misuse 

Infographics: TBS

Amid allegations that nearly $5 billion worth of fabric, garments and accessories enter Bangladesh's domestic market every year through misuse of bonded facilities and smuggling, the National Board of Revenue (NBR) has launched a major enforcement drive, including scrutiny of bank transactions of around 100 exporting companies, officials said.

As part of the move, the revenue authority is collecting five years of banking data of large exporters suspected of importing raw materials duty-free under bonded facilities and diverting them to the local market instead of exporting finished goods.

The transaction records will be cross-checked against import and export data available in customs' ASYCUDA World system and other databases to detect inconsistencies, NBR officials said.

At the same time, the NBR has tightened operational controls by abolishing all manual utility permission (UP) processes related to bonded operations from 1 January, making digital compliance fully mandatory.

From now on, all bonded services including raw material entitlements, will be processed exclusively through the Customs Bond Management System (CBMS). Officials said CBMS is integrated with the databases of Bangladesh Bank and customs, significantly strengthening monitoring, audits and risk profiling.

NBR Chairman Abdur Rahman Khan told The Business Standard that misuse of bonded facilities would no longer be tolerated.

"Bond automation has now been made fully mandatory. We will conduct regular physical inventory checks at bonded warehouses, and if raw materials that are supposed to be there are not found, cases will be filed immediately," he said.

According to NBR sources, about 6,000 direct and indirect exporters currently hold bond licences, which allow duty-free import of raw materials.

Allegations of widespread misuse

Textile mill owners say they are among the worst affected by the alleged misuse. Industry leaders claim that duty-free imports diverted into the domestic market alongside outright smuggling, account for nearly $5 billion worth of products annually, undercutting local manufacturers and depriving the government of substantial revenue.

Other products, including garment accessories, are also reportedly affected.

Industry insiders say misuse surged following the August 2024 political transition and the subsequent administrative split within the NBR, which weakened field-level monitoring and created enforcement gaps.

Textile entrepreneurs warn that of the $23 billion invested in the sector, around $14 billion in local investment is now at risk due to unfair competition from duty-free materials illegally sold in the domestic market.

How the bond facility works and how it is abused

Under the bonded warehouse facility, exporters are allowed to import raw materials duty-free on the condition that the goods are stored in approved warehouses, used to manufacture products and then exported.

If those materials are sold locally, prior customs approval is required and import duties ranging from 40% to 89%, depending on the item, must be paid.

The facility was introduced to enhance export competitiveness and has been a cornerstone of Bangladesh's ready-made garment industry since the 1980s, helping the country become the world's second-largest apparel exporter.

However, allegations persist that some exporters divert duty-free raw materials into the local market, where commercial importers must pay full duties. Economists say this creates double losses: government revenue is lost, while domestic manufacturers face unfair competition, discouraging industrial investment.

There are no official statistics on the scale of annual bond misuse. However, in 2016, former NBR chairman Md Nojibur Rahman estimated the amount exceeded Tk50,000 crore.

Bank accounts under scrutiny

As part of the crackdown, tax offices across the country have begun requesting banking data from commercial banks.

Officials said most of NBR's 30 tax regions have already issued instructions, with some offices requesting information on multiple companies.

A senior official from Dhaka Tax Zone-8, speaking on condition of anonymity, said, "Our office has requested banking information for seven companies initially. These are suspected of relatively large-scale bond misuse involving several crore taka."

"Once we receive five years of banking records, we will cross-check them against export-import data in ASYCUDA. If discrepancies are found, companies will be asked to explain," the official said.

"If a company's banking transactions exceed what is reflected in its export data and it fails to provide a valid explanation, it will be assumed that duty-free raw materials were diverted to the domestic market."

He added that, if necessary, bank accounts of related individuals or affiliated companies could also be examined.

An official from Tax Zone-15 said letters have already been sent to banks for information on eight companies, adding that the total number of firms under scrutiny nationwide is expected to reach around 100.

Both offices declined to disclose the names of the companies. However, a separate source from Tax Zone-15 said at least two companies from the Thermax Group are among those whose banking data has been requested.

Industry reaction

Attempts to reach Mohammad Hatem, president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), were unsuccessful. However, during a meeting with NBR last month, he urged visible enforcement action.

"At least one violator should be publicly punished, because their actions are harassing genuine businesses. We want to know who is misusing the bond facility," he told the authorities.

Khorshed Alam, chairman of BTMA's standing committee on local spinning, weaving, dyeing and printing mills, said Bangladesh's annual domestic demand for fabric and garments is about $12 billion, of which local mills supply roughly $7 billion.

"The remaining $5 billion, around Tk60,000 crore, comes through bond misuse or smuggling," he said, adding that many local mills are now under severe financial pressure.

"NBR's initiative will help reduce irregularities, but full results will depend on the efficiency of both the system and the officials operating it," he said.

Meanwhile, BGMEA President Mahmud Hasan Khan Babu cautioned against broad-brush blame. "We should not hold the entire business community responsible for the actions of a few misusers," he told a recent NBR meeting.