Trade deal set to cut tariff, get duty-free access for RMGs made with US cotton 

Infographics: TBS

Garments made in Bangladesh using American cotton are likely to receive duty-free access to the US market, while the country's reciprocal tariff rate is set to fall from the current 20%, officials said.

A trade agreement incorporating these benefits will be signed in Washington on 9 February, Commerce Secretary Mahbubur Rahman told The Business Standard, adding that Bangladesh will need to meet several conditions to secure the concessions.

"The reciprocal tariff will be reduced from 20%, though the exact rate cannot be disclosed at this stage. It will be formally announced after the agreement is signed," he said.

Senior commerce ministry officials indicated that the tariff could be lowered to around 15%.

To qualify for the reduced tariff, Bangladesh has agreed to increase imports from the United States, refrain from imposing tariffs on e-commerce, withdraw export subsidies on fisheries products, comply with US intellectual property requirements, and support Washington's proposals for reforms at the World Trade Organization (WTO), the secretary said.

Before finalising the US deal, Bangladesh will sign an Economic Partnership Agreement (EPA) with Japan in Tokyo on 6 June, he added.

E-commerce tariffs

Commerce officials added that under current WTO rules, imports of goods and services via e-commerce are tariff-free. This status will expire after the WTO's 14th Ministerial Conference, scheduled in Yaoundé, Cameroon, during 26–29 March.

Several ministry officials and international trade experts said the US has submitted a proposal to the WTO to ensure e-commerce remains permanently tariff-free. 

Under this proposal, even services purchased online and downloaded cannot be subjected to tariffs. WTO member states will vote on the measure at the ministerial conference.

Mostafa Abid Khan, former member of the Bangladesh Trade and Tariff Commission, told TBS that the US seeks a permanent moratorium on e-commerce tariffs. A similar proposal has been made by the OACPS group, representing 79 countries in Africa, the Caribbean, and the Pacific Islands.

Bangladesh applies tariffs selectively on some e-commerce goods and services under WTO rules. If e-commerce becomes fully tariff-free, government revenue from these imports will decline, he said. 

"However, Bangladesh will retain the right to set annual spending limits per individual or company on e-commerce purchases," Abid Khan added.

Md Hafizur Rahman, former director general of the WTO Cell at the commerce ministry, said US conditions will not affect other e-commerce laws or regulations. "Tariffs may simply not be applied to goods and services imported via e-commerce, reducing revenue but causing no other concerns," he added.

Intellectual property rights

A commerce ministry official said Bangladesh will need to make significant concessions on intellectual property rights (IPR) to secure duty-free access for garments produced from US cotton.

Speaking on condition of anonymity, an official told TBS that Bangladesh's existing patent laws allow some flexibility, but the US conditions will require revisions to make them stricter.

Apparel exports to US

Under WTO rules, Bangladesh, as a least-developed country, is entitled to duty-free benefits. However, while the US provided Generalised System of Preferences (GSP) benefits on some non-traditional products, these were suspended for garments following the 2013 Rana Plaza tragedy.

Although the US indicated that GSP benefits could be reinstated if Bangladesh implemented its action plan, the country was unable to meet the conditions.

Mohammad Hatem of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) told TBS that Bangladesh has already increased cotton imports from the US. 

He added that duty-free access for garments produced from US cotton would be mutually beneficial, boosting both US cotton imports and RMG exports from Bangladesh.

Reciprocal tariff

In July last year, the Trump administration proposed an additional 35% reciprocal tariff on Bangladesh, along with 90 other countries. 

Subsequently, after several rounds of negotiations covering 100 US products, duty-free access, and increased imports, Washington reduced Bangladesh's reciprocal tariff rate to 20%, effective from 1 August.

The move coincided with Bangladesh's decision to increase imports of wheat, soybeans, maize, cotton, 25 Boeing aircraft, LNG, and other goods and services from the US. 

Negotiations continued to secure further tariff reductions and duty-free access for garments produced from US cotton, culminating in the agreement to be signed on 9 February.

According to the Export Promotion Bureau, the US remains Bangladesh's largest export market. 

Last fiscal year, exports to the US amounted to $8.69 billion, including $4.95 billion in woven garments (27.21% of total woven exports) and $2.60 billion in knitwear (12.27% of total knitwear exports). Home textiles exports reached $150 million, while cap exports stood at $259 million.

According to BTMA, Bangladesh imported $346 million worth of US cotton in FY25, up from $278 million in the previous fiscal year. US cotton accounted for 10% of Bangladesh's total cotton imports last fiscal.