India Abolishes Transshipment Facility for Bangladeshi Exports to Third Countries

The Indian government has terminated the transshipment facility for Bangladeshi exports to third countries, following requests from Indian exporters. This decision is expected to ease logistics for Indian sectors, particularly in apparel, but may disrupt Bangladesh’s trade logistics. The shift comes amidst rising tensions in India-Bangladesh relations and recent comments by Bangladeshi officials.

The Indian government has rescinded the transshipment facility that permitted the export of Bangladeshi goods to third countries via Indian land customs stations. This decision follows appeals from Indian exporters, particularly in the apparel sector, who argued against the continuation of this arrangement. The facility, initially established in June 2020, allowed seamless trade for Bangladesh to nations such as Bhutan, Nepal, and Myanmar.

A recent circular from the Central Board of Indirect Taxes and Customs, dated April 8, confirms this termination, stating, “It has been decided to rescind… circular…dated June 29, 2020, as amended with immediate effect.” It noted that cargo already in India could still exit under the procedures outlined in the original circular.

This policy change coincides with remarks made by Bangladesh Chief Adviser Muhammad Yunus regarding India’s northeastern states, wherein he indicated a call for Chinese goods to be routed through Bangladesh. Such comments have ignited political backlash in India, further straining bilateral relations, particularly following the interim government’s inability to address rising violence against minorities in Bangladesh.

Moreover, this announcement arrives amidst recent U.S. tariffs that impact both India and Bangladesh. The rescinded circular previously allowed for the transshipment of Bangladeshi export cargo through Indian ports and airports, facilitating easier logistics for trade.

Experts suggest that the reversal will benefit Indian exporters across various sectors including apparel, footwear, and gems. Ajay Sahai, Director General of the Federation of Indian Export Organisations, noted that this decision improves air cargo capacities for Indian exporters, who faced congestion issues due to Bangladeshi truck shipments coming into India.

The Apparel Export Promotion Council (AEPC) previously called for suspension of the transshipment allowance, citing operational delays and inflated air freight rates caused by the influx of Bangladeshi goods. AEPC Secretary General Mithileshwar Thakur mentioned that this policy modification would “help in rationalization of freight rates resulting in less transportation cost to the Indian exporters besides decongesting the airports.”

Ajay Srivastava, Founder of the Global Trade Research Initiative, indicated that the revocation could disrupt Bangladesh’s logistics for exports and imports dependent on Indian infrastructure, suggesting potential delays and increased costs ahead. Additionally, landlocked nations like Nepal and Bhutan may face difficulties in accessing Bangladeshi ports, further complicating regional trade dynamics. Notably, India has maintained a supportive stance towards Bangladesh, allowing zero-tariff access to Indian markets for Bangladeshi goods since two decades, excluding a few items.

The latest figures indicate that trade between India and Bangladesh amounted to $12.9 billion for the fiscal year 2023-24.

In conclusion, the Indian government’s abolition of the transshipment facility for Bangladeshi exports to third countries represents a significant shift in trade policy. While this move may alleviate some logistical burdens for Indian exporters, it poses challenges for Bangladeshi trade logistics, potentially affecting regional commerce. The evolving political context and ongoing trade dynamics between the two nations remain crucial as India navigates its diplomatic and economic interests in South Asia.

Original Source: www.business-standard.com