What Are Customs Duties in Bangladesh?

Introduction

Customs duties are taxes levied on goods that are imported into or, less commonly, exported from a country. They serve as a significant source of revenue for the government and play a crucial role in regulating international trade, protecting domestic industries, and influencing the flow of goods across borders. In Bangladesh, customs duties are an important aspect of the country's trade and fiscal policy. Understanding how customs duties are calculated, applied, and administered is essential for businesses engaged in international trade, particularly those involved in importing or exporting goods to or from Bangladesh. This article provides a comprehensive overview of customs duties in Bangladesh, explaining their purpose, mechanisms, and the legal framework that governs them.

Taxes on Imported and Exported Goods

Customs duties are essentially taxes imposed on the cross-border movement of goods. They can be broadly categorized into:

• Import Duties: These are taxes levied on goods when they are brought into Bangladesh from a foreign country. Import duties are the most common type of customs duties and serve multiple purposes:
  • Revenue Generation: Import duties are a significant source of revenue for the government, contributing to the national budget and funding public services.
  • Protection of Domestic Industries: By making imported goods more expensive, import duties can help protect domestic industries from foreign competition, allowing them to compete on a more level playing field.
  • Regulation of Trade: Import duties can be used to influence the balance of trade between Bangladesh and other countries, discouraging excessive imports and promoting exports.
  • Control of Consumption: High import duties on certain goods, such as luxury items or goods deemed harmful to health or the environment, can be used to discourage their consumption.
• Export Duties: These are taxes levied on goods when they are exported from Bangladesh to a foreign country. Export duties are less common than import duties and are typically imposed for specific reasons:
  • Discouraging Export of Essential Commodities: Export duties can be used to discourage the export of goods that are deemed essential for domestic consumption or for use in domestic industries, ensuring adequate domestic supply.
  • Controlling Prices: Export duties can help regulate the domestic prices of certain commodities by influencing their supply in the international market.
  • Generating Revenue: In some cases, export duties may be imposed on certain goods to generate revenue for the government, particularly when Bangladesh has a comparative advantage in the production of those goods.

How Customs Duties are Applied:

• Valuation: The value of imported or exported goods is the primary basis for calculating customs duties. The Customs Act, 1969, and the Customs Valuation Rules provide detailed guidelines for determining the value of goods. Generally, the transaction value (the price actually paid or payable for the goods) is used, but other methods may be applied if the transaction value cannot be determined or is deemed unreliable.
• Classification: Goods are classified according to the Harmonized System (HS Code), which is an internationally standardized system of names and numbers for classifying traded products. Each HS Code corresponds to a specific product category and determines the applicable rate of customs duty. The Bangladesh Customs Tariff, which is based on the HS Code, lists the duty rates for various products.
• Duty Rates: The rates of customs duties vary depending on the type of goods, their country of origin, and other factors. Bangladesh has a multi-tiered tariff structure, with different rates for different categories of goods. Some goods may be subject to specific duties (based on quantity or weight), while others are subject to ad valorem duties (based on the value of the goods).
• Other Taxes and Charges: In addition to customs duties, other taxes and charges may be levied on imported goods at the time of importation, including:
  • Value Added Tax (VAT): VAT is generally applied to the value of imported goods, including the customs duty and any other applicable charges.
  • Supplementary Duty (SD): SD is an additional duty levied on certain goods, often luxury items or goods deemed harmful to health or the environment.
  • Regulatory Duty (RD): RD is imposed on specific goods to regulate their import and protect domestic industries.
  • Advance Income Tax (AIT): AIT is collected at the import stage and is adjustable against the importer's final income tax liability.
  • Advance Trade VAT (ATV): ATV is collected at the import stage from traders on the import of certain goods.

Governed by the Customs Act, 1969

The Customs Act, 1969, is the primary legislation governing the administration of customs duties and the regulation of imports and exports in Bangladesh. This comprehensive Act, along with the rules and regulations made thereunder, establishes the legal framework for all customs-related matters, including:

• Powers and Functions of Customs Authorities: The Act defines the powers, functions, and responsibilities of the National Board of Revenue (NBR) and customs officers in administering the customs system. This includes powers related to the assessment and collection of duties, the examination of goods, the prevention of smuggling, and the enforcement of customs laws.
• Procedures for Import and Export: The Act outlines the detailed procedures for the clearance of imported and exported goods, including the filing of import and export declarations (Bills of Entry and Bills of Export), the examination and assessment of goods, the payment of duties and taxes, and the release of goods.
• Valuation of Goods: The Act provides the legal basis for determining the value of goods for customs purposes. It establishes the principles of valuation, including the use of the transaction value as the primary method, and outlines alternative methods to be used when the transaction value is not applicable.
• Classification of Goods: The Act mandates the use of the Harmonized System (HS Code) for the classification of goods for tariff purposes. It empowers the NBR to issue rulings and clarifications on the classification of goods.
• Assessment and Collection of Duties: The Act outlines the procedures for the assessment and collection of customs duties, including the determination of applicable duty rates, the calculation of duty liability, and the payment of duties by importers and exporters.
• Import and Export Restrictions and Prohibitions: The Act empowers the government to impose restrictions or prohibitions on the import or export of certain goods in the interest of national security, public health, or other policy objectives.
• Offenses and Penalties: The Act defines various offenses related to customs violations, such as smuggling, misdeclaration of goods, undervaluation, and evasion of duties. It prescribes penalties for these offenses, including fines, confiscation of goods, and imprisonment.
• Appeals and Dispute Resolution: The Act provides mechanisms for resolving disputes between taxpayers and customs authorities, including procedures for filing appeals against assessment orders and other decisions of customs officers.

Key Provisions of the Act:

• Declaration of Goods: Importers and exporters are required to declare their goods to customs authorities by filing a Bill of Entry (for imports) or a Bill of Export (for exports), providing detailed information about the goods, their value, origin, and destination.
• Examination of Goods: Customs officers have the authority to examine imported and exported goods to verify their description, quantity, value, and origin, and to ensure compliance with customs laws and regulations.
• Payment of Duties: Customs duties and other taxes must be paid before imported goods can be released for home consumption or before exported goods can be shipped out of the country.
• Warehousing: The Act provides for the establishment of bonded warehouses where imported goods can be stored without payment of duty for a specified period, subject to certain conditions.
• Drawback: The Act allows for the refund of duties paid on imported goods that are subsequently used in the manufacture of exported goods, subject to certain conditions. This provision, known as "duty drawback," aims to promote exports by reducing the cost of imported inputs.
• Appeals: Taxpayers have the right to appeal against decisions of customs officers to higher authorities, including the Commissioner (Appeals), the Customs, Excise, and VAT Appellate Tribunal, and ultimately to the courts.

Conclusion

Customs duties are a vital instrument of trade and fiscal policy in Bangladesh, serving to generate government revenue, regulate the flow of goods across borders, and protect domestic industries. The Customs Act, 1969, provides the comprehensive legal framework for the administration of customs duties and the regulation of imports and exports. Understanding the intricacies of customs valuation, classification, duty rates, and the various procedures involved in importing and exporting goods is essential for businesses engaged in international trade. Staying informed about changes to customs laws and regulations and seeking professional guidance from experienced customs experts, such as those at Afzal and Associates, is crucial for ensuring compliance, minimizing costs, and optimizing trade operations. Their expertise can help businesses navigate the complexities of customs procedures, avoid potential penalties, and ensure the smooth and efficient movement of goods across borders.

Call to Action

Do you need expert assistance with customs duties in Bangladesh? Contact Afzal and Associates today. Our team of highly skilled and experienced professionals can provide comprehensive guidance on all aspects of customs law and procedures, including valuation, classification, duty calculation, import and export procedures, duty drawback, warehousing, and dispute resolution. We are committed to helping you navigate the complexities of international trade, ensure compliance with all applicable customs regulations, minimize your costs, and optimize your trade operations. Let us be your trusted partner in achieving success in your international trade endeavors.

Afzal Hosen Mandal

Position: Lawyer at Afzal and Associates

Specializations: Civil Litigation, Criminal Defense, Property Law

Location: Narsingdi Judge Court, Bangladesh

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