Bangladesh is getting a globally practiced trading facilitation system, “Authorized economic operator (AEO)” from the National Board of Revenue. This feature enables the firms to enjoy the benefits of transferring their products to their warehouses from ports without any physical custom interaction. This helps them save valuable time and keeps them more focused on external trade schedules. 63 companies have applied to be part of the AEO firms so they can benefit from rapid customs clearance at the port area. However, only three firms are included in this desirable benefit. NBR expects to add at least ten more firms within a month, mainly from the textile, pharmaceutical, and leather sectors, to avail the facility from AEO.
However, in April, 2022, NBR took this action to include firms with these AEO benefits. According to the NBR Commissioner Mohammad Enamul Hoque, from the application of 63 companies, the audit commissionerate is organizing to give them the recognition of this benefit and hoping that 10-15 companies will obey their conditions. According to NBR sources, at least 12 of the 63 firms export and import textiles and readymade garments. In addition, the AEO status has also been applied for by ten companies from the Abul Khair Group, three from Bangladesh Steel Re-Rolling Mills, two from Beximco, two from Apex Footwear, and two from Shah Cement, Eskayef Pharmaceuticals, Nestle Bangladesh, Syngenta Bangladesh, and Fair Electronics.
MR. Hoque also said that for VAT, several companies are not using NBR-assigned software for VAT because they have customized software. Therefore, it’s hard for them to find any issues in their accounting system. He also mentioned that at least ten companies had notified them to install the NBR-authorized VAT software. After that, they are hopeful to provide them with AEO recognition within a month.
Picard Bangladesh Limited is also one of the applicants for the VAT software. Saiful Islam, who is the managing director of the company and also the president of the Metropolitan Chamber of Commerce and Industry, said that “As our company is 100% export-oriented and is exempted from VAT, we are not supposed to have VAT software, and if any firms do not have a bad past track record, they should get the AEO recognition.”
Deputy general manager (commercial) of Envoy Textile Mills Limited Mohammad Mizanur Rahman said, “Our company is using VAT software, but the NBR has asked us to install its nominated software. So we are working to install a new one within a short time.”
The AEO program was introduced in Bangladesh in 2005 by The World Customs Organization (WOC) and transformed the customs law in 2017 to simplify the customs formalities. NBR issued an order to specify the criteria for AEO in 2018 and continued this facility to three pharmaceutical firms. But NBR failed to improve the agenda of the program.
According to WCO data, the USA has 11,020 AEO firms, and the EU has 17,895, India 4,496, China 3,203, South Korea 845, and Japan has 706. In addition, three Bangladeshi firms have AEO status, yet Bangladesh is not listed in the WOC’s AEO Compendium. However, Vietnam is the prime competetor of Bangladesh in terms of apparel export, which began AEO program in 2011 and is one step ahead of AEO mutual recognition agreement (AEO MRA) to maximize their benefits from the new generation of FTA along with the European Union and others as a comprehensive and progressive agreement for Trans-Pacific Partnership or the Regional Comprehensive Economic Partnership.
In 2019 prominent drug maker Square Pharmaceuticals got the AEO status from the NBR on a trial basis out of three companies. These companies are supposed to get rapid clearance at the customs house at Chittagong and Dhaka. However, an official from Square Pharma said anomalously, “the status does not mean anything for them as there is no improvement in terms of customs clearance time for their goods, and it still takes 3-4 days like before,” and also pointed out that “ From our end, we do not have any limitations, but the customs has a bureaucratic complexity.” NRB thinks that the companies could not take advantage of these facilities as they don’t install the dedicated VAT software from NBR for this AEO service. The main reason for this failure is that the authority hasn’t changed their thoughts about businesses. It is a matter of sorrow that, having the AEO status, they did not get their consignments released from ports within 24 hours. The time release study (TRS) of NBR shows that it took 11 days and six hours to release a consignment after the ship arrived at the port compared to the previous TRS back in 2014, and no significant improvement in this regard. It happens because of low customs and port expertise, and for that, Bangladesh ranks 168 out of 190 countries on the World Bank Logistic Performance Index (LPI) 2018. And yet Bangladesh is far behind its major competitors, including China, Vietnam, India, and Cambodia. Again, the country performed the worst in customs clearance among the six LPI indicators.
In this frustrating issue Md Saiful Islam, president of the Metropolitan Chamber of Commerce and Industry (MCCI), said that “ customs officials should trust the AEO firms to make the system functional” Mohammad Hatem, executive president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) quoted that “positive” initiative that could help reduce congestion at ports and reduce time and cost for the businesses. This would also help in improving the ease of doing business, and we urge making this system functional as early as possible,” Former NBR member of customs policy Md Farid Uddin thinks that “it cannot become fully functional without political commitment and a holistic approach by the NBR.”
AEO enterprises must deliver their documentation early, so all customs processes are finished before the items reach the port to release goods without physical customs checks. In infrequent circumstances, officials check items physically randomly in the port or after being released. All communications with customs authorities will take place online. Furthermore, an application organization’s authorized capital must be Tk15 crore, its paid-up capital must be Tk5 crore, and its annual import must be at least Tk5 crore. The facility will be granted based on specified requirements. These include an acceptable compliance record under the Customs, VAT, and Income Tax Acts, the applicant being guilt-free for the past three years, no revenue arrears, and the fine being less than 1% of the entire value in any case.
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