Customs Duty Drawback for Bangladesh Exporters: Complete Process

Customs Duty Drawback for Bangladesh Exporters: Complete Process Guide

The customs duty drawback scheme is one of the most important fiscal incentives available to Bangladesh exporters, allowing them to reclaim import duties paid on raw materials used in export production. This comprehensive guide explains the entire process, eligibility criteria, calculation methods, and practical tips for maximizing benefits under the scheme administered by the National Board of Revenue (NBR).

What is the Duty Drawback Scheme?

The duty drawback scheme allows exporters to receive a refund of customs duties paid on imported inputs that are incorporated into exported goods. This ensures that Bangladesh's export prices reflect only the cost of inputs at world-market prices, without the additional burden of import duties. The scheme is administered under the Customs Act, 2023 and is available to all registered exporters who hold a valid Export Registration Certificate (ERC) from the EPB.

Two Methods of Duty Drawback

The NBR offers two methods for claiming duty drawbacks: the Brand Rate method and the All-Industry Rate method. The Brand Rate is based on the actual duty paid on specific import documents, providing a precise refund but requiring detailed documentation. The All-Industry Rate is a fixed rate per unit of export, calculated based on standard input-output norms (SION) for each product category. This method is faster but may not capture the full duty paid.

Eligibility Criteria

To qualify for duty drawbacks, exporters must: (1) hold a valid ERC from EPB; (2) import raw materials through official banking channels using LC or TT; (3) use the imported inputs in the production of exported goods; (4) export the finished goods within 12 months of importing the inputs; (5) maintain proper books of accounts for five years; and (6) submit monthly export returns to EPB. Exporters using bonded warehouse facilities are not eligible for duty drawback on the same inputs, as they already import duty-free.

Step-by-Step Application Process

The application process involves several steps: First, the exporter files a drawback claim through NBR's online portal within 12 months of the export date. The claim must include the B/L number, CO number, bank realization certificate, and input import documents. Second, NBR verifies the claim against import records and export documentation. Third, the drawback amount is calculated based on either the Brand Rate or All-Industry Rate. Fourth, the refund is processed and transferred to the exporter's bank account within 60-90 days.

Standard Input-Output Norms (SION)

NBR maintains a comprehensive SION schedule that specifies the quantity of each input required per unit of output. For example, 1 dozen cotton T-shirts (HS 6109) requires 2.4 kg of cotton yarn (HS 5205). The drawback is calculated as the duty paid on 2.4 kg of yarn per dozen T-shirts exported. Exporters can request new SION rates for products not yet covered by submitting detailed production data.

Common Challenges and Solutions

Exporters often face delays in drawback processing due to incomplete documentation, mismatched HS codes between import and export, or exceeding the 12-month time limit. To avoid these issues, exporters should: maintain meticulous records, ensure HS code consistency, file claims promptly, and use the online portal for faster processing. The average processing time has been reduced from 180 days to 60-90 days under the digital system.

Impact on Export Competitiveness

The duty drawback scheme is critical for maintaining Bangladesh's export competitiveness. Without it, exporters would face 15-25% higher input costs, making their products uncompetitive in global markets. The scheme effectively neutralizes the duty impact, ensuring that Bangladesh's export prices are based on world-market input prices. For international buyers, this means that BD exporters can offer competitive prices comparable to producers in countries with zero import duties on raw materials.

Comparison with Bonded Warehouse Scheme

Exporters must choose between the bonded warehouse scheme (duty-free import upfront) and the duty drawback scheme (pay duty, claim refund later). Bonded warehouse is preferred by large, regular exporters who can manage the compliance requirements. Duty drawback is suitable for smaller exporters or those who source inputs through normal channels. Both schemes ensure that export products are not burdened with import duties.

For more information, visit the NBR website at nbr.gov.bd or contact the Duty Drawback Cell at the NBR headquarters in Dhaka.