Written by The Banking Post
A proposal to restrict duty-free imports of certain textile yarn has opened a sharp divide between Bangladesh’s spinning mills and garment exporters, exposing a policy dilemma at a time of weak global demand and looming LDC graduation.
The Ministry of Commerce has recommended excluding 10–30 count yarn from the bonded warehouse facility, arguing that duty-free imports at low prices are hurting local spinners and threatening their survival. The recommendation has been sent to the National Board of Revenue (NBR), which will take the final decision.
Garment exporters, however, fear the move would raise production costs, disrupt supply chains and erode competitiveness in global markets. Industry bodies say any increase in input costs could push orders to rival sourcing countries.
The commerce ministry maintains that continued duty-free access has sharply increased yarn imports over the past two fiscal years, cutting domestic sales and forcing mills to operate at around 60 per cent capacity. About 50 spinning factories have already shut down due to sustained losses, officials said.
The issue gained traction after textile millers last year sought intervention, alleging that low-priced yarn from India was flooding the market. The ministry endorsed those concerns and, on January 12, formally advised the NBR to withdraw bond benefits for the specified yarn counts. It also instructed that import documents clearly mention yarn counts to prevent misuse.
Exporters see the proposal as counterproductive. They argue that restricting bonded imports would lengthen lead times and force manufacturers to rely on costlier local yarn at a time when global garment demand has fallen by 15–16 per cent.
“Imposing safeguards will not automatically make buyers accept higher costs,” said a knitwear industry leader, adding that some buyers have already expressed concern. He also criticised the duty drawback system as complex and costly, pointing to a persistent cost gap of 30–50 US cents per kilogram between Indian and Bangladeshi yarn.
Another garment sector leader warned that withdrawing bond facilities for Indian yarn could be read as a political signal and strain bilateral trade ties. “Even a small cost increase can divert orders. Closing access to bonded facilities will push up costs and threaten the survival of many garment factories,” he said.
The commerce ministry has linked the issue to Bangladesh’s graduation from least developed country status in November 2026. After graduation, duty-free access to key markets will be phased out, and exporters will need to meet value-addition thresholds of 40–50 per cent. Officials argue that heavy reliance on imported yarn could make compliance difficult, especially for knitwear producers.
Spinners say the threat is immediate. Import data show rising volumes but falling unit prices for several yarn categories, often cited as indicators of dumping. In one category, imports more than doubled over two years while per-kilogram prices fell sharply.
Welcoming the ministry’s move, the spinners’ association alleged that imported yarn is being sold below production cost, supported by incentives abroad, and called for deeper studies and possible anti-dumping measures to protect an industry that has invested more than $23 billion.
With no formal order yet issued, the NBR is reviewing the proposal. The outcome will determine whether policymakers prioritise shielding domestic spinners or preserving cost competitiveness for the export-oriented garment sector at a critical juncture.
