Background

The Office of the U.S. Trade Representative reports that discussions at the third meeting of the U.S.-Bangladesh Trade and Investment Cooperation Forum Council held May 17 in Dhaka focused on market access and tariff reforms, intellectual property, ease of doing business, digital economy, regional connectivity, energy and infrastructure developments, transparency in government procurement, and labor. The U.S. particularly noted its interest in addressing specific market access barriers to trade and concerns on overall labor reform.

USTR’s most recent trade barriers report identified Bangladesh’s tariff policy as a particular concern. Tariffs are a significant source of government revenue in Bangladesh, the report stated, which “greatly complicates efforts to lower tariff rates.” The country’s average most-favored-nation tariff rate is 15.5 percent and the maximum MFN applied rate is 25 percent. Products subject to duty rates from 5 percent to 25 percent include general input items, basic raw materials, and intermediate and finished goods. Bangladesh provides concessions for the import of capital machinery and equipment, as well as for specified inputs and parts, which USTR said makes determinations of tariff rates a complex and nontransparent process. Other charges applicable to imports are an advance income tax of 5 percent; a value-added tax of 5 percent to 15 percent, with exemptions for input materials; and a supplementary duty of 10 percent to 150 percent, which applies to luxury items such as cigarettes and perfume.

Another problem raised in the USTR report is the wide availability of counterfeit goods and inadequate IPR protection. Bangladesh is in the initial stages of formulating a national IPR policy but that effort did not make measurable progress in 2016. In addition, annual bilateral talks have yielded recognition for certain foreign country copyrights but Bangladesh has not yet instituted a gazette notification system that would make enforcement of these rights practicable.

Other issues identified in the report include impediments to business such as frequent transportation blockades, overlapping administrative procedures, a lack of transparency in regulatory and administrative systems, corruption, the safety of infrastructure, and industrial relations practices.

Bilateral trade deficits have been a priority for the Trump administration, but the U.S. goods trade deficit with Bangladesh in 2016 was relatively small at $5.0 billion, 0.6 lower than the previous year. However, the U.S. exported only $895 million worth of goods to Bangladesh in 2016 while importing $5.9 billion worth.

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