Over 200 tariff lines set for rationalisation

Bangladesh is preparing another round of tariff rationalisation in the next fiscal year, cutting or easing protective duties on more than 200 imported goods, as part of a wider effort to modernise the trade system ahead of graduation from least developed country (LDC) status.

Under this plan, customs duties, regulatory duties and supplementary duties of the items are likely to be rationalised, according to finance ministry officials.

Last year, the government proposed cuts on around 350 tariff lines in the first phase of a broader reform programme. The upcoming budget for fiscal year 2026-27 is expected to continue that process.

Officials said the changes are designed to bring the trade system closer to global standards and prepare for the post-LDC era starting from November this year.

“We are continuing the process of tariff rationalisation to make the structure more competitive, transparent and compliant with international trade obligations,” said a senior official involved in the process.

Preferring anonymity, he also said that despite the planned reductions, sensitive sectors would continue to receive a degree of protection to allow local industries time to adjust to increased competition from imports.

According to finance ministry officials, Bangladesh will face more pressure to reduce trade barriers after the LDC graduation, as the country will lose several preferential trade benefits under the current international arrangements.

They also said the reforms are being designed in consideration of Bangladesh’s commitments under the World Trade Organization and ongoing talks on future trade agreements.

Bangladesh currently has 7,611 tariff lines. In other words, the country has 7,611 different product categories for which import taxes are set separately.

Its binding commitments at the World Trade Organization (WTO) cover 955 tariff lines, including 763 agricultural and 192 non-agricultural products. Tariffs on 60 of these lines were higher than the bound rates set when Bangladesh joined the WTO in 1995.

The National Board of Revenue (NBR) began tariff rationalisation in phases in FY23, following recommendations from a committee formed in 2021 to prepare for LDC graduation challenges.

In the past two years, tariffs on 60 items have been brought within bound rates based on those recommendations.

A related study also called for a review of supplementary and regulatory duties, noting that Bangladesh would need to compete without relying on import protection after graduation.

The study found regulatory duties on 3,565 tariff lines, about 47 percent of the total, ranging from 3 to 35 percent. Nearly 95 percent of revenue from regulatory duties comes from just 250 tariff lines.

Based on the recommendations, the NBR scrapped regulatory duties on 282 items between FY23 and FY25 and removed minimum import prices on 50 items.

Speaking on the implications of the country’s scheduled LDC graduation this year, trade expert Mostafa Abid Khan said that oversight was limited while Bangladesh remained an LDC, but that would change.

“But once we graduate, we will come under surveillance.”

He said the transition would not automatically force Bangladesh to change its policies, but verification from trading partners would increase.

He pointed out two immediate risks. These are exceeding agreed tariff limits on a small number of products and maintaining minimum import prices.

“In some cases, not many, only for a limited number of products, our bound tariff rates have already been exceeded,” said Khan.

He said, “Another issue is the minimum import value or minimum import price system. That cannot be maintained. It will not be allowed.”

He said Bangladesh must gradually lower protection and prepare industries for competition under future trade agreements.

M Masrur Reaz, chairman and CEO of Policy Exchange Bangladesh, said Bangladesh’s post-LDC challenge will centre on a sharp loss of trade competitiveness with the ending of preferential market access.

He said the impact of higher tariffs will largely depend on productivity and efficiency in the economy.

“Competitiveness comes from productivity, lower costs of doing business, and logistics efficiency, including speed to market,” he noted, adding that Bangladesh is currently weak in both productivity and competitiveness.

He also warned that the pharmaceutical sector will come under pressure after the loss of TRIPS-related flexibilities, particularly due to limited API production, weak backward linkages and patent constraints, which could push up medicine costs.

Reaz stressed that long-term reforms are essential, especially investment in skills, technology adoption, logistics and trade facilitation.

“Ideally, these reforms should have started five years ago, but they did not. We are still ignoring them. But this is a golden opportunity, and I would say almost the last opportunity.”

He said reforms should begin gradually from the next budget cycle, rather than being delayed or introduced abruptly after graduation.

Abdur Razzaque, chairman of Research and Policy Integration for Development (RAPID), said that the timing of graduation, whether soon or later, does not change the need for preparation.

“Whether LDC graduation happens in November or three years later, the government should identify the programmes needed and allocate resources accordingly,” he said.

Like Reaz, Razzaque highlighted the need for infrastructure and logistics reforms.

“Important infrastructure will be needed, and we must clearly define what is required. Implementation of the logistics policy will be essential, with clear responsibilities and timelines,” he added.

Calling for a structured approach, he said the transition should be guided by clear milestones.

“There should be a roadmap for what we want to achieve in the next one year, and in the next two years. A priority list has been prepared, and if implemented effectively, it could be a positive step,” he added.