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Published: 12:14 AM, 26 July 2020

https://dailyasianage.com/news/236574/of-chinese-duty-free-access-to-bangladesh

Of Chinese duty free access to Bangladesh

M S Siddiqui The 1996 Singapore Ministerial Declaration World Trade Organization (WTO) focused the attention of the trading community on the idea of unilateral preferences by launching the initiative of special trade preferences for LDCs. It was decided in the 6th WTO Ministerial Conference held in Hong Kong in 2005. All developed countries will provide duty free & quota free (DFQF) market access to LDCs for at least 97% tariff lines. This is the first legally binding decision on DFQF for LDCs. The Bali Ministerial Conference in 2013 introduced a decision on preferential rules of origin for least-developed countries. Bangladesh is getting Generalized System of Preferences (GSP) facilities from 38 countries. Everything but Arms (EBA) is a kind of GSP offered by EU offering to LDCs including Bangladesh is as per the DFQF programme of WTO. Bangladesh would continue to enjoy DFQF benefits up to 2027 even if it qualifies for graduation from LDC status. China implemented this DFQF scheme from 1 July 2010. China primarily granted zero-tariff to 60 per cent of its total tariff lines, covering 4,762 tariff lines imported from 33 LDCs, which concluded "exchange of letters" for that purpose. Subsequently, it has extended duty free facility to LDCs in the second phase on July 01, 2013covering 95 per cent of its total tariff lines -- 7,381 out of 8,243. Again China renewed its LDC scheme on January 01, 2015 covering 97 per cent of China's tariff lines, including 8,036 out of 8,285, to the LDCs. The facility has provided to those LDCs that completed formal exchange of letters of agreement. This is the formality of China for DFQF facility. The 2013 Bali Ministerial declaration introduce a decision on preferential rules of origin for LDCs, setting the guidelines for preference-granting countries to build upon their individual rules of origin, in a manner that promotes the utilization of their preferential arrangements and therefore contributing to facilitating market access for LDCs. Therefore, WTO a set of non-binding guidelines were established from which preferential granting countries might build upon their individual rules of origin applicable to imports from LDCs with a view of contributing in facilitating their market access. The Rules of Origin of goods wholly obtained or produced entirely in the beneficiary country. The guidelines are follows such as: The total value of the non-originating materials, parts, or produce used in the manufacture of the export product does not exceed 70 per cent of the Free on Board (FOB) value of the product so produced or obtained (i.e. the local value added content in the beneficiary country is at least 30 per cent) Change in tariff heading (4 digit levels) The final process of manufacture is performed within the territory of the exporting beneficiary country. The Rules for identification of origin of goods are of two types. Wholly obtained: Products are wholly obtained in a single beneficiary country (or in the EU, in the case of bilateral cumulating) if only that country has been involved in their production.

Substantially transformed - requires substantial/sufficient production activities to be done in the exporting country. The Substantial transformation be ascertained mainly by three criteria: Value addition criteria: Minimum domestic content or maximum import content Specific process criteria: Minimum manufacturing processes to be undertaken CTH (Change of Tariff Heading) criteria: Change of Chapter, Change of Tariff Heading (CTH), Change of Tariff Sub-heading (CTSH) etc. The LDCs including Bangladesh as member of Asia Pacific Trade Agreement (APTA) enjoy the rules of origin of 35% and the value measured as percentage of FOB value. EU GSP scheme also grants duty free access for the 50 least developed countries under EBA scheme. EBA grants duty-free quota-free access to all products, except for arms and ammunitions, covering 99% of all tariff lines. China's DFQF Program is a non-reciprocal tariff preference treatment for LDCs launched on 1 July 2010. Currently, the Program covers products of 4788 tariff lines (8-digit level), accounting for 97 per cent of all tariff lines of China. China is one of the export destinations of Bangladeshi apparel items, mainly cotton-based, the export volume is too small compared to that of the European Union (EU) countries and the United States. All kinds of Bangladeshi apparel items, including cotton and textiles do not fall under DFQF scheme for Least Developed Countries (LDCs). Currently, 4788 Bangladeshi products have DFQF access to Chinese market with 60 per cent coverage of China's tariff lines. The Chinese rules of origin require products to originate entirely in the country that exports them or, if external inputs are used, they must have undergone substantial transformation. "Substantial transformation" means either change of tariff heading or that the value of non-originating parts used in the manufacture of the good does not exceed 60 per cent of the value of the product. The final stage of processing must be in the country of origin, and the finished goods must enter China directly. China will continue to remain a lucrative export destination of Bangladeshi apparel items following China's economic transformation from labour-intensive to high-tech manufacturing, high production cost, relocation of factories, and the growing demand of Chinese consumers. China have just allowed duty free market access for almost 97 per cent products from Bangladesh as a LDC. Bangladesh is now enjoying zero tariff facilities under APTA for about 2700 products from China. There will be no problem in conducting trade with other countries under APTA even if Bangladesh comes out of APTA facilities for DFQF scheme of China. The other countries offered more flexible criteria of value addition to Bangladesh. It be noted that, the Canadian GSP RoO for all LDCs requires only 25 per cent domestic value addition. So, Bangladesh can comfortably export its major exportable products including apparel to Canada under the Canadian GSP scheme for LDCs. The EU allow one stage transformation in case of LDCs' export of garment products e.g., fabric to clothing in European market, but set rule of two stage transformation for exports from non-LDCs. Bangladeshi garment export is currently benefiting from the EU's single transformation rule for LDCs. The is a doubt immediate benefit of Bangladesh due to stringent RoO, and Bangladesh's lack of diversified as well as high-value products. China also introduced the "cumulation" clause of the rules of origin allows producers to import materials from a specific country or region without affecting the origin. Under this, final goods exported by LDCs to China using products and materials produced in non-beneficiary countries

can still satisfy the rules of origin, if those non-beneficiary countries have diplomatic relations with China. Bangladesh may opt free trade agreement with China to get entry to Chinese market even after graduation from LDC and look for Chinese market of with relocation of low cost garment industries from China to Bangladesh. Relocation will give Bangladesh double export benefits - first in the Chinese market and then in the world market where China is the number one supplier for many products including Garments. The confidence generation of Chinese investor to come to Bangladesh has a big challenge of cost of doing business and obstacle identified by ease of doing business study in Bangladesh. We need rapid change in our law, rule and practice. Bangladesh export dominated by Garments and major market is western world. The Chinese 98 percent duty free offer for export may open up the Chinese market for diversified products and attract overseas investment. The writer is a legal economist. Email: mssiddiqui2035@gmail.com