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Download PDF More than 2,000 consignments of Bangladeshi garments exported to Germany have been hit by a special 12 percent security deposit due to fears over the widespread abuse of certificates that allows the country’s products duty-free access.
German authorities imposed the security deposit on September 17 following investigations that showed that several companies had been exporting products to European countries using fake Bangladeshi GSP (generalised system of preference) certificates.
Under the new rules importers must pay German customs a deposit of 12 percent of the value of the consignment. The money is refunded only when the GSP certificate is fully verified. Local exporters are concerned that this additional burden will deter buyers in Bangladesh’s second largest garment market.
Speaking to The Daily Star from the German capital Berlin Oliver Heyder-Rentsch, a spokesman for the German Ministry of Finance, said the 12 percent security deposit is imposed on all garment imports from Bangladesh, not just in suspicious cases.
But up to now manufacturers and exporters in Bangladesh assumed that the new rule is applied to suspect consignments only. European Union Trade Adviser in Dhaka Zillul Hye Razi told The Daily Star early November that the imposition was on suspicious consignments only and not random.
“Because the fraud was large scale and complex, doubts on the true origin of the imported goods will persist until the EU commission has definitely cleared up the case,” German spokesman Heyder-Rentsch clarifies. “Given the existing risk [of misused certificates] in the textile sector, the security deposit is collected in all cases.”
According to a recent German investigation one out of seven certificates had to be objected.
Until the end of October security deposit had been collected in 2,153 cases on merchandise worth €62,9 million (Tk 636 crore), Heyder-Rentsch told The Daily Star. All cases will be submitted to the Bangladeshi Export Promotion Bureau (EPB) for verification, he said. If the certificate turns out to be true, the security deposit will be reimbursed.
Earlier this year a Bangladesh government investigation found out that several Chinese and Indian companies had been exporting products to European countries using Bangladeshi GSP certificates trying to avoid import taxes.
Buyers are also concerned about the deposit. “German customs demand the security deposit on all textile imports,” Martin Bruening, a spokesman for the German department store chain Metro AG, told this newspaper by email from Duesseldorf.
“We received an announcement that all certificates of origin are examined and everybody has to pay the security deposit,” an official with one of the largest German buyers in Dhaka told The Daily Star. “Our management is now examining the implications,” he said. One buyer’s agent regretted that due to the fraud of a few, the duty free access of all Bangladeshi manufacturers is questioned now.
“We are carefully examining the situation,” Md Khalilur Rahman, director general of the EPB in Dhaka, told The Daily Star. He called it a serious matter.
Germany, second largest buyer of garments from Bangladesh, imported last fiscal year knitwear worth $1.1 billion, the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) states. Woven garments added some $400 million, according to industry estimates, so Germany bought garments worth some $1.5 billion (Tk 10,500 crore) from Bangladesh.
The security deposit imposes a new burden on the importers. “Money is tightened up and that may discourage customers and hamper exports to Germany,” EPB Director General Rahman said. The problem is that the buyers’ cash flow is absorbed during the verification process. “We have to add the 12 percent in our price calculation,” a German importer said, “and that makes Bangladeshi products more expensive at first. This can be corrected only later if we eventually get the money back.”
Rahman said, “On average it takes us two to three months to verify a certificate and this time is needed because queries to banks and our customs are often essential.” If applied to all shipments, the deposits sum up to $180 million (Tk 1,260 crore) being blocked over several months. Alternatively a bank guarantee can be given in some cases, but this will involve additional costs as well.
The cause of the German ruling was a memorandum of the European Anti-Fraud Office (OLAF) to customs authorities of all member countries.
The German finance ministry spokesman could not confirm whether other EU member countries are handling the matter in the same way. Manufacturers say that the other countries do not impose such a rule. “Only Germany asks for a deposit,” Anwar-Ul-Alam Chowdhury, president of Bangladesh Garment Manufacturers and Exporters Association (BGMEA), told The Daily Star.
He regretted that the joint efforts of Bangladeshi industry associations and country’s representatives to convince German customs were not successful yet. “Many buyers complain to us that they have to provide a deposit on all their shipments,” he said, expressing hope that the introduction of fraud-resistant certificates by the beginning of this month will help to restore German confidence soon.
Another step may help as well, according to BKMEA Director MA Basset: “The EPB has now restricted the access to the certificates.”
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