Commerce Ministry Lifts Restriction on 10-30 Count Yarn Imports
For years, garment factories avoided import taxes on yarn by simply promising to export their products. A sudden rule change threatened that deal, then it got frozen within a week.
In a Nutshell
- Bangladesh's bonded warehouse system lets export-oriented garment factories import raw materials like yarn without paying duty upfront, based purely on a promise to export the finished goods, no cash or bank guarantee required.
- On September 7, 2026, the NBR withdrew this duty-free perk for 10-30 count cotton yarn, covering about 60% of Bangladesh's total yarn imports, and replaced it with a bank guarantee requirement instead.
- Under the new rule, importers had to freeze money in a bank guarantee, releasable only after they exported the finished garments and brought the sale proceeds back into Bangladesh, a process NBR linked to roughly 7 billion US dollars in unrepatriated export earnings.
- Garment exporters, through BGMEA and BKMEA, protested loudly, warning that locking up working capital this way would raise costs and hurt competitiveness, while local textile millers backed the change to protect domestic spinning mills.
- On September 13, 2026, the Commerce Ministry told NBR to suspend the new bank guarantee requirement "for further review," just six days after it took effect.
Context
For a long time, garment factories in Bangladesh could bring in yarn from abroad without paying any import tax, as long as they promised to turn it into clothes and sell them overseas. The government recently tried to add one more condition: factories would also need to prove the money from those overseas sales actually came back to Bangladesh, because a lot of export earnings, around 7 billion US dollars, had reportedly gone missing along the way. That single extra condition is what turned a small paperwork change into a big fight between the government, local yarn makers, and garment exporters.
Why It Matters
Think of this as two important goals bumping into each other. The government wants to make sure money earned from selling Bangladeshi clothes abroad actually comes back into the country, because that foreign money helps pay for things like fuel and food imports. But garment factories, which bring in most of the country's export income and employ millions of people, said the new rule would freeze up their cash and make it harder to compete with factories in other countries.
Since Bangladesh is about to lose some trade benefits it currently gets in markets like Europe, making every extra cost for exporters feel bigger than usual. Bangladesh is currently scheduled to graduate from LDC status on 24 November 2026, though it has requested a three-year deferral to 2029, with a final decision from the UN General Assembly still pending.If Bangladesh graduates, the duty-free, quota-free access to the EU market under the Everything But Arms (EBA) scheme is only guaranteed for a three-year transition period; after that, it expires around 2029.
Once that window closes, exports dominated by ready-made garments, which account for over 60% of Bangladesh’s EU trade, will face the EU’s standard tariff of roughly 12% on apparel, unless Dhaka first secures a free trade agreement or qualifies for the EU’s GSP+ preference scheme.
The fact that the government reversed its own decision in less than a week shows just how much power the garment industry has when it pushes back, but it also shows the government still hasn't figured out how to fix its money problem without upsetting its biggest export sector.
What we think
Here are two core concerns: jobs and keeping export earnings inside the country. Garment factories employ vast numbers of workers, so costlier operating rules risk slower hiring or lower wages, particularly at smaller, less cushioned factories.
The question worth watching is whether authorities pursue a targeted fix, such as tracing missing funds through banks rather than penalising every yarn importer, or simply abandon the effort unresolved.
Repeated missteps on this balance risk undermining confidence in Bangladesh's economic coordination at a time when stability is demanded.