Can Bangladeshi Apparel Suppliers Seize a Golden Opportunity with China?

Date: Monday, August 17, 2020
Source: Sourcing Journal

Bangladeshi suppliers have a massive new export opportunity with ready-made garments.

On Wednesday, the Chinese government reduced tariffs on products imported from Bangladesh under its Preferential Tariff Program—a move that dates back to items imported from July 1. Now, nearly all Bangladeshi products (97 percent) will see reduced duties moving forward, up from 60 percent prior to the news.

According to China Briefing, a publication produced by professional services firm Dezan Shira and Associates, China will now give duty-free export benefits to an additional 5,161 products from Bangladesh, bringing the number of exempted products to 8,256. That total includes items that are admissible under the Asia Pacific Trade Agreement (APTA).

Exporters in Bangladesh have enjoyed the bulk of these duty-free benefits since 2010, the publication said, with items like jute, plastics, raw hide, skins, frozen fish and crabs, live eels, sesame seeds and cotton waste products being the most popular imports to China. But despite the duty benefits that the country has enjoyed over the past decade, China Briefing reported that exports haven’t shown substantial growth.

Export Promotion Bureau data shows that during the 2014-2015 fiscal year, total exports to China amounted to $791 million. By 2019, that number had only increased to $831 million. By May, looking back at the fiscal year that began in July 2019, exports amounted to $557 million.

However, there’s one area that is trending positively: ready-made garments. Due to loopholes created by a clash between APTA and China’s Preferential Tariff Agreement, the incentives offered by each agreement aren’t synchronized. Those issues actually present an area of opportunity for Bangladeshi exporters looking to bring clothing to the Chinese market, China Briefing analysts said.

The new tariff exclusions are still in their early days. But Bangladesh’s embattled apparel sector is likely looking for a home for the goods it’s been saddled with, as well as any new business it can find to ease the burden. Bangladeshi apparel manufacturers have suffered a staggering $3.1 billion in losses this season due to canceled orders from international, and largely Western, fashion brands.

If exporters can pinpoint specific product categories by examining the tariff agreements, and conduct an analysis of price competitiveness, it could be a worthwhile exercise for the country’s apparel suppliers.

The China Briefing report recommends that Bangladeshi exporters first ensure their valuable trademarks are registered in China, however. Corporate entities should also be registered in the country, such as Foreign Invested Commercial Enterprises, which arm foreign investors with the export and import licenses they need to do business and cut out third parties or middle men.

 

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