Under-invoicing by importers crowding out country's lone sandpaper maker

Bangladesh's first and only sandpaper plant is struggling to expand its footprint owing to unhealthy competition from importers, who are allegedly under-invoicing prices of the abrasive paper.

Due to its various applications in the manufacture of furniture and automobiles as well as in the garment and construction industries, several commercial importers bring in sandpaper for around $1-2 per kilogramme.

As such, local sandpaper makers, including Grind Tech Ltd, a concern of Sheltech Group, are in hot water as their production cost stands at $7-8 per kilogramme (kg), said Tanvir Ahmed, managing director of Sheltech Group.

"We are becoming uncompetitive because of the cheaper prices of sandpaper imported by traders," he said.

Grind Tech Ltd started its journey in 2020 at an investment of Tk 80 crore, looking to fill a vacuum as the country, which requires sandpaper worth around Tk 1,500-Tk 2,000 crore, was fully dependent on sandpaper imports.

Ahmed said they invested in the sector as the government was encouraging domestic manufacturing by offering reduced import duties for raw materials.

"We wanted to take an advantage by making the first move. However, we cannot profit as we have to sell products for a price far below the cost of production," he said.

He also alleged that commercial importers were under-invoicing imports in order to evade duties.

"We see two different prices for sandpaper in case of import. Industrial importers are bringing it at $8-11 per kilogramme for their own use whereas the assessment value of sandpaper imported by commercial traders is far lower."

Following an application by Sheltech last year, the Bangladesh Trade and Tariff Commission (BTTC) examined the difference in assessment value of sandpaper imported by industrial users and commercial importers.

In its findings, the BTTC reported a massive gulf between the assessment values of sandpaper imported by the two groups.

It also analysed the price of sandpaper in the domestic market and recommended the NBR impose a minimum assessment price of $5 per kg.

In October last year, the NBR slapped a minimum assessment value of $2.5 per kg. Customs officials said they had done so because many importers were not declaring the actual value of products.

Afterwards, in December last year, Sheltech filed another application, seeking a further increase in the minimum assessment value.

Ahmed added that the government was losing a huge amount of revenue due to under-invoicing.

"The government should fix the minimum import value instead of an assessment value. If it does, the local industry will get protection and more investors will feel encouraged," he said.

"This market is growing because of economic growth and infrastructure construction. The more the construction, the higher the demand for sandpaper."

Ahsan Ullah, deputy commissioner of Custom House, Chattogram, told The Daily Star that they were considering a further increase in the assessment price for sandpaper imports.