Under-invoicing in import takes a toll on local industry

Rampant under-invoicing in import of goods from China and India is affecting the domestic manufacturing sector, entrepreneurs said.

They said the declared prices of imported goods such as glass, tyre, tube and many others are much lower than their actual value and export prices.

For example, the export price of a 26-inch cycle tyre is $2.3, but the item is being imported at 81 cents only. A tube is being valued at 41 cents at import level though its export price is $1.20-$1.30.

The situation is graver for imports of glass and glassware.

A kilogram of glass is imported at 80 cents only though the price in international markets is $1.5. Industry insiders said some 150-200 tonnes of glass are being imported everyday causing serious damage to the local manufacturers.

Also, there is incidence of misdeclaration, such as importing high-end products declaring those as low-end ones.

Wholesale and retail traders are selling these under-invoiced imported goods at up to 50 percent lesser prices than the goods of same standards being made locally, manufacturers said. So, there is no reason that consumers will buy locally-made goods at higher prices, they added.

“Our investment is at stake. Under-invoicing and misdeclaration in import are becoming a serious threat to us,” said NG Saha, senior general manager of Gazi Group that makes tyre and tube for motorised vehicles, rickshaws and bicycles.

Saha said Gazi Group has invested more than Tk 300 crore to set up a modern and import-substitute plant for manufacturing tyre and tube.

“The entire sector will be destroyed if under-invoicing in import doesn't stop,” he said.

Luthful Bari, general secretary of Bangladesh Tyre and Tube Manufacturers' Association, echoed the same.

“Already, some small tyre and tube makers have gone out of business after failing to compete with under-priced products,” Bari said.

Nasir Group of Industries, which has invested more than Tk 1,000 crore to set up two factories for making import-substitute float glass and glassware, is in a serious problem due to a surge in imports of under-invoiced products, mostly from China.

“Per kg glass is being valued at 80 cents by customs officials, while its import price is $1.5,” said Nasiruddin Biswas, chairman and managing director of Nasir Group.

After long persuasion, Biswas said, the government revalued the import price of a kg of glass at 80 cents, from just 16 cents a couple of years ago.

About float glass, he said imported products are being sold at 20 percent less price than his production costs.

“My investment as well as jobs of thousands of workers is at risk,” he said.

Businesses said under-invoicing in import is not only affecting the local manufacturers, but also causing a revenue loss for the government.

Businesspeople in Bangladesh think a section of unscrupulous Chinese exporters is ready to compromise both quality and price to sell their goods. China-made counterfeits of leading global brands, particularly electronics and telecommunication items, have flooded the local market. Influential magazine The Economist estimated the sum -- involved in under-invoicing in import from China by Bangladeshi importers -- at $3 billion a year, mainly because of the astronomical rise in both value and volume of imports over the last one decade. It was all about duty evasion by Bangladesh importers through under-invoicing, said the prestigious British weekly.

The National Board of Revenue, the tax administrator of Bangladesh, is augmenting its efforts to bring down tax evasion, under- and over-invoicing of imports and misdeclaration.

“The tax evasion tendency is rampant in Bangladesh,” NBR Chairman Ghulam Hussain said.

He said the NBR has recently taken some steps to reduce tax evasion through under- and over-invoicing. The steps include bringing uniformity in assessment at all ports, and identifying habitual tax evaders and clearing and forwarding agents who help importers dodge tax.

"Things are improving gradually," the NBR chairman said, adding that tax income from import duties is on the rise.

Import duty grew 15 percent in July, from 9 percent in the same month last year.

“Things will improve further once the NBR gets fully automated in two years,” Hussain said. However, high import duty often prompts importers to resort to under-invoicing, another NBR official said.