The move by Indonesia has come at a time when both Bangladesh and Indonesia are in negotiations to enter into a preferential trade agreement (PTA) and this may affect the negotiation process as well as Bangladesh’s export to the country if Indonesia finally imposes any safeguard duty after the investigation is completed, say experts.
The country’s Export Promotion Bureau (EPB) meanwhile underlined, “These types of conditions are mainly non-tariff barriers (NTB), which will hinder Bangladesh’s exports to India”, pertaining to India’s move on imposition of ‘rules of origin’ norms, with the aim to reduce the dumping of goods and stop imports of low-quality products. .
Indonesia has initiated a safeguard investigation regarding its import of apparel products. The Indonesian Safeguard Committee of the Ministry of Trade has notified the issue to the World Trade Organization (WTO) and underlined it had initiated the investigation regarding the import of the articles of apparel and clothing accessories following an application from the Indonesia Textile Association for safeguard measures against the import of the products.
Meanwhile, in a separate development, Indian Government has imposed ‘rules of origin’ norms, with the aim to reduce the dumping of goods and stop imports of low-quality products. The Department of Revenue under the Ministry of Finance has issued notification on the new provisions.
The new norms are expected to check low quality imports and to prevent the dumping of goods by a third country by routing them through one of India’s free trade agreement (FTA) partner countries. These rules “will apply to imports of goods into India where the importer makes a claim of preferential rate of duty in terms of a trade agreement,” as per the Customs (Administration of Rules of Origin under Trade Agreements) Rules, 2020.
Countries that have trade pacts with India get the benefit of lesser or zero trade barriers, as well as a concessional tariff regime. But, some countries, which do not have trade pacts with India, allegedly try to take advantage of these benefits by routing their products through India’s partner countries.
Even though the moves by both Indonesia and India are not aimed at any particular country as such, but they seem to have not gone down too well with Bangladesh; let’s find out why?
The move by Indonesia has come at a time when both Bangladesh and Indonesia are said to be in negotiations to enter into a preferential trade agreement (PTA) and this may affect the negotiation process as well as Bangladesh’s export to the country if Indonesia finally imposes any safeguard duty after the investigation is completed, say experts.
It may be mentioned here that Bangladesh in the last fiscal year 2019-2020 exported readymade garment products worth US $ 27.91 million to Indonesia, which is more than 54 per cent of the country’s total export of worth US $ 51.42 million to Indonesia. Further, of the US $ 27.91 million, the value of knitwear products export was US $ 14.48 million and the amount of woven export was US $ 13.44 million.
To put things in perspective, according to the WTO, a safeguard investigation seeks to determine whether increased imports of a product is causing or is threatening to cause serious injury to the domestic industry. During a safeguard investigation, importers, exporters and other interested parties may present evidence and views and respond to the presentations of other parties.
Though the safeguard investigation was not any country-specific move, it would create trouble in the PTA negotiation process. There is no provision in the draft PTA of excluding Bangladeshi products from such types of duties. Further, signing a PTA will not bring any expected outcome for Bangladesh if such duty is imposed as RMG products dominate Bangladesh’s export to Indonesia, said experts.
As such Bangladesh has opposed Indonesia’s move to impose safeguard duty on apparel shipments to the country as such a measure would be inconsistent with the provisions of global agreements on safeguards, tariffs and trade, it felt.
The Bangladesh Trade and Tariff Commission (BTTC) and the Bangladesh Garment Manufacturers & Exporters Association (BGMEA) shared their arguments and observations on the matter during a hearing conducted by the Indonesian Safeguards Committee (KPPI).
The hearing took place on 20 November, more than one-and-a-half months after the KPPI initiated an investigation into the viability of a safeguard duty following a request from the Indonesia Textile Association against the import of apparels.
The event was organised to give apparel exporting nations an opportunity to present their views on the proposed safeguard duty.
In its submission on behalf of the Government, the BTTC cited the provisions in the General Agreements on Tariffs and Trade (GATT) and the World Trade Organization (WTO) Agreement on safeguard to explain that imposing such protective measures does not fulfil the conditions set in the related treaties.
“Therefore, resorting to safeguard measures is unwarranted,” maintained BTTC Member Mostafa Abid Khan.
The Indonesian authority initiated an investigation into its apparel imports for the period between 2017 and 2019 even as the BTTC said it made an effort to determine whether apparels were exported to Indonesia in increased quantities, absolute or relative terms to domestic production along with the trends in the rates and amounts of increase in imports, during the period.
It then said the number of garments shipped dropped in 2019 compared to the previous year and that the downward trend was going to continue this year as well. Therefore, the upward trend in the cost and amount of the products under investigation does not satisfy the conditions outlined in the WTO Agreements on Safeguard, the BTTC underlined while adding Indonesia cut its tariff rates in line with free trade agreements with countries such as China.
It said due to a 10 per cent reduction in tariff for China, imports from the country would likely increase.
This is actually what happened, the BTTC said while adding that it may be deduced that an increase in the import of the product shown in the petition is not a result of any unforeseen development, a prime prerequisite of taking safeguard action as per the global trade agreement.
Meanwhile, the apex garment makers’ body in Bangladesh, the BGMEA said the claim in the petition filed by the Indonesian Textiles Association, regarding the decline in production, did not match data from the large and medium manufacturing industries or micro and small manufacturing industries that produced apparels for the same period.
Indices clearly show the production of micro, small, medium and large manufacturing industries maintained a positive growth between 2017 and 2019, according to the BGMEA, which went on to add the petition even as was lodged on the grounds of injury to the domestic industry, Indonesia’s apparel export has also been confronted with losing competitiveness.
BGMEA cited falling exports of apparel and increasing producers’ prices, unit prices and the rising minimum wage in the southeast Asian nation. “Since all the data related to price and wages are suggesting that Indonesia’s apparel industry may be suffering from erosion in competitive advantage, the temporary safeguard measure is neither appropriate as per the agreement on safeguards, nor is it sufficient to protect the local industry,” it underlined.
The trade body also cited the trade imbalance between Bangladesh and Indonesia, showing that it favours the latter. “The import of textile by Bangladesh, which goes to the production of export-oriented garments, is allowed to enter duty-free here,” maintained BGMEA President Dr. Rubana Huq even as BGMEA in its submission, cited that Bangladesh’s apparel items face duties as high as 25 per cent to enter Indonesian markets while Chinese products get duty benefits.
Indonesia’s local industry might be facing the impact because of the zero-tariff access in favour of giants like China and Vietnam. Therefore, imposing additional duty would simply harm Bangladesh, Rubana added.
Meanwhile, as to India’s new Customs rules, Dhaka has reportedly requested New Delhi to withdraw the same as officials fear the new rules may make it difficult for the former to get tariff preferences.
Bangladesh reportedly made the request to India after a thorough examination of the new customs rules and consultation with the stakeholders. “We have asked for the withdrawal of the rules considering its possible impact on our exports to India,” stated a senior Commerce Ministry official to the media adding Dhaka has also requested India to follow the guidelines for the regional trade treaties while verifying the compliance with rules of origin.
After India issued the Customs Rules-2020 in September, framed for the administration of rules of origin under all the trade agreements it has signed so far, Bangladesh’s Ministry of Commerce asked the Export Promotion Bureau (EPB), the Bangladesh Trade and Tariff Commission (BTTB), and the National Board of Revenue (NBR) to examine the impacts the new rules will have on Bangladesh’s exports to India.
All the agencies have found that due to what they term the ‘harsh rules’, Bangladeshi exporters would not be able to avail tariff preferences in the Indian market, thus exports will fall and widen the trade gap further. They also found the new customs rules go against the guidelines for rules of origin of the regional trade pacts like the SAARC Preferential Trading Agreement (SAPTA), South Asian Free Trade Area (SAFTA), and the Asia-Pacific Trade Agreement (APTA).
The EPB said while exporting goods, Bangladesh presently enjoys tariff preferences in the Indian market under the three regional agreements and that the new rules of India will come as a barrier to the duty preferences under the regional deals. It also suggested examining whether preferences given under the multilateral pacts can be scrapped by making rules individually by a signatory country.
The EPB underlined the rules of origin and other rules are made under each trade agreement for commercial cooperation and providing duty preferences and that it (EPB) ensures compliance with the rules of origin by issuing certificates of origin, and also cooperates with the Indian authority in case any dispute arises.
The sections (a) and (b) of the rule-4 have asked the Indian importers to get origin-related information while claiming a preferential rate of duty and these include the country-of-origin criteria including the regional value content and the product-specific criteria specified in the rules of origin for five years. The EPB said Bangladeshi exporters may not agree to provide this info to importers since those are related to production procedure and expenditure and are business secrets.
“These types of conditions are mainly non-tariff barrier (NTB), which will hinder Bangladesh’s exports to India,” the EPB underlined while adding that since the rules 6 (1) (b) have kept the provision for keeping tariff preference withheld, the Indian importers may feel discouraged to import from Bangladesh.
The rules 7 also kept the provision that the authority will be able to decline tariff preferences for all goods of an exporter if one item fails to meet the originating criteria and this provision will make things uncertain for exporters, it said while the Tariff Commission on its part maintained that several sections of the Indian customs rules may impede Bangladeshi exporters to obtain duty preference to India.
Now, looking from the perspective of Bangladesh and considering the views and opinions shared by the concerned agencies, trade bodies and the experts, one can very well gauge Bangladesh’s stand on the so-called safeguard investigation by Indonesia that could result in the latter imposing safeguard duty as well as new customs rules of India, considering the fact that Bangladesh’s apparel exports to India have been increasing significantly over the years on the back of duty benefit.
Bharat Tex Special Report 2026 
