This policy adjustment is intended to assure timely deliveries and increase export orders

TDS Desk:

According to a recent notification issued by the NBR, non-readymade garment (non-RMG) enterprises, particularly those with bonded warehouse licenses, can now subcontract with other manufacturers.

This policy adjustment is intended to assure timely deliveries and increase export orders.

Subcontracting was previously permitted in all export-oriented sectors. However, the previous government limited this privilege to the RMG sector.

This restriction posed issues for non-RMG sectors, particularly leather exporters, who struggled to acquire further orders without the opportunity to subcontract.

In its recent notification, the NBR said that subcontractors involved in legal disputes with NBR can now process orders only through undertaking, indenture, or letter of agreement instead of bank guarantee.

Earlier, owners of sub-contracting factories had to provide bank guarantees to continue operations in case of legal disputes.

Moreover, manufacturing activities should be carried out as per the Contract Act 1872. Both manufacturers should have up-to-date renewed warehouse licenses and permission from concerned authorities in the case of an export processing zone and an economic zone for subcontracting.

The notification also stated that an organization with a suspended warehouse license or Business Identification Number (BIN) cannot continue subcontracting.

NBR has issued 15 instructions regarding procedures and processes for subcontracting production and export of goods.

The significant instructions include the contract between the original owners of the imported materials and the contract manufacturer, which will be executed per the provisions of the Contract Act 1872 in force in the country.

In the case of contract manufacturing of goods, the period of the respective raw material shall be within the permitted period of storage of the goods in the warehouse.

Both contracting manufacturers must have up-to-date renewed warehouse licenses and others.

A subcontractor is an individual or corporation that assumes some or all of the obligations of another’s contract.

When a factory unit gets more orders than its capacity, it often subcontracts some of the work to another factory through the approval of its buyers.

Recently, the Leathergoods and Footwear Manufacturers and Exporters Association of Bangladesh (LFMEAB) issued a letter to the NBR requesting that the non-RMG sector be granted the same subcontracting privileges as the RMG sector.

The RMG industry accounts for more than 80% of the country’s export profits, with the remaining coming from non-RMG sectors such as leather, footwear, and plastics.

Manufacturers from the non-RMG industries praised the NBR’s effort, claiming it will help them get additional orders.

Tipu Sultan, managing director of Bengal Shoe Industries Limited, a well-known leather goods exporter, said that this decision will help them secure more orders and reduce losses.

They may need to relocate some work to another factory to decrease the burden and achieve deadlines. Moreover, there are times when they want to take on subcontracting work during a shortage of orders.

He also said that if a factory maintains compliance and has all the necessary setup with workers, they should not be restricted from getting subcontracts.

However, it was disappointing that the non-RMG sector could not engage in or receive subcontracting from other factories earlier.