Duty Drawback in Bangladesh: How the DEDO Scheme Refunds Duty on Imported Inputs

If your business imports an input from China, does something to it in Bangladesh, and then exports the result, you are probably paying duty twice on the same material — once at import, and again in the form of a price that has to absorb that duty when you compete for an export order. Bangladesh has two mechanisms to stop that: the bonded warehouse, and duty drawback administered by the Duty Exemption and Drawback Office. This guide is about drawback: what it refunds, who it suits, and why the claims so often go unfiled.

Two ways to relieve duty on export inputs

The principle behind both is that a country should tax goods that are consumed domestically, not goods that pass through on their way to an export. The difference is timing.

• Bonded warehouse. Duty is suspended at the point of import. You bring the input in duty-free against a bond licence, on the condition that it goes into an exported product within a set period, and you account for it against your export performance. This is the route used by the large ready-made-garment exporters.
• Duty drawback. You pay all the duty and taxes at import like any other importer, then claim a refund after you have exported the finished goods and can prove the imported input went into them. The cash goes out first and comes back later.

Drawback suits businesses that export intermittently, that are below the scale where a bond licence makes sense, or that only export part of their output and sell the rest domestically.

What DEDO does

The Duty Exemption and Drawback Office, under the National Board of Revenue, is the body that processes both bond entitlements and drawback claims. For drawback it maintains the rules on how a claim is calculated, receives and verifies claims against export and import records, and authorises the repayment. A claim is essentially an argument, backed by documents, that a specific quantity of duty-paid imported material is embodied in a specific quantity of exported goods.

Flat rate versus actual basis

There are two ways to compute how much duty is refundable:

• Flat rate (notified rate). For common export products, DEDO publishes a standard drawback amount — for example a fixed figure per dozen, per kilogram or per unit of the exported item — that is meant to approximate the duty content of the typical input mix. You claim the notified rate without having to prove your exact consumption. It is faster but may under-recover if your input costs are above average.
• Actual basis. You establish an input-output coefficient — how much of each imported input goes into one unit of export — get it verified, and then claim the real duty paid on that quantity. It recovers more when your material content is high, but it needs the coefficient to be accepted and the consumption to be documented shipment by shipment.

New exporters usually start on the flat rate for simplicity and move to actual basis once volumes justify the extra record-keeping.

The documents a claim rests on

• The import side: the assessed and paid bill of entry for the input, and the treasury challan or bank advice proving the duty was paid
• The export side: the export declaration (EXP form), the bill of export, the bill of lading or airway bill, and the commercial invoice and packing list for the shipment
• Proof of repatriation of export proceeds — the bank realisation certificate
• The input-output statement linking the imported input to the exported product, on actual basis
• The drawback application itself, filed within the time limit that runs from the date of exportation

The time limit is the reason so many claims are lost. A small exporter ships the order, moves on to the next one, and by the time the accountant looks at drawback the window has closed. Treat the claim as part of closing out each export order, not as an annual clean-up.

Where drawback does not help

Drawback only refunds duty that was actually paid and that is genuinely attributable to an exported good. It does not apply to inputs you bought locally (there was no import duty to refund), to the portion of your production sold domestically, or to overheads and packing sourced in Bangladesh. It also does not recover VAT that you have already adjusted through your VAT account — that relief comes through the VAT system, not drawback. And if you imported under a concessionary SRO and paid little or no duty, there is little to draw back.

Choosing between bond and drawback

If you export the large majority of your output on a steady basis, a bonded warehouse keeps the cash in your business instead of cycling it through the treasury — see bonded warehouse versus duty-paid imports and EPZ import-export rules. If your exports are occasional or partial, drawback is the lighter-weight fit. Either way, the decision belongs in your costing before you quote an export price. Related reading: re-export and return shipments and why Bangladeshi businesses should look at exporting to China.

Cash-flow reality: how long the money is out

Drawback is a refund, and refunds take time. Run the timeline before you rely on it: you pay full duty at import, hold stock while you produce, ship the export order, wait for the export proceeds to be repatriated and the bank realisation certificate issued, assemble the claim, file it with DEDO, and then wait for verification and payment authorisation. From duty paid to cash back can be several months even when nothing goes wrong. For a thinly capitalised exporter that gap is the whole problem, and it is the main argument for a bonded warehouse if your export share is high enough to qualify. If you stay on drawback, price the financing cost of that gap into your export quote.

Common reasons a claim is rejected

• Filed late — outside the time limit that runs from the date of exportation. This is the single biggest cause of lost claims.
• No proof of realisation — the export proceeds have not been repatriated, so the bank realisation certificate is missing.
• Input-output coefficient not accepted on an actual-basis claim, or consumption not documented consignment by consignment.
• Import and export records do not link — the bill of entry for the input cannot be tied to the specific export shipment.
• Duty was not actually paid — the input came in under a concessionary SRO or a bond, so there is little or nothing to draw back.
• Local inputs claimed — only imported, duty-paid material qualifies.

Recordkeeping that makes actual-basis claims possible

The businesses that recover the most are the ones whose records were built for it from the start. That means a bill of materials for each export product that states exactly how much of each imported input goes into one unit; a stock ledger that shows imported material coming in against a specific bill of entry and being consumed against a specific production batch; and an export file per order that bundles the EXP form, bill of export, transport document, invoice, packing list and bank realisation certificate. If you can hand DEDO a single folder that walks from import duty paid to goods exported without a gap, verification is quick. If the link has to be reconstructed months later from scattered papers, the claim drags or dies. See import record keeping for retention periods.

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