India scraps transshipment facility for Bangladesh's third-country exports

The government has terminated the transshipment facility that allowed export cargo from Bangladesh to third countries using Indian land customs stations en route to ports and airports, according to a government circular.

Indian exporters, mainly from the apparel sector, had earlier urged the government to withdraw this facility to the neighbouring country.

The facility had enabled smooth trade flows for Bangladesh's exports to countries like Bhutan, Nepal, and Myanmar. It was provided by India to Bangladesh in June 2020.

"It has been decided to rescind... circular...dated June 29, 2020, as amended with immediate effect. Cargo already entered into India may be allowed to exit the Indian territory as per the procedure given in that circular," the Central Board of Indirect Taxes and Customs' circular, dated April 8, said.

The decision comes against the backdrop of the recent comments made by Bangladesh Chief Adviser Muhammad Yunus on India's northeastern states.

Yunus while addressing a programme apparently in China, has purportedly stated that India has seven landlocked states in its eastern part known as seven sisters and "they have no way to reach the ocean. We are the guardian of the ocean (Bay of Bengal)". He also invited China to send goods through it across the world.

This statement drew sharp reactions from political leaders across party lines.

India-Bangladesh relations nosedived dramatically after the interim government headed by Muhammad failed to contain attacks on minorities, especially Hindus, in that country.

The announcement comes at a time when the US has imposed sweeping tariffs on a number of countries, including India and Bangladesh.

The earlier circular had allowed transshipment of export cargo from Bangladesh to third countries using Indian Land Customs Stations (LCSs) en route to Indian ports and airports.

According to trade experts, the decision will help many of the Indian exporting sectors like apparel, footwear, and gems and jewellery.

Bangladesh is a big competitor of India in the textile sector.

"Now we will have more air capacity for our cargo. In the past, exporters have complained about lesser space due to the transhipment facility given to Bangladesh," Federation of Indian Export Organisations (FIEO) Director General Ajay Sahai said.

Apparel exporters' body AEPC had earlier urged the government to suspend this order, which allows the transshipment of Bangladesh export cargo to third countries through the Delhi air cargo complex.

AEPC Chairman Sudhir Sekhri had stated that almost 20-30 loaded trucks arrive in Delhi every day, which slows down the smooth movement of cargo, and airlines are taking undue advantage of this.

This leads to an excessive increase in air freight rates, delay in handling and processing of export cargo, and severe congestion at the Cargo Terminal at the IGI Airport, Delhi, resulting in exports of Indian apparel through the Delhi air cargo complex becoming uncompetitive.

"This will help in rationalization of freight rates resulting in less transportation cost to the Indian exporters besides decongesting the airports leading to the shorter transit time to ship the goods," AEPC Secretary General Mithileshwar Thakur said.

Think tank Global Trade Research Initiative (GTRI) Founder Ajay Srivastava said that the withdrawal of this facility is expected to disrupt Bangladesh's export and import logistics, which depend on Indian infrastructure for third-country trade.

"The previous mechanism had offered a streamlined route through India, cutting transit time and cost. Now, without it, Bangladeshi exporters may face logistical delays, higher costs, and uncertainty. Additionally, Nepal and Bhutan, both landlocked nations, may raise concerns about restricted transit access to Bangladesh, especially as this move will hamper their trade with Bangladesh," Srivastava said.

He added that Bangladesh's plans for creating strategic base near Chicken's Neck area with China's help may have prompted this action.

On the other hand, India always supported Bangladesh cause. India allows one way zero tariff access to Bangladesh goods (all except alcohol and cigarettes) to vast India market since past two decades.

The India-Bangladesh trade stood at $12.9 billion in 2023-24.