Wrongdoings centering export and import await harsher penalties under the new customs act that provides for a slew of stern punitive actions against trade-based offences.

The law, passed in parliament on October 25, 2023, might be enforced through issuing a gazette with the Finance Act 2024, officials said.

The National Board of Revenue (NBR) is currently working on drafting the rules for implementing the new act, they added.

A recent analysis, conducted by Business Initiative Leading Development (BUILD), shows a substantial hike in the amount and intensity of the penal measures in the new act compared to the Customs Act 1969.

However, economists find it justified to curb the volume of misdeclaration, under-invoicing and over-invoicing and check trade-based money laundering.

According to Global Financial Integrity, US$8.27 billion had flown out of Bangladesh on average annually (between 2009 and 2018) through under-and over-invoicing in export and import trade.

Talking to the FE writer, a senior customs official has acknowledged the ramping up of penal measures though "area of penalties has been cut down".

The BUILD review has found 98 subheadings of penalties in the customs act 1969 while the latest customs act contains 45.

However, in most cases penalties have been made harsher in the new law .

For instance, for false statement in import-export (unreal statement section 33), customs authorities are empowered to impose fourfold penalties under the new act, instead of existing twofold.

In case of delay in payment of duties, taxes or other changes within the specified date after import-export trade, the customs would charge 10-percent penalty (as interest) on the tax. The same penalty would also be imposed on any outstanding amount.

However, the provision of penalty is not present in the current act, the analysis says.

On attempt to unload or load goods from the customs point other than declared ports, the new act has reduced penalty but increased the time of imprisonment for at least one year, keeping maximum six years' jail unchanged.

However, penalty has been reduced to two times from existing ten times on value of the goods.

Fines have also been increased for irregularities in transshipment of goods, temporary stock of import goods, boat-notes, declaration of cargos or arrival time of transport, routes, crew, passenger, names of customs station as arrival of goods.

As per Trade Facilitation Agreement (Article ii: (b) additional fees, charges etc beyond customs duty will be considered as ODC, which is contradictory to the TFA agreement and WTO rules.

Md Nooruzzaman, senior Research Associate of BUILD, has observed an increased penalty by two to fourfold in the new act and suggested a cautious step considering Bangladesh's upcoming graduation to the middle-income status.

"Considering the LDC graduation it is important to be cautious about imposing higher penalties, whether these penalties would be included as ODCs(Other Duty and charges) as per WTO rules ( Article 1.1-b) and crosses the MFN(Most Favoured Nation) rate which is obligatory condition after graduation," he said.

Chairman and founder of Policy Exchange Bangladesh Dr Masrur Reaz, however, says penalty is unlikely to be considered as fees or charges as defined in the TFA.

"Increasing penalty for customs-related offences was due as many of the penalties are age-old considering inflation and value of money in recent times," he adds.

He notes that high penalties give a message and help to check wrongdoings.

Dr Zahid Hussain, former lead economist at the World Bank (WB) Dhaka office, has found the penalties 'nondiscriminatory' in nature that has no scope to contradict TFA of the World Trade Organisation.

"Such penalties are required for good governance and reforms as its not different for importers and local industries," he says.