India blocks trans-shipment facility for Bangladesh to export goods to other countries. Here's why

The Indian government has terminated the trans-shipment facility that gave Bangladesh's export cargo shipments access to go via India to a third country. With this blocking, the crucial trade route to Bhutan, Nepal, and Myanmar will be affected.

According to a government circular, Bangladesh will be unable to access Indian land customs stations en route to ports and airports.

The facility was provided to Bangladesh in 2020 to enable smooth trade and exports. Meanwhile, Indian exporters from the apparel sector had urged the government to take note of the situation and withdraw this access to the neighbouring country.

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"It has been decided to rescind the 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.

This announcement comes amid tariffs by the Trump administration in the US. 37% taxes have been levied on Bangladeshi goods entering America. Trump tariffs have been imposed of countries across the world, and even the farthest end of Antarctica features on the list.

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 less 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 trans-shipment 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 the rationalisation of freight rates, resulting in less transportation cost to the Indian exporters, besides decongesting the airports, leading to a 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 a 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.

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

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

(With inputs from agencies)