Bangladesh Raises Required Value-Added Rate for Garment Exports to a Maximum of 40%

Recently, Bangladesh officially issued the “2026‑2029 Import Policy Order.” The new policy significantly raises the minimum local value-added standards for garment exports and implements differentiated control according to product categories, cargo value, and raw material import modes. The value-added rate ranges from 10% to 40%, with the highest threshold rising to 40%, aiming to reduce the garment industry’s dependence on imported raw materials, cultivate local upstream and downstream supporting industries, and simultaneously prevent trade laundering risks.

The new regulations differentiate between back-to-back letters of credit and free-of-cost (FOC) raw material import modes. Under the standard back-to-back letter of credit mode, knitwear and woven garments with an FOB price above $60 per dozen maintain a 10% value-added rate; garments with an FOB price below $60 per dozen have their value-added rate increased to 30%; the minimum value-added rate for children’s clothing is 15%, and for underwear and synthetic fiber products, the requirement is 20%.

Regarding the model where brands provide raw materials for import free of charge (FOC), the threshold has been significantly raised: the value-added requirement for ordinary knitted and woven garments is 30%; for synthetic fiber garments and underwear products, it is directly increased to 40%; for children’s clothing, the FOC model value-added rate is raised from 15% to 30%, making it one of the categories most affected by this policy change. If enterprises fail to meet the minimum value-added rate, they will lose the benefits of raw material import duty reductions as well as eligibility for export cash incentives.

Bangladesh is the world’s second-largest garment exporter, with prominent shortcomings in domestic spinning and weaving support, leading to a large portion of fabrics and synthetic raw materials being imported from China. The free-of-charge raw material model is widely used in OEM orders for European and American brands. The implementation of this new policy will directly impact a large number of contract factories that rely on imported fabrics for simple sewing, forcing local garment enterprises to increase the proportion of domestic procurement and accelerating the construction of the local textile industry chain.

For domestic textile foreign trade enterprises, on one hand, the trade model of exporting fabrics and chemical fiber raw materials to Bangladesh will face changes in compliance thresholds; on the other hand, for the layout of the ‘China 1′ manufacturing projects in Bangladesh, it is necessary to recalculate costs and the risks associated with origin compliance. Industry analysis points out that in the short term, local small and medium-sized subcontracting enterprises will be under pressure, while in the medium to long term, it may drive the expansion of investment in Bangladesh’s local yarn and fabric production capacity.

This import policy is valid until the end of 2029, and the value-added assessment standards for exports such as footwear, bags, and furniture are also updated simultaneously.