FOC Import in Bangladesh RMG Sector: Policy Rules, Limits, Compliance & 2025–2026 Updates on No Cost Basis Imports

Although the term “FOC” is sometimes confused with FOB, it is not part of Incoterms...

Introduction

Import under FOC (Free of Cost) or No Cost Basis is a specialized trade mechanism widely used in Bangladesh’s export-oriented garment industry. 

Although the term “FOC” is sometimes confused with FOB, it is not part of Incoterms. Instead, it is governed by national regulations under Bangladesh’s import policy framework. This facility plays a vital role in enhancing export competitiveness, cost efficiency, and global buyer collaboration in the RMG sector.

What is FOC Import (No Cost Basis Import)?

FOC import refers to the import of goods without any payment from the importing country.

Under this arrangement:

• Foreign buyers supply raw materials or inputs

• Local manufacturers process these inputs

• Finished goods are exported back to the buyer

Common categories of FOC imports include:

• Raw materials for export production

• Free samples and trial consignments

• Replacement shipments

This model reduces working capital requirements for procurement by manufacterer and strengthens buyer-supplier integration.

Legal Framework of FOC Import in Bangladesh

FOC imports are regulated under the Import Policy Order (IPO) issued by the government.

Key provisions include:

• Import Policy Order 2015–2018 (Clause 9(f))

• Import Policy Order 2021–2024 (Chapter 4, Section 21(8))

These regulations define eligibility, procedural compliance, and operational limits for No Cost Basis imports in Bangladesh.

FOC Import Limits and Recent Policy Updates

Traditional Limit

Historically, FOC import entitlement was capped at:

• One-third (1/3) of previous year’s export earnings

Current Practice

• In many cases, the limit has been increased to 50% of export value

Latest Policy Development (2025–2026)

As reported by The Financial Express (December 2025):

• The government is planning to revise FOC import ceilings

• New limits may vary by industry sector

• Policy focus is shifting toward domestic value addition and industrial protection

This reflects a move toward a balanced trade policy that supports exports while safeguarding local industries.

Export Obligation Under FOC Facility

FOC import is strictly tied to export performance.

Manufacturers must:

• Use imported materials only for export production

• Export finished goods to the same foreign buyer

Restriction:

• Sale in the domestic market is strictly prohibited

This ensures alignment with Bangladesh’s export-led growth strategy.

Simplified Import Process Without LC

One of the major advantages of FOC import is procedural simplicity.

Under this system:

• No Letter of Credit (LC) is required

• No foreign currency remittance is needed

• No TT or documentary collection process is involved

Instead, importers must submit:

• A bank certificate confirming the transaction nature

This reduces transaction costs and speeds up the import process.

Eligibility Criteria for FOC Import

To access FOC import benefits, firms must:

• Be a recognized export-oriented RMG manufacturer

• Operate under the Bonded Warehouse System

This ensures duty-free imports are used exclusively for export purposes.

Compliance Conditions and Operational Requirements

FOC imports must meet strict compliance conditions, including:

• Consignment-based import procedures

• Utilization Declaration (UD) issued by BGMEA

• No outward remittance of foreign currency

• Accurate documentation of quantity, value, and description

• Mandatory repatriation of export proceeds

Additional flexibility includes:

• Inter-bond transfer of raw materials

• Processing through dyeing, printing, and finishing units

These conditions ensure traceability, accountability, and regulatory compliance.

Minimum Value Addition Requirement

To maintain economic contribution, exporters must meet minimum value addition thresholds.

Standard rate of Value Addition include:

• Woven & Knit per dozen < USD60: 20%

• Woven & Knit per dozen > USD60: 10%

• Baby-wears : 15%

This ensures Bangladesh retains a share of export value beyond basic assembly operations.

Risks and Misuse of FOC Import Facility

Despite its benefits, misuse remains a concern.

Common issues include:

• Importing without export obligations

• Exceeding approved limits

• Diverting duty-free materials to local markets

Such practices lead to:

• Tax evasion

• Market distortion

• Unfair competition

These risks highlight the need for stronger monitoring systems.

Regulatory Actions and Penalties

Authorities impose strict penalties for non-compliance.

These include:

• Suspension of import/export privileges

• Cancellation of Bond licenses

• Blocking Business Identification Number (BIN)

• Legal action and criminal proceedings

Such enforcement ensures integrity in Bangladesh’s trade and customs system.

Industry Perspective: Growth vs Protection

Exporters’ Position

Exporters advocate for expanded FOC facilities due to:

• Lower production costs

• Reduced financial risk

• Increased competitiveness in global markets

Industry insights reported by The Financial Express suggest:

• Removing FOC limits could generate $5 billion in additional exports

• Growth potential is significant in the man-made fiber (MMF) segment

Domestic Industry Concerns

Local manufacturers highlight potential risks:

• Reduced demand for locally produced inputs

• Decline in backward linkage industries

• Lower domestic value addition

They argue that unrestricted FOC imports could shift the industry toward low-margin assembly operations.

Emerging Trends and Policy Proposals (2026)

Sector-Specific FOC Limits

• Future policy may introduce differentiated ceilings based on industry capacity

Emphasis on Value Addition

• Ensuring higher local content in export products

Proposal for Local FOC Sourcing

Recent industry discussions indicate:

• Manufacturers are seeking approval to source materials FOC from domestic suppliers

• Proposal submitted to the National Board of Revenue (NBR)

Expected outcomes:

• Strengthening local supply chains

• Boosting domestic industrial growth

• Enhancing overall value addition

Recommended Policy Reforms

To improve governance and efficiency, experts recommend:

• Standardized bank certificate formats

• Digital tracking and reporting systems

• Centralized database for FOC transactions

• Real-time monitoring of import utilization

• Clear accountability framework

These reforms would enhance transparency, compliance, and policy effectiveness.

Future Outlook for FOC Import in Bangladesh

FOC import will remain a key driver of Bangladesh’s export economy.

However, future success depends on:

• Balanced policy implementation

• Strong regulatory oversight

• Integration with domestic industrial development

The ongoing reforms indicate a shift toward a data-driven, controlled, and sustainable FOC import system.

Conclusion

FOC import, or No Cost Basis import, is an important component of Bangladesh’s export-oriented industrial strategy. It enables cost-efficient production and strengthens global trade relationships.

At the same time, it presents challenges related to compliance, misuse, and domestic industry impact.

Recent policy discussions, highlighted by The Financial Express (2025), show that the government is actively working to refine the framework. The goal is to balance export growth, value addition, and industrial sustainability.

A modern, transparent, and well-regulated FOC system will be essential for maintaining Bangladesh’s competitiveness in the global apparel market.

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