Fabric traders in Bangladesh are reportedly using forged letter of credit (L/C) documents to obtain materials from the country's Export Processing Zones (EPZs) to sell into domestic markets.

The Daily Star, a Bangladeshi online daily, reports an increase in such smuggling activities and quotes customs sources as saying that traders are using the forged documents to evade paying duties and taxes.

Factories within EPZs can export and import goods without paying duties and taxes. Factories outside the EPZs making goods for export only may also buy materials from suppliers within these zones without paying duty. Such buyers must however provide L/Cs as evidence that fabric purchased from these sources is ultimately destined for export markets.

Investigations

The Daily Star says traders have been showing fake L/C documents to buy fabrics from the EPZ factories that are then sold into the local market. The report goes on to cite two tax evasion incidents investigated earlier this year.

The first case allegedly involved traders working in collaboration with a forwarding agent to release goods from a foreign company based at the Dhaka EPZ. Investigators apparently found that the documents submitted to obtain duty and tax free materials included what appeared to be an L/C on behalf of the Shanta Garments International Ltd. opened with the Amin Court branch of Agrani Bank.

Banks deny involvement

The Daily Star reports that the bank wrote to the investigators saying it had not opened the L/C submitted to the customs authorities, thereby indicating that false documentation was used in this case.

A director of the foreign company, Korea's Goriong BD Textile, reportedly told a customs hearing that he had signed documents without realising they were false. The company has appealed against a fine levied on them by the customs authorities for its involvement in the case.

The Daily Star reports another incident in which customs officials challenged a person who had arrived to release goods, also from the Dhaka EPZ. He was asked to produce documentation and showed what purported to be an L/C, which was later confirmed as a forgery by the bank named on the documentation.

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