The Indian government has announced the termination of a transshipment facility that previously allowed Bangladesh to route its cargo to third countries via Indian customs stations.
The decision, formalised through a Central Board of Indirect Taxes and Customs circular dated April 8, brings to an end a service introduced in June 2020 that facilitated smoother trade flows for Bangladesh’s exports to Bhutan, Nepal, Myanmar, and beyond. The circular rescinds the provision that permitted Bangladesh to use Indian ports and airports as transit points for its shipments destined for third countries. Under the now-defunct agreement, Bangladeshi goods would travel through Indian land customs stations (LCS) before reaching their final destinations, cutting down on transit time and costs. The cancellation of this arrangement has immediate consequences for the trade logistics between Bangladesh, India, and its neighbouring countries.
The move to terminate the facility has been met with mixed reactions. On one hand, Indian exporters, particularly in the apparel, footwear, and gems sectors, have welcomed the decision. They had long raised concerns about the competitive edge that Bangladesh gained through its access to Indian infrastructure. Exporters had frequently complained about the congestion and increased costs at Indian cargo terminals, especially at Delhi’s IGI Airport, where Bangladeshi shipments often occupied valuable space meant for Indian goods.
Ajay Sahai, Director General of the Federation of Indian Export Organisations (FIEO), emphasised that the closure of the transshipment facility would free up air cargo space, which had previously been overcrowded by Bangladeshi shipments. “We will have more air capacity for our cargo,” Sahai noted, pointing out that this would alleviate the excessive pressure on air freight rates and lead to better operational efficiency. However, the withdrawal of this facility has broader regional implications, particularly for Bangladesh and its neighbours, Nepal and Bhutan. The transshipment mechanism had offered a streamlined route for Bangladeshi exports, and trade experts warn that its termination could cause disruptions. Ajay Srivastava, Founder of the Global Trade Research Initiative (GTRI), stated that the cancellation could lead to logistical delays, higher costs, and increased uncertainty for Bangladeshi exporters.
The withdrawal of this facility comes in the context of growing geopolitical tension in the region. In a controversial remark during his recent visit to China, Bangladesh’s interim government adviser, Muhammad Yunus, had urged China to leverage its economic influence in the region, highlighting the landlocked nature of India’s northeastern states as an opportunity for Beijing. Yunus’ comments had described the region’s lack of direct access to the ocean as a “strategic opportunity” for China, further complicating the political backdrop to India’s decision.
From a trade law perspective, the termination has raised questions about its alignment with international norms. The World Trade Organization (WTO) mandates that member countries provide unhindered transit access for goods moving through landlocked countries. Both India and Bangladesh are members of the WTO, and as such, the withdrawal of this facility could lead to further scrutiny and diplomatic exchanges on trade facilitation between the two nations.
The decision also comes at a time when both India and Bangladesh face pressure from global trade dynamics. The United States has imposed tariffs on several countries, including India and Bangladesh, which could further complicate trade relations. While Indian exporters may gain from reduced competition in certain sectors, the broader impact on regional trade could be more complex, especially for landlocked countries like Nepal and Bhutan that rely on Bangladesh as a transit hub for their own exports.
In the coming months, the real challenge will lie in managing the logistical fallout from this decision. While some sectors in India may benefit, others could face setbacks as trade routes are recalibrated and new agreements are negotiated. The government’s next steps will be crucial in maintaining smooth trade relations with its neighbours while balancing the needs of domestic exporters.
India Halts Bangladesh’s Use of Indian Ports for Transshipment
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