Tit for Tat: India Cancels Transhipment Facilities for Bangladesh Cargo

Manas Dasgupta

NEW DELHI, Apr 9: In an apparent move to hit back Bangladesh against its chief advisor Mohammad Yunus’ invitation to China to extend its economy into the strategically important Northeast India region, New Delhi has terminated the transhipment facility for Bangladesh’s export cargo to third countries using Indian land customs stations en route to ports and airports.

A government circular dated April 8 and released on Wednesday said, “It has been decided to rescind… 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 circular was issued by the Central Board of Indirect Taxes and Customs (CBIC).

Indian exporters, mainly from the apparel sector, had asked the government to withdraw this facility to the neighbouring country. The facility enabled smooth trade flows for Bangladesh’s exports to countries like Bhutan, Nepal, and Myanmar. It was provided by India to Bangladesh in June 2020.

The announcement comes at a time when the US imposed sweeping tariffs against a number of countries, including India and Bangladesh. The earlier circular allowed transhipment of export cargo from Bangladesh to third countries using Indian land customs stations (LCSs) en route to Indian ports and airports. India-Bangladesh trade stood at $12.9 billion in 2023-24.

According to trade experts, the decision will help many 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 lesser 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 asked the government to suspend this order, which allowed transhipment of Bangladesh export cargo to third countries through the Delhi air cargo complex. AEPC chairman Sudhir Sekhri said 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 Indira Gandhi International Airport in Delhi, resulting in exports of Indian apparel through the Delhi air cargo complex becoming uncompetitive.

“This will help in rationalization of freight rates resulting in less transportation cost to the Indian exporters besides decongesting the airports leading to the shorter transit time to ship the goods,” AEPC secretary general Mithileshwar Thakur said.

Think tank Global Trade Research Initiative (GTRI) founder Ajay Srivastava said the withdrawal of this facility was likely to disrupt Bangladesh’s export and import logistics, which depend on Indian infrastructure for third-country trade. “The previous mechanism 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,” Mr Srivastava said.

He said Bangladesh’s plans for creating a strategic base near the Chicken’s Neck area with China’s help may have prompted this action. India has always supported Bangladesh’s cause, as it allowed one-way zero tariff access to Bangladesh goods (all except alcohol and cigarettes) to the vast Indian market for the last two decades.

However, India-Bangladesh relations nosedived dramatically after the interim government headed by Muhammad Yunus failed to contain attacks on minorities, especially Hindus, in that country. In addition, during his four-day visit to China, from March 26-29, Mr Yunus had remarked that India’s north-eastern states being landlocked entirely depended on Bangladesh for access to ocean. This statement was widely interpreted as an attempt by Dhaka to assert its leverage over access to the Northeast — a matter of concern for Delhi. Yunus’ efforts to portray Beijing as a new strategic partner have further complicated the already fragile India-Bangladesh relationship.

“The seven states of eastern India, known as the Seven Sisters, are a landlocked region. They have no direct access to the ocean,” Yunus said. “We are the only guardian of the ocean for this entire region. This opens up a huge opportunity. It could become an extension of the Chinese economy — build things, produce things, market things, bring goods to China and export them to the rest of the world,” he had said.

Mr Srivastava noted that India had consistently supported Bangladesh’s interests but its plan

to establish a strategic base near the Chicken’s Neck area with China’s assistance may have prompted this action. Bangladesh has invited Chinese investment to revitalise the airbase at Lalmonirhat, near India’s Siliguri Corridor,” Srivastava said.

The North-Eastern states of Assam, Arunachal Pradesh, Manipur, Meghalaya, Nagaland, Mizoram, Tripura and Sikkim collectively have a 1,596 km long international border with Bangladesh, 1,395 km border with China, 1,640 km border with Myanmar, 455 km border with Bhutan and 97 km border with Nepal, but are only connected with the rest of India through a 22 km strip of land called the ‘Chicken Neck’ corridor.

However, Mr Srivastava noted that the decision could raise questions regarding India’s commitments under World Trade Organization (WTO) provisions, which mandate freedom of transit for goods to and from landlocked countries.

“According to WTO rules, particularly Article V of the General Agreement on Tariffs and Trade (GATT) 1994, all WTO members are required to allow freedom of transit for goods moving to and from landlocked countries. This means such transit must be unrestricted, free from unnecessary delays, and not subject to transit duties,” Srivastava explained.

Further support comes from the WTO Trade Facilitation Agreement (TFA), Article 11, which strengthens and modernises the transit provisions under GATT. It calls for transparent procedures, reduced inspections, and regional cooperation, while promoting practical solutions such as guarantees or bonds to ease cross-border trade. These rules aim to ensure that landlocked countries such as Nepal and Bhutan have efficient and fair access to global markets via neighbouring transit countries such as India.