India has revoked the transhipment facility that allowed Bangladesh to export goods to third countries—such as Bhutan, Nepal, and Myanmar—via Indian land routes.

The Central Board of Indirect Taxes and Customs (CBIC) announced the decision in a notification issued on Tuesday, rescinding with immediate effect an earlier circular dated June 29, 2020, according to the India’s media.

"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," said the CBIC' circular, dated April 8, Business Standard reports.

The decision will help many of the Indian exporting sectors like apparel, footwear, and gems and jewellery.

Bangladesh is a big competitor of India in the textile sector.

"The previous mechanism had 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," Srivastava said.

He added that according to WTO (World Trade Organisation) rules, all 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. Both India and Bangladesh are members of this Geneva-based organisation.

The CBIC order stated that the 2020 directive had permitted the transshipment of goods from Bangladesh destined for third countries, allowing the use of an Indian customs station to access another port or airport. The CBIC has now withdrawn this provision.

The order further clarified that goods-laden vehicles already within Indian territory will be allowed to exit the country expeditiously.

Currently, Bangladesh utilizes Indian land routes for exporting goods to Nepal and Bhutan. Transshipment in this context involves the movement of Bangladeshi goods through Indian territory to reach the borders of Nepal and Bhutan. This process typically includes the exchange of goods-carrying vehicles (trucks, trailers) at the Bangladesh-India border and within Indian territory up to the Nepal and Bhutan borders. India's recent decision effectively terminates this transshipment arrangement.

It is worth noting that India and Bangladesh signed their first transit agreement in November 2010. Subsequently, in 2015, a protocol was signed by both governments granting India the right to use four river routes through Bangladesh, aimed at connecting Kolkata and Murshidabad with the Indian states of Assam, Tripura, and Meghalaya.

The cancellation of the transshipment facility is likely to have implications for Bangladesh's trade with Nepal and Bhutan, potentially necessitating alternative, and possibly more costly or logistically challenging, routes for their exports. The specific reasons behind India's decision have not been explicitly stated in the available information.