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'Luggage party' goods take over cosmetics market

  • Published at 05:46 pm June 12th, 2017
  • Last updated at 06:44 pm June 12th, 2017
'Luggage party' goods take over cosmetics market
Things that we like but are not made in our country have to be imported, and when we import goods the government collects a tax. Taxation makes goods pricier, and that gives birth to smuggling which gives us cheaper ware. There is one market however, where the smuggled products are pricier than those legally imported. Cosmetics, toiletry and perfumery products, identified by HS codes 33.03 to 33.07, are all subject to high customs duties. In the upcoming budget, the duty for cosmetics will be 50% and toiletries like soaps, shaving creams and deodorants will face a 25% duty. Only the tax for hair products has been lowered from 60% to 50%. [caption id="attachment_68801" align="aligncenter" width="800"]Air crews play a crucial role in the smuggling of cosmetics, as their check-in baggage is rarely screened Mehedi Hasan/Dhaka Tribune Air crews play a crucial role in the smuggling of cosmetics, as their check-in baggage is rarely screened Mehedi Hasan/Dhaka Tribune[/caption] Cosmetic and toiletries products from brands like Noir, L’oreal, Garnier, Mac, Ponds and Dove are some of the products commonly bought in Bangladesh. There are essentially two grades of these products in the markets, one is imported and the other, as the local retailers call it, 'luggage party' goods. The luggage party goods are products brought in by international travellers and airline crew in quantities within the duty-free limit, or sometimes beyond those amounts but without any duty. Travellers bring branded cosmetics from different countries saying they are for personal use or gifts and later sell them to the retailers. Airline crew take advantage of the fact that the 20 or so kilograms of luggage they are allowed are rarely if ever screened. Our correspondents went undercover to several cosmetics stores in the city to find out to what extent the smuggled goods had penetrated the market. A wholesaler and retailer at the Dhaka North City Corporation (DNCC) Market in Gulshan 1, said he has long been dealing with luggage party. According to him, the procedure begins with airline crew who take pre-orders of cosmetics products. “Most shopkeepers here have connections with airline crew members. When we need products, we call them and give them name of the brand and quantity. As they can carry more than 20kg in each international flight so we get a continuous supply from them in cheap rate.” Such products are mostly bought in countries like USA, UK, Canada, China, Malaysia, Thailand, Germany, Italy, India and Singapore. A salesman in a retail cosmetics shop in capital's Bashundhara City said most people travelling to Malaysia, Singapore, Thailand, and India only travel abroad to bring such products to sell. Owners of different cosmetic shops also travel with family, friends or by themselves to different countries to bring cosmetics for showrooms, said a salesman at the same market.

So why is it pricier?

When these correspondents, posing as customers, asked a salesman at Bashundhara City why the smuggled cosmetics were more expensive, he explained that being hauled by tourists was the guarantee of a product being made originally in that country. On the other hand, the imported goods are often mixed in quality because the importers ask foreign manufacturers to help cut costs. “So while the imported goods come at a lower quality but higher cost, the luggage parties bring the best quality stuff and sell them to us cheaply,” he said. The customers who are looking for luggage party products because of their superior quality, and the retailers' margin is also handsome. [caption id="attachment_68802" align="aligncenter" width="800"]Retailers make a handsome profit on 'luggage party' cosmetics, as they buy them more cheaply but sell them at higher prices than imported equivalents Mehedi Hasan/Dhaka Tribune Retailers make a handsome profit on 'luggage party' cosmetics, as they buy them more cheaply but sell them at higher prices than imported equivalents Mehedi Hasan/Dhaka Tribune[/caption] He pulled out several eyeliners of the same brand, and said that the smuggled ones were bought by a carrier for $8 in USA and he would charge a customer $12 or about Tk1,000 for it. “On the other hand, the imported one is much cheaper.” He said that he had bought a bottle of shampoo from a top brand for Tk800 from a luggage party and would sell it for Tk1,200. The same product, if imported would have a fixed price so the profit would be low.

How 'luggage party' works

The man in Gulshan 1 market who revealed the secrets of the cosmetics smuggling trade said that he used to bring the goods in luggage himself back in 2000s. He is now importing from USA and the UK. He boasted that he was a pioneer in this trade, having shown many retailers in the same market the how to's of this process. “All they need to have is some pre-arrangement with some customs officers,” he said. “They travel to different countries and while coming back, they bring gifts for family or friends. Sometimes they sell those spare products to us but our regular suppliers are cabin crew,” said another retailer. luggage-of-smugglers

Sharp drop in cosmetics import

How much of the market is taken by these smuggled goods? Bangladesh Cosmetics and Toiletries Importers Association (BCTIA) General Secretary Jahangir Alam said that the market size of imported cosmetics and toiletries is approximately Tk4,500 crore. In the last two or three years, this had sharply dropped from a market size of about Tk6,000-6,500 crore, he said. The volume of products brought through luggage party was at least Tk500 crore by his estimates. Because of the significant rise of smuggled products, the demand for imported cosmetics had declined, Jahangir said. “Imported products meet 99% of the demand for cosmetics and toiletries and 1% is met by local producers. Of that, Unilever has 40% market share and rest is covered by importers and other sources,” he added. [caption id="attachment_68803" align="aligncenter" width="800"]Imported cosmetics are sold at lower prices than 'luggage party' equivalents as the imported versions are of a lower quality to reduce prices Mehedi Hasan/Dhaka Tribune Imported cosmetics are sold at lower prices than 'luggage party' equivalents as the imported versions are of a lower quality to reduce prices Mehedi Hasan/Dhaka Tribune[/caption] A recent report of the State of the Global Islamic Economy Report 2016-17 showed Bangladeshis spent a whopping $2.5 billion dollars on cosmetics in 2016 alone. The report said Bangladesh is the sixth largest buyer of cosmetics in the Muslim world. Asked about the smuggling, Customs Intelligence and Investigation Directorate (CIID) joint commissioner Saifur Rahman said: “People travelling from abroad can bring in maximum 5-6 of the same products of a brand with a maximum weight of 30kg. They have to pay duties if it exceeds the limit.” Director General of Customs Intelligence and Investigation Directorate Dr Moinul Khan told the Dhaka Tribune that they had previously taken actions against some cabin crew who were found involved in smuggling. “We found some airline staff involved and one of them was carrying gold. He was arrested and lost his job,” he said. The recently announced budget for fiscal year 2017-18 has introduced some measures to prevent hauling goods in luggage. It has proposed to limit the number of visits at three for people entering into the country with duty free products. The Passenger Baggage Rules keeps the limit of tax free products at $400 for incoming passengers. Passengers can carry different products not exceeding 65kg without paying any tax or duty as carry on luggage. In addition to that limit, people can also bring clothing, books, periodicals, books, personal items of additional 35kg as duty free items. Bangladeshi crew or officials working in Biman or any other airline operating in Bangladesh can bring duty free goods of $300 through baggage as duty free while entering Bangladesh. The same benefit applies for any Bangladeshi sailor of officials of ships entering into the country through sea ports from abroad.
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