Proposed customs valuation raises risk of lube market distortions, say stakeholders

Highlights:
- Bangladesh
proposes ICIS-based lubricant customs valuation replacing fixed benchmarks
- Industry
says no global ICIS benchmark exists for finished lubricants
- Stakeholders
warn proposal may trigger valuation disputes and misdeclaration
- Lubricant
market worth Tk8,000 crores with strong local production
- Lower
assessed values may reduce revenue and enable under-invoicing
- Industry
urges using actual import data instead of ICIS formulas
Bangladesh's lubricant sector is pushing back
against a proposed budget measure that would replace fixed customs values for
synthetic and semi-synthetic lubricants with a floating formula based on
Independent Commodity Intelligence Services (ICIS) price assessments.
Industry stakeholders argue that because no
internationally recognised ICIS benchmark exists for finished lubricants, the
proposal risks creating valuation disputes, revenue leakage and market
distortions rather than strengthening tax compliance.
In the proposed FY2026-27 budget, the National
Board of Revenue (NBR) suggested replacing the existing fixed minimum customs
values for imported synthetic and semi-synthetic lubricants with a floating
valuation formula based on international price assessments published by ICIS,
plus a minimum 30% markup.
Currently, Bangladesh applies minimum customs
values of $3,200 per tonne for semi-synthetic lubricating oil and $5,000 per
tonne for synthetic lubricating oil. The budget proposal would replace those
separate benchmarks with a common ICIS-based assessment method.
However, industry stakeholders argue that the
proposed mechanism may fail to achieve its intended goal of revenue protection because
ICIS does not provide any internationally recognised benchmark price for
finished synthetic or semi-synthetic lubricant as standalone products.
They fear that instead of strengthening customs
valuation, the new method could create valuation disputes, encourage
misdeclaration and allow lower-quality products to enter the market.
According to the Bangladesh Lube Blenders
Association, Bangladesh's lubricant market is currently worth around Tk8,000
crores, with annual demand estimated at 1,60,000-1,70,000 tonnes. More than
half of the domestic demand is now met by local blending companies.
The market has expanded rapidly due to rising
demand from transport, industrial manufacturing, power generation, agriculture
and construction sectors.
Major international brands including Mobil, BP,
TotalEnergies, Castrol and Petronas operate in Bangladesh, while state-owned
Jamuna Oil, Padma Oil and Meghna Petroleum are involved in blending and
distribution. Local companies such as Lub-ref Bangladesh have also established
a significant presence in the market.
Why the industry objects
In a recommendation submitted to the NBR,
industry stakeholders said ICIS publishes prices for different categories of
base oils but does not provide a standard international reference price for
finished synthetic or semi-synthetic lubricants.
They said finished lubricants are not simply
base oils; rather, they are highly engineered products produced through
combinations of different base oils, additive technologies and proprietary
formulations.
As a result, the industry asked which ICIS price
would be used as the benchmark and whether it would be based on a particular
grade, viscosity level, market or time period.
Azam J Chowdhury, managing director of MJL
Bangladesh PLC, said there is no global ICIS standard for synthetic or
semi-synthetic lubricants because they are blended products.
"These oils are produced using different
combinations of Group I, Group II, Group III, Group IV and Group V base oils.
The exact formulation is a patent and commercial secret of the manufacturers.
It is not possible for customs authorities to determine the composition and
calculate a uniform value," he said.
He added that two products labelled as synthetic
lubricants may have completely different formulations and production costs
depending on the technology used by manufacturers.
Revenue loss, market distortion risks
Industry stakeholders fear the proposed
valuation system could unintentionally reduce government revenue by creating a
gap between actual import prices and customs-assessed values. They said
high-quality synthetic lubricants are currently traded internationally at
around $6,000 per metric tonne or higher, while the proposed ICIS-based formula
could result in significantly lower assessed values in some cases.
Such a gap, they warned, may encourage
under-invoicing and reduce collections from customs duties, VAT, advance tax
(AT) and advance income tax (AIT). They also raised concerns that manipulated
import values could increase risks of trade-based money laundering.
The industry further argues that finished
lubricants cannot be valued solely based on base oil prices. The final price
depends on several factors, including advanced additive packages, research and
development, international manufacturer approvals, packaging and supply-chain
costs. In many premium lubricants, additives account for a substantial portion
of production costs and may even exceed the value of base oils.
Stakeholders say applying a uniform 30% markup
on base oil-related benchmarks would fail to capture the actual value of
finished lubricant products.
They also fear that an unclear valuation
mechanism could create unfair competition, allowing businesses that
under-declare import values to gain an advantage over compliant companies importing
genuine branded products.
According to industry representatives, this
could encourage the entry of low-quality lubricants into the market, posing
risks for vehicles, industrial machinery, power plants and agricultural
equipment. Modern engines, particularly hybrid and high-performance vehicles,
require lubricants that meet strict technical specifications, and the use of
unsuitable products could increase maintenance costs and reduce equipment
efficiency, they added.
An NBR official told The Business Standard that
the revenue authority is discussing the issue with both lubricant importers and
local blending companies.
"After receiving applications from the
industry, we are talking with both groups. We want to formulate a policy that
does not harm any industry while ensuring proper revenue collection," the
official said.
The official added that changes could be
incorporated into the final budget.
Wayez Mahmud, Director (Sales & Marketing)
at United Lube Oil Limited, the distributor of Petronas lubricants in
Bangladesh, said it is not the right time to introduce an ICIS-based customs
valuation system for lubricant imports.
He argued that the NBR should rely on actual
import data and declared transaction values rather than a pricing benchmark
that does not exist for finished lubricant products.
"About 80% of the lubricant market consists
of mineral oils, while synthetic and semi-synthetic oils account for a
relatively small share. Synthetic lubricants are produced using different
combinations of base oils from various groups, making it impossible to
determine a uniform value based on ICIS references," he told The Business
Standard.
He suggested that the NBR adopt a data-driven
approach based on the average import prices of different importers, supported
by exporters' declared values and recent import statistics.
















