India Ends Trans-shipment Route for Bangladesh, Trade with Nepal & Bhutan Disrupted

Chennai – In a sudden policy shift, India has withdrawn the trans-shipment facility for Bangladesh that allowed cargo movement through Indian territory to landlocked neighbors like Nepal and Bhutan. The move, enforced through a new notification by the Central Board of Indirect Taxes and Customs (CBIC), is expected to severely impact regional trade and logistics for Dhaka.

The rescinded provision, Circular No. 29/2020-Customs, had allowed export cargo from Bangladesh to pass through Indian Land Customs Stations (LCSs) en route to Indian ports and airports for onward shipment to third countries. This arrangement significantly reduced both cost and transit time for Bangladeshi exporters.

In its Tuesday directive, CBIC stated:

“It has been decided to rescind the aforesaid Circular… with immediate effect. Cargo already entered into India may be allowed to exit the Indian territory as per procedure.”

Strategic Undercurrents Behind the Move

While no official reason was cited, strategic observers link the decision to Bangladesh’s growing engagement with China in sensitive regions. Dhaka’s recent overtures to establish a strategic airbase at Lalmonirhat — alarmingly close to the Siliguri Corridor (Chicken’s Neck) — with Chinese assistance has raised red flags in New Delhi.

“India is clearly sending a message,” noted a senior analyst at the Global Trade Research Initiative (GTRI). “If Bangladesh is seen cozying up to adversaries in geopolitically sensitive zones, economic concessions can’t be taken for granted.”

Ripple Effects: Trade, Trust & WTO

The decision is expected to cause major disruptions for Bangladesh’s trade with Nepal and Bhutan. Without access to Indian land routes, exporters now face increased shipping costs, delays, and logistical hurdles.

Critics also highlight that this abrupt move could be interpreted as inconsistent with India’s commitments under WTO norms, particularly Article V of GATT 1994, which calls for:

• Freedom of transit for landlocked countries’ goods
• No undue delays or restrictions
• No transit duties or discriminatory treatment

Though the original trans-shipment arrangement was a policy gesture and not a WTO obligation, the timing and manner of its withdrawal could trigger diplomatic and trade scrutiny.

India’s Leverage and the Bigger Picture

Over the past two decades, India has offered Bangladesh extensive zero-tariff access (excluding alcohol and cigarettes) to its market — a goodwill gesture rooted in regional economic cooperation. However, this latest move indicates New Delhi is now more willing to leverage access and logistics as geopolitical tools.

This recalibration in South Asia’s trade dynamics signals a more assertive Indian posture, especially as regional security becomes intertwined with economic corridors and infrastructure diplomacy.