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How to Setup Food Processing Business in Bangladesh

Food, life’s essential. Whether we eat to live or live to eat, one cannot survive without food. Food has evolved through the ages as per people’s culture and taste but over the last century the taste of food has gone beyond borders. 

Bangladesh is a country of 170 million people where the staple is rice. As per the culture of the sub-continent its’ cuisine is curry based which includes all types of vegetables, fish, lentils and meat. The general Bangladeshi cuisine also comes with the necessity of a lot of spices. Mainly a Muslim major country, alcohol and pork are not open for sale. The recent trend has seen a lot of restaurants business growing some of the bigger cities which are offering all kinds of cuisines from around the world along with different fusions. While all this development is very encouraging, the food processing industry gives birth to a lot of legal conundrums every day.

There is the import of the basics such as from rice, meat, milk, vegetables, fruits etc. while export of fish, spices and other seasonal vegetables go out of the country. The food processing industry thus plays a huge role both internally and externally. Food products being mostly perishable probably have the highest needs for quality control, climate control and hygiene. This is also the sector where packaging makes the biggest difference as having the wrong packaging can ruin any consignment of food very quickly. How the food are being produced also attracts a lot of question with the presence of so many chemicals in the market. The labor working behind the industry and the pricing of the food are the two final cogs on the two sides of the spectrum. All these factors have legal implications one way or other.
How to Setup Food Processing Business in Bangladesh

LICENSE AND REGISTRATION PROCESS

So, in Bangladesh, who is responsible for the quality of food? Overall, generally the quality of product is first tested and determined at the Bangladesh Standard and Testing Institution commonly known as BSTI. BSTI takes into account all the factors including the process, system by which the product is created, the quality, whether it is fit for import or export amongst other things. Most importantly it provides a standard mark which shows BSTI certification for a product. There is a list of One Hundred and Eighty-One products which must be verified and tested by BSTI before they are sold in the market. Similarly, there is a list of Fifty-Four imported products which have been brought under mandatory certification of BSTI before customs clearance. Twenty-Three of these products are food products. Therefore, many of the food processing companies need to obtain license from BSTI before their products are sold in the market.

Amongst all kinds of food, meats are very sensitive as meats are highly perishable and can actually be the carrier of different kinds of pathogens and bacteria. Over the last two decades meat have been the center of outbreaks such as bird flu and swine flu, therefore it is a necessity for meat to be tested properly. It becomes more important in a country like Bangladesh where every year, during certain religious celebrations a lot of animals are sold and bought by people who are not professionals. Therefore, the Department of Livestock has to be very careful so that no harmful substances are fed to the animals or anything injected to animals which can be detrimental to human lives when the meat of these animals are consumed. With regards to meat processing, there is a license required from the Department of Livestock for slaughtering, meat processing and meat selling facilities.

The same way as meat, fishes and crustaceans such as prawn and lobsters are also very perishable which must be handled and tested properly especially as it can prove to be fatal if toxicity develops. The recent years have seen a lot of fish farms and prawn hatcheries popping up. For setting up a fishery or hatchery, registration is required form the Department of Fisheries. Further, for the processing and packaging of fish and prawn, a license would be required from the Department of Fisheries.

For setting up any company to run food processing business in Bangladesh, it generally starts with the registration of a company at the Registrar of the Joint Stock of Companies also known as RJSC. 

For any import in Bangladesh, it is required to have an Import Registration Certificate and similarly for any exports, an Export Registration Certificate is necessary. If a factory is set up for processing of the meat, fish or prawn or any other food products, then a Factory License is required from the Department of Inspection for Factories and Establishments (DIFE). Other than that, Fire License, Environmental Clearance Certificate, Trade License, VAT registration certificate and TIN (Tax identification number) are required to run the food processing business. 

LEGAL ISSUES 

The food processing industry is so massive, it is bound to have a lot of legal issues. The legal implications especially with regards to this industry also evolves quite a bit due to necessity as different kind of food products are invented every day. Food processing and products require regular monitoring from the government. The Bangladesh Food Safety Authority or BFSA has the power to monitor any establishment processing food and can penalize an establishment as necessary under the Food Safety Act 2013. The inspectors have the power to enter any food establishment and collect sample as necessary and get them tested by their food analysts. If anything, illegal or detrimental is found in the food in excess of the law, they can levy the necessary scheduled punishments as per relevant acts and rules. Just to put things in context, in the recent years, a major concern was the use of a chemical called formalin which were used to make the fish and vegetables look fresher for a longer period of time. However, this chemical was detrimental to human health. Use of this substance is banned and a result the mobile courts and inspectors from BFSA took a string stand against use of this chemical in food.

The BSTI similarly can penalize any entity related to listed food products if they have not followed the proper procedure and did not secure the proper license under BSTI Act 2018. BSTI has its own force of inspectors to make sure whether or not the standard mark provided by the BSTI is misused in terms of quality of the product. Also, BSTI looks after any trade marks which is being illegally used. Additionally, the mobile courts will have the power to punish through fine, jail, seizure of materials or closure of the establishment in case of any illegal activity as prescribed by the BSTI. 

As the meat industry is extremely volatile for health and hygiene issues, the Director General of the Department of Livestock has the power to appoint Veterinary Officers to inspect and collect samples as necessary to ensure that the proper quality, hygiene and standard of the meat is maintained throughout the production process of the market and the remaining wastes are also properly disposed of. In case, the standard is not followed as per the law, the Director General or any Veterinary Officer vested power by him, will be able to take legal action under the Animal Slaughter and Quality of Meat Control Act -2011. 

Similarly, to the meat industry there is the fisheries and hatcheries industry which also produce a very sensitive payload which needs to be tested and handled with care. Fish and fish products are dealt with under a few laws which includes Fish and Fish Products (Inspection and Quality Control) Ordinance, 1983 which talks about the proper handling, packaging and disposal of the products and their bi-products. There is also the act regarding quarantine of fish and crustaceans which specifically focuses on making sure that any fish which can carry a harmful pathogen or can be dangerous in some way to other species or to the human body is quarantined as required under Fish Quarantine Act 2018. Some fishes and crustaceans require special arrangement and protocols which need to be followed during import and export to make sure they are safe for human consumption. There are inspectors employed mainly from the Department of Fisheries who look for discrepancies and on finding one give punishment as per the relevant acts or rules.

The labour law is also very relevant in the food processing industry, in the primary, secondary and tertiary sector. From those who are catching the fish or growing the rice, or feeding the cow, to ones processing these food products to ones selling them and also with food shops and restaurants, a group that is serving these food products. The food business would also face similar labour law issues such as wages, wrongful termination or dismissal, working hours & leaves, health & safety of the workers etc. under Bangladesh Labour Act 2006. A major issue with the food industry is the use of casual/seasonal labours as there are lots of seasonal food for which year-round permanent workers are not necessary. Employers are required to follow the laws and rules regarding the employment of seasonal/casual workers. 

Introduction of FMA and its services

FMA as one of the premier legal firms in Bangladesh can provide any assistance required with regards to the legal needs of the food processing industry. FMA is a full-service law firm with an extremely dedicated team ready to provide all your legal solutions. FMA specializes in company incorporations, trade licenses and can assist in acquiring all kinds of legal registrations such as Name Clearance Certificate, VAT, IRC, ERC, TIN etc. Any and all drafting required with regards to these services from the Articles and Memorandum of Association etc. can be availed by FMA. FMA can also provide assistance with licenses related to Trade Mark, Standard Marks etc. with the BSTI. FMA can also provide assistance with licenses related to Trade Mark, Standard Marks etc. with the BSTI. FMA can provide legal supports to obtain licenses from Department of Livestock & Department of Fisheries.

FMA’s team is also very apt at providing any sort of assistance with regards to acquisition of land be it lease or purchase. FMA can vet the necessary documents and draft any legal agreements necessary including Power of Attorneys, for purchase or lease of the land or property. FMA can also provide legal expertise in the matter of labour requirements or disputes in any of the establishments processing or packaging food in any form or nature.

FMA has a fully dedicated team for supporting any immigration needs. FMA can assist in securing the E-visa recommendation, Work Permit, Security Clearance and any other subsequent visas or extensions. FMA has a full wing specifically to support taxation issues which can easily take over all tax matters, payrolls and banking issues.

All in all, FMA, has a very unique team which can serve to any legal needs in the food processing industry. FMA has an excellent group of lawyers who can cater to any needs in the court and are also experts at conducting alternative dispute resolutions including arbitration, mediation and negotiation.

COVID-19 Impact on Business

The food processing industry has been affected by the Covid-19 coronavirus outbreak. Yes, it is an essential product but the production of food has halted to an unprecedented level not only in Bangladesh but all around the world. Only the essential food products are being focused on in Bangladesh for now.

Restaurants and shops which cater to a more luxury level in Bangladesh have actually mostly shut down or operating in a small scale. The food delivery business is also suffering due to the same reason. As a result, a lot of people who work in the food processing business have either been laid off or terminated on the ground of redundancy. 

The worst part of it is probably transportation, as most food products cannot be circulated around the country during the lockdown phase and as a result a lot of food is perishing and getting destroyed. Food industry is still running but because of these lockdown issues, a lot of companies will face huge losses as their products will not reach the market. The milk industry is facing the unique crisis where factories are not able to purchase and transport the milk from the farms and as a result millions of dollars’ worth of milk was being wasted every day. The paddy from the paddy fields are not extracted because of lack of labour. 

The Covid-19 will leave a long-lasting mark in the economy and as a result, a lot of businesses might never recover or re-open. This will also lead to a lot of legal implications where food products did not get delivered on time or did not enter Bangladesh on time which will surely lead to losses. Only time will tell what this ugliest tale of the Twenty-First Century leaves behind.

Taxation

General rate of tax is 32.5% currently in the laws of Bangladesh. Bangladesh government provides a lot of exemptions and other benefits in case of entities exporting items outside Bangladesh. Nominal requirements for a limited company formed locally includes a number of reporting to be done to NBR, such as: Opening a TIN, Monthly Tax deduction statement, Half Yearly Withholding Tax statement, Yearly statement related to tax return submission of its employees, Yearly statement related to salary disbursed from company to its employees, Quarterly Advance tax deposition, Yearly Tax return submission, attending appeal/hearing session as required on behalf of the company, Monthly VAT return etc. FMA can advise and assist to satisfy all regulatory compliances to enable the company to run smooth and hassle free.

Conclusion

In conclusion, with the ever evolving and growing taste of the people of Bangladesh, the food processing industry is growing parallelly and quite successfully. The government has been diligent in putting more bodies and introduced more rules and regulations to ensure that the food processing industry is maintained well. With Seventeen Crores mouths to feed, if one produces quality food, there should not be an issue in finding a customer. 

Executive Summary 

The food industry has only flourished over the last century. In the age of globalization, food from different cultures have merged and the advances of sciences have led to rediscovering of many foods. The food industry in Bangladesh is no different. As an agriculture based and highly populated country, Bangladesh always gives high priority to its’ food processing industry.

So, in terms of looking after the quality of the food, the main institution is Bangladesh Standard and Testing Institution or BSTI and Bangladesh Food Safety Authority or BFSA. BSTI generally conducts all sorts of testing necessary to ensure the quality of certain foods in Bangladesh. Similarly, BFSA ensures the safety of the food in terms of whether it is grown and sold in the proper environment and to make sure it adheres to the standard for human consumption. There are a number of licenses required from different ministries and departments depending on the type of operation of the food processing entity. Some basics that are required include Trade License, VAT Registration certificate, IRC, ERC etc. Meat processing industry requires licenses to run their business from the Department of Livestock under the Animal Slaughter and Quality of Meat Control Act -2011. Similarly, fish processing industry requires licenses to run their business from the Department of Fisheries under the Fish and Fish Products (Inspection and Quality Control) Ordinance, 1983.

This industry is currently facing some serious issues due to the Covid -19 crisis as a lot of businesses pertaining to this industry are under threat of existence. The world has shut down and the food industry has taken the hit. Restaurants have been closed and farmers aren’t able to make the right moves for saving their food be it for the lack of labor or because the food they are producing is not reaching the right market which is why they are not getting the right price anymore.

The food processing industry needs constant monitoring as new laws are being developed everyday and as a result of these new laws any player of the food processing industry must be on their toes to make sure they are compliant. Bangladesh has been very strict with compliance of the food industry in the recent past through the operation of its’ Mobile Court which ensures that the quality is maintained and overpricing is avoided.

FMA being a full-service firm with and excellent team can cater to any legal needs of any entity involved in the food processing industry. FMA has the experience and the right approach to be the one stop solution center for any legal conundrums faced in the food processing industry.