India Ends Transshipment Facility for Bangladesh After Yunus Hints at Chinese Economic Expansion in Northeast
In a significant shift in regional trade dynamics, India has ended a key transshipment facility that previously allowed Bangladesh to move export cargo to third countries via Indian ports. The move follows controversial comments made by Professor Muhammad Yunus, the Chief Adviser of Bangladesh’s interim government, during his four-day visit to China from March 26 to 29.
While speaking to Chinese business and government leaders, Yunus emphasized Bangladesh’s strategic geographical role. He stated that the Northeast region of India is “landlocked” and that Dhaka acts as the “only guardian of the ocean” for the area. He further added that this positioning creates opportunities for the region to integrate with the Chinese economy—through building, producing, marketing, and exporting goods to global markets via Chinese routes.
These remarks sparked concern in New Delhi, particularly due to the sensitive geography of Northeast India and the strategic vulnerability of the narrow Siliguri Corridor—often referred to as the “Chicken’s Neck”—which connects the region to mainland India.
India Responds Swiftly with Policy Change
Soon after Yunus’ remarks, India’s Central Board of Indirect Taxes and Customs (CBIC) issued a circular on April 8. It officially revoked a 2020 policy that had permitted Bangladesh’s export cargo to transit through Indian Land Customs Stations (LCSs) to Indian ports and airports.
That transshipment facility had offered a vital logistical route for Bangladeshi exports to landlocked neighbors like Bhutan and Nepal, as well as to Myanmar. It reduced costs, shortened transit times, and simplified trade routes. But the new CBIC circular has now ended that privilege effective immediately.
However, the CBIC noted that shipments already within Indian borders under the old policy can continue their journey according to the previous procedures.
A Strategic Retaliation?
Experts believe that India’s decision goes beyond administrative policy. Ajay Srivastava, former trade officer and current head of the Global Trade Research Initiative (GTRI), sees this move as a direct response to Bangladesh’s growing ties with China in strategically sensitive areas.
“India has supported Bangladeshi exports for over 20 years by offering zero-duty access to most products,” Srivastava said. “But Dhaka’s decision to invite Chinese investment to revive the Lalmonirhat airbase—located near India’s vulnerable Siliguri Corridor—likely triggered this policy reversal.”
Given Lalmonirhat’s proximity to the narrow land link connecting the Northeast to the rest of India, any foreign strategic presence in the area alarms Indian security analysts.
Impact on Regional Trade
Ending the transshipment facility will not only disrupt Bangladesh’s export plans but also strain its trade relations with landlocked neighbors. Bhutan and Nepal, which rely on Indian infrastructure to connect with Bangladesh, now face new logistical hurdles.
Previously, Bangladeshi goods moved efficiently through Indian customs to third countries. This access helped reduce freight charges and eliminate unnecessary delays. With the facility gone, exporters must now navigate longer, more expensive, and possibly less reliable routes.
Nepal and Bhutan may soon raise diplomatic concerns, as restricted transit could undermine their access to Bangladeshi markets—essential trade partners for both nations.
Possible WTO Implications
India’s decision could attract scrutiny at the international level under World Trade Organization (WTO) provisions. Article V of the General Agreement on Tariffs and Trade (GATT) 1994 requires member states to allow freedom of transit for goods moving to and from landlocked countries. These rules aim to prevent barriers such as transit duties or procedural delays.
The WTO Trade Facilitation Agreement (TFA), especially Article 11, reinforces this obligation by promoting transparent customs procedures, limited inspections, and smoother regional cooperation. It also encourages practical mechanisms—like bond guarantees—to support transit trade.
Srivastava cautioned that although India has the sovereign right to manage access to its infrastructure, its action may face legal or diplomatic challenges if it appears to obstruct WTO principles, especially for third-party trade between landlocked countries and Bangladesh.
The Bigger Picture
This development reflects growing geopolitical tensions in South Asia. China’s continued push to expand its economic influence in regions traditionally allied with India is reshaping strategic alliances. Bangladesh, by positioning itself as a regional hub and aligning closer with China, may be seeking to boost its own strategic relevance. However, such moves could strain existing relationships—particularly with a powerful neighbor like India.
India’s reaction shows it intends to guard its strategic interests assertively. By leveraging its geographic control over regional trade routes, New Delhi is sending a strong message: it will not tolerate foreign expansionism near its vulnerable areas, especially the Northeast.
Conclusion
India’s decision to terminate the transshipment facility for Bangladesh is more than a trade issue—it marks a major geopolitical signal. The fallout may affect trade for landlocked nations like Nepal and Bhutan and potentially raise questions under WTO rules. But it also highlights the delicate balance of strategic trust in South Asia. As China deepens its regional ties and India reacts with strategic caution, smaller nations like Bangladesh must tread carefully to avoid long-term diplomatic fallout.
