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Sanction panic grips Bangladesh apparel makers

Staff Correspondent
06 Dec 2023 21:48:05 | Update: 06 Dec 2023 21:55:23
Sanction panic grips Bangladesh apparel makers
BGMEA President Faruque Hassan addresses a views-exchange meeting at the BGMEA Bhaban in Dhaka on Wednesday – Courtesy Photo

As Bangladesh's apparel manufacturers grapple with the impact of US visa and labour policy, buyers are introducing new conditions, raising concerns about trade restrictions.

Faruque Hassan, President of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), confirmed that at least one Western buyer added a condition to the Letter of Credit (LC) stating that they won't assume responsibility for goods or payments if the country or exporter faces restrictions.

In addition, many Western buyers are closely monitoring the situation and slowing down their orders. This development comes at a challenging time for the readymade garment sector, a major contributor to the country's export earnings, which witnessed negative export growth of 13.93 per cent and 7.45 per cent in October and November, respectively.

The BGMEA president in a statement on Wednesday said, “A copy of a letter of credit (LC) from a foreign buyer to one of the members of BGMEA has come to our attention. The LC contains the following text – ‘We will not process transactions involving any country, region or party sanctioned by the UN, US, EU, UK. We are not liable for any delay, non-performance or/ disclosure of information for Sanctions Reasons’.”

“This is to be noted that the LC came from a particular buyer, and this is not a statutory order or notice by any country. So this should not be misinterpreted as a measure of trade enforcement or economic sanction on Bangladesh,” read the statement.

On Monday, Faruque told The Business Post that due to sanction rumours, buyers are placing fewer orders as they assess the country's political situation. He expressed belief that the US government would not take any measures against the apparel industry.

Industry insiders suggest that this development could have a domino effect on the export-oriented apparel sector, with other buyers potentially following suit.

If this occurs, Bangladesh's apparel sector and the overall economy may face challenging times, particularly as the foreign exchange reserves are already under tight scrutiny.

Fazlee Shamim Ehsan, managing director of Fatullah Apparels Ltd and vice president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), said that though the Biden administration adopted a new labour rights policy, Bangladesh continues to follow labour rights. Expressing concern over the buyer's inclusion of such a condition, he warned of a negative impact on the export sector, particularly in Western countries. “I don’t know why the buyer included such a condition. If this goes viral then it will create a negative impact on our export sector as our major goods destination in western countries,” he said.

Ehsan also emphasised the need to investigate whether this clause applies to all sourcing countries or is specific to Bangladesh. Supporting this perspective, Md Mohiuddin Rubel, director of Denim Expert Ltd and a BGMEA director, said that including such a clause in the LC is unnecessary, as buyers automatically receive indemnity if Bangladesh or any exporter faces trade restrictions or sanctions.

Rubel highlighted that exporters are turning to BGMEA for guidance, expressing panic due to the economic crisis and Western pressure. He noted that the US, being Bangladesh's single largest export earnings country, is causing significant challenges for exporters.

The backdrop of this situation includes the US government's announcement of visa restrictions for Bangladeshi citizens on May 23, linked to hindering a free, fair, participatory, and widely accepted election.

Additionally, on November 20, a new labour rights policy was announced, warning of sanctions for those violating worker rights. The European Union delegation's assessment of labour rights in Bangladesh in mid-November highlighted delays in meeting commitments outlined in Bangladesh's action plan.

Given these circumstances, the introduction of such conditions by buyers adds an alarming dimension for apparel exporters, potentially impacting LC-related transactions and export orders.