Apparel exporters in uncertainty over receiving payments

In Chattogram’s BM Container Depot fire back in June, JFK Fashion’s 44,994 pieces of clothes worth $2.6 lakh were damaged or burned. The clothes were made for Hong Kong-based Top Grade Int’l.

As per the letter of credit (LC) condition, the buyer should bear all liabilities of the goods after JFK Fashion will hand them over to the forwarding agent Unitrans Container. JFK Fashion met that criterion.

Though around two and a half months have passed since then, the buyer has not yet cleared the LC payments. Now it has become risky for JFK Fashion to open a new LC.

“We are contacting Top Grade Int’l regularly, but they have not responded yet. I do not know when we will receive the payments, or whether we will at all. I am worried about how I will continue my business if the bank refuses to open a new LC,” JFK Fashion Managing Director M Kafil Uddin told The Business Post.

Trust Knitwear manufactured clothes for the US-based Roochi Traders and handed the goods over to the forwarding agent WAC Logistics. Those goods were also burned in the BM Container Depot fire, and the buyer is yet to clear the payments.

“We talked to the buyer, but they did not respond. They will probably not pay me, but I am eligible to receive that as per the LC conditions,” Trust Knitwear Managing Director Md Kamrul Hasan told The Business Post.

On the night of June 4, a blaze broke out at BM Container Depot in the Kadamrasul area of Sitakunda Upazila, which killed at least 47 people and injured around 450 others.

The fire burned or damaged at least 100 apparel manufacturers’ goods worth $29.38 million. As per the LC conditions, buyers were bound to clear the payments.

But like Kafil and Kamrul, many manufacturers are still in uncertainty over receiving payments. They also said their business would close if they do not get their payments. That is why they are seeking strong support from the government and the Bangladesh Garment Manufacturers and Exporters Association (BGMEA).

The BGMEA said it was continuously contacting the buyers and a good amount of payments had already been cleared.

“As manufacturers hand their goods over to forwarding agents, buyers have no legal option to deny LC payments. We are trying to help our members receive their money,” BGMEA acting president Shahidullah Azim told The Business Post.

Industry insiders said most Bangladeshi exporters are doing business on the free on board (FOB) basis. If shipments are designated as FOB, sellers record sales as complete as soon as the shipments leave the warehouse. It means the buyers own the products en route to their warehouses and must pay any delivery charges.

After the BM depot fire, the shipping authorities appointed a third party to assess the extent of damage. As per the assessment, the manufacturers will claim their payments. On the other hand, the buyers will claim compensation as per their insurance.

Several manufacturers claimed H&M and other reputed buyers announced to take responsibility for compensation after the fire and already paid that. They even placed new orders.

TRZ Garments Managing Director Haroon Ar Rashid told The Business Post, “I manufactured goods worth $2.32 lakh for H&M and those were damaged in the fire. But H&M has already settled the LC. They have cleared not only my payments but also that of others.”

Mohiuddin Rubel, director of BGMEA, said, “If a buyer does not respond when contacted, the BGMEA will do everything for their members so that they can get their payments.”