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German retailer yet to pay suppliers

Arifur Rahaman Tuhin
26 Nov 2022 00:00:00 | Update: 26 Nov 2022 00:33:16
German retailer yet to pay suppliers
The BM Depot fire burnt 5.38 million pieces of apparel items worth $29.38 million – TBP Photo

Many apparel exporters are yet to get paid by the German discount retailer Lidl for their supplied goods that were burned in a fire incident at the BM Container Depot in Chattogram in June.

The situation is getting more worrying for the exporters with each passing day as their foreign buyer refuses to clear the dues, while in the country they are faced with back to back Letter of Credit (LC) payments due to reach maturity soon. 

Forced loan risk

Industry insiders say if the buyers do not pay the dues before the LC payments reach maturity, then it will fall onto the shoulders of banks in the country that opened the LCs to meet the import obligations to foreign banks. Meaning, it will turn into a forced loan. 

As per LC terms, the buyers are responsible for the goods handed over to their forwarding agents by exporters, according to industry insiders. The buyers in turn will be compensated by their insurers.

While most of the international clients have complied with the terms, there are some like Lidl who are dilly-dallying.

JFK Fashion exported worth $0.2 million apparel items to Lidl through Topgrade Int’l, and the export procedure was completed before the fire.

“But the buyer is not paying my export bill. They are starting to refuse to pay citing the financial crises,” said M Kafil Uddin Ahmed, managing director of the company, told The Business Post (TBP).

“How am I to consider their request while my back-to-back LC is still unpaid and the bank is regularly pressuring me to clear it,” he said.

Some paid, some uncertain

Mohammed Iqbal, chairman of BHIS Apparels, a garments manufacturer specialising in wrinkle-free shirts and ladies blouses, said he exported $45,523 worth apparel items to Lidl but did not get paid for it. However, he said, “Lidl had sent me nearly $0.4 million to pay fabrics import bills (of the burned goods), but due to bureaucratic limitation I failed to make the payment.” Lidl is continuing business with the company.

Another Bangladeshi RMG factory, Magpie Composite Tex, exported worth $18,648 clothes to Lidl through Top Grade Intl, but their payment is still due.

“The buyer did not send us any clear statement about when they will pay the due. We do not know what will happen about the export bill,” an official of the company said, seeking anonymity.

However, Lidl has cleared a $0.8 million payment to Impress Fashion, a manufacturer of woven apparel.

“As I know, those who exported directly to Lidl have already got the payments,” Impress Director Nafis Ud Doula told TBP. However, he added that those who supplied the goods via third-parties are yet to be paid,”

Seeking help from BGMEA

Unpaid exporters are now seeking intervention from the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) intervention to solve the issue. “We heard that many buyers did not pay their exporters. But no one has submitted a written application on the issues,” BGMEA Vice President Shahidullah Azim told TBP.

“If they seek intervention with a written application then we will take further action,” he said.

According to a government-appointed third-party assessment, the BM Depot fire, which killed at least 47 people and injured around 450 others, burnt 5.38 million pieces of apparel items worth $29.38 million supplied to forwarding agents of the buyers by at least 100 Dhaka-based exporters.