A copy of a letter of credit (LC) from a foreign buyer to one of the apparel manufacturers in Bangladesh created a bewildering situation among the country's readymade garment sector and its stakeholders.
According to industry insiders, several Western purchasers had given letters of credit with stipulations stating they would not be held liable for goods or payments if Bangladesh is subjected to trade restrictions by Western countries.
Dhaka Tribune obtained a copy of the LC copy, where it stated: "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 sanction-based causes."
Faruque Hassan, president of Bangladesh Garments Manufacturers and Exporters Association (BGMEA) acknowledged it and said that that a buyer had already inserted a clause in its recent LC, stating that they would not receive the items and won't be able to pay for them if Bangladesh suffered any sanctions.
However, he also said that there was concern and confusion caused by the misinterpretation of this clause that a sanction may have been imposed against Bangladesh, which was factually incorrect.
Faruque Hassan further clarified that individual buyers or entities may have their own internal policies and protocols, but a LC copy or a private commercial instrument is not an official declaration.
However, he declined to name the buyer who inserted the restriction issues on the new LC.
"Moreover, BGMEA did not receive any information from our diplomatic mission or from any official source to support any sanction or trade measure," the BGMEA president also said.
“Workers’ rights and wellbeing is a supreme consideration for us,” Hassan commented.
He also said that the global trade landscape is changing fast; human rights and environmental due are getting increased priorities, while geo-political issues are also influencing trade.
“Since Bangladesh’s economy and its growth are heavily reliant on trade, any development around trade policy concerns us. Therefore, I felt the urge to clarify a few issues that were creating confusion,” he said.
Notably, the LC came from a particular buyer, and was not a statutory order or notice by any country.
Therefore, this should not be misinterpreted as a measure of trade enforcement or economic sanction on Bangladesh, he further added.
Chaotic situation caused by an LC copy
However, Bangladeshi apparel manufacturers feared that the prospects of holiday sales may be disrupted if the export restrictions are enforced on Bangladeshi-made readymade garment (RMG) items.
They also said that this was happening at a time when the apparel business is waiting for a rebound in the US, as well as globally.
According to the monthly Economic Review November 2023 published by the National Retail Federation (NRF) of the US, the retail sales during the holiday season -- defined as November 1 through December 31 -- to increase between 3% and 4% over 2022.
The report also said that the consumers’ savings are still providing a buffer to support holiday spending and the overall story for this holiday season is that it looks very good.
The report made exporters of the country optimistic about an uptick in the retail sales of the United States market in the holiday season of 2023 amid the challenges in global economies.
He also said that this is a concerning issue for exporters as the banks might now be reluctant to open back-to-back LCs against these master LCs or export orders.
‘A united RMG front’
The BGMEA held a meeting with stakeholders at Chittagong on Tuesday.
In the meeting, Faruque Hassan sought the support and cooperation of all stakeholders to overcome the challenges being faced by the readymade garment industry.
The RMG industry of Bangladesh is passing a trying time and needs close cooperation and concerted efforts of all players from their respective positions to stay on course, he said.
For the first time ever, the United States (US) has introduced a Presidential Memorandum on Advancing Worker Empowerment, Rights, and High Labor Standards Globally, which will allow the country to impose sanctions, penalties and visa restrictions on November 16.
Secretary of the US Department of State Antony J Blinken in his speech said those who threaten, intimidate, and attack union leaders, labour rights defenders and labour organizations will be held accountable at the Rollout of the Presidential Memorandum on Advancing Worker Empowerment, Rights and High Labor Standards Globally.
The exporters expressed their concerns about the recently updated policies.
However, Bangladesh's State Minister for Foreign Affairs Md Shahriar Alam stated that there is no need for concern on the part of Bangladeshis.
Earlier, on November 20, the Bangladesh embassy in Washington wrote to the commerce ministry speculating that Bangladesh could be among the countries targeted by the US memorandum.
The letter suggested that the relevant parties should give it careful consideration.
Senior Secretary Tapan Kanti Ghosh of the Commerce Ministry convened an exclusive meeting with stakeholders on Monday to discuss the implementation of the National Action Plan on the labour sector, in response to a letter received from the Bangladeshi embassy in Washington.
According to the meeting, the government would inform the US regarding the recent steps taken to protect labour rights in Bangladesh and the improvement of the labour rights situation.
Ghosh also told the media that Bangladesh’s state of labour rights did not justify trade restrictions from the US.
