The brands, the buying house, and the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) have jointly addressed the concerns surrounding the widely discussed Letter of Credit (LC). In letters exchanged among these entities, as obtained by Dhaka Tribune, it is emphasized that the LC clause from a buyer to a specific factory has led to misconceptions regarding sanctions on Bangladesh, which has been clarified as inaccurate.
This matter has garnered significant attention, causing both panic and confusion. As outlined in the exchanged letters, the focal LC in question was transferred by ZXY International, a buying house, against a master LC issued by the French buyer 'Kariban'. ZXY facilitated the transfer of the LC in favor of the Bangladeshi apparel manufacturer Knit Concern Group.
A copy of the LC reveals that it was issued by Standard Chartered Bank Dubai and includes a crucial stipulation: “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 clarification aims to dispel any confusion surrounding the impact of the LC on Bangladesh and emphasizes the adherence to international sanctions outlined in the LC terms.
BGMEA seeks clarification
Subsequently, BGMEA sought clarification from ZXY regarding the mentioned clause and received a formal response from ZXY.
In the clarification provided by ZXY, BGMEA President Faruque Hassan explained that the specified clause had been introduced by SCB Dubai, a practice they had consistently followed in every Letter of Credit (LC) since November 30, 2022. Importantly, the clause does not indicate any sanctions against Bangladesh.
ZXY also stated: "We have already dispatched a letter to SCB Dubai requesting confirmation that this clause will be permanently removed and will not be used in any future transferred LC clauses."
According to the ZXY statement, if necessary, they are prepared to issue a fresh LC without the contested clause.
Hassan emphasized the speculation surrounding the LC clause implies the imposition of sanctions against Bangladesh is unfounded and inaccurate.
SCB Dubai had stated: “We will not process transactions of any country, region or party sanctioned by the UN, US, EU, and UK. We are not liable for any delay, non-performance or disclosure of information for sanctions reasons.”
However, in a revised swift sent to the Knit Concern, the SCB Dubai removed the mentioned clause.
What Kariban said?
In a statement, signed by Kariban Managing Director Laurent Merceau, the company said that they didn’t insert any clause regarding sanctions.
“We have not inserted any clause about sanction from Bangladesh in our master LC to ZXY International and have requested the receiving bank to remove this clause,” Merceau added.
Faruque Hassan said that LCs are private commercial instruments, not statutory order or notice so this should not be misinterpreted as a measure of trade enforcement or economic sanction.
“We urge all the valued brands, retailers and their agents not to complicate trade with external issues, particularly not to insert any unnecessary clause creating such confusion.”
Moreover, he also urged the members not to accept any LC having such a clause, and to communicate with the respective buyer(s), solicit clarification and amendment if such clause is found in the LC.
He also said that the RMG industry of Bangladesh has made a paradigm shift in workers wellbeing and environmental sustainability issues.
“Workers’ rights and dignity are of supreme consideration for us,” he added.
Earlier, the 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 which stated they would not be held liable for goods or payments if Bangladesh is subjected to trade restrictions by Western countries.
However, the BGMEA 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.
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.
