Twenty-three Bangladeshi readymade garment (RMG) exporters are still uncertain about recovering over $20 million owed by Australia’s one of the largest retailers, Mosaic Brands Ltd.
The exporters said that if the buyer continues to delay payments, these exporters may face difficulties in maintaining their business due to overdue Export Permits (EXP).
Moreover, diplomatic efforts have hit a dead end so far. The Australian High Commission in Dhaka, after being approached by the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), has advised exporters to pursue legal action, citing limited avenues for embassy intervention.
Australian High Commission instructs to seek legal advice
Upon continuous reporting from exporters, the BGMEA has already contacted the Australian High Commission in Dhaka twice to address the issue.
BGMEA sent the first letter on September 3 and the second on September 28. Dhaka Tribune obtained copies of both letters from an industry insider.
However, the high commission recently replied through a letter to Khandoker Rafiqul Islam, president of the recently dissolved BGMEA board.
Dhaka Tribune also obtained a copy of the letter from a reliable source who wished to remain anonymous.
In the letter, the high commission said that the Australian government has no role in advising or making representations regarding private commercial disputes.
The letter read that it would be in the best interest of the affected BGMEA members to seek their own independent legal advice and prosecute the merits of their cases in Australia or Bangladesh.
Moreover, they have inquired with AUSTRADE and Canberra and found that Mosaic Brands is undergoing a significant restructuring, which has implications for suppliers in numerous countries.
According to the source, BGMEA is preparing to send the 3rd letter soon.
Companies that have business with Mosaic
Bangladeshi exporters have worked with Mosaic for years. They have sales contracts that require payments to be made within 120 days after they submit the bill of lading.
The affected exporters are Big Boss Corporation Ltd, Active Composite Mills Ltd, Savar Sweaters Ltd, Padma Satel Arab Fashion Ltd, Sultana Sweaters Ltd, Oasis Fashion Ltd, FNF Trend Fashion Ltd, Fabrica Knit Composite Ltd, NRN Knitting & Garments Ltd, Smug Sweaters Ltd, Fine Sweaters Ltd, Bhuyan Warmtex Pvt Ltd, Fyne Sweaters Ltd, Hera Sweaters Ltd, Hydroxide Knitwear Ltd, Mega Denim Ltd, Men's Fashion Ltd, Asrotex Group, Reaz Knitwears Ltd, Impress Newtex Composite Textiles Ltd, Pretty Sweaters Ltd, Raiyan Knit Composite Ltd and AST Knitwear ltd.
According to industry insiders, they shipped a significant portion of goods to the buyers, but despite receiving the goods, the brand has not paid Bangladeshi exporters for several months, citing financial difficulties.
They also said that Mosaic Brands Ltd is one of Australia's largest fashion retailer groups, with nine subsidiary brands like Millers, Rockmans, Noni B, Rivers, Katies, Autograph, W Lane, Crossroads, and Beme, and about 1,000 stores nationwide.
Due to the financial crisis, in early October, they planned to shut down five of their nine brands: Rockmans, Autograph, Crossroads, W Lane, and Beme, while other brands like Millers, Noni B, Rivers, and Katies would remain active.
However, the company said it would continue selling goods from the closing brands until Black Friday.
Manufacturers still in limbo
On October 6, BGMEA requested its members to report any payment issues or business challenges with Mosaic by October 14. Several manufacturers began to respond.
So far, 23 manufacturers have responded, with unpaid dues of nearly $20 million by Mosaic. Some $15.20 million worth of goods have already been shipped, while $4.72 million remains with the exporters.
The buyer is asking the exporters for discounts ranging from 50%-75%, said the affected exporters.
Mosaic Brands owes around $1.5 million to NRN Knitting and Garments Ltd, including $0.8 million for shipped products and $0.7 million for products prepared for them.
Moin Uddin, the company's manager (merchandising), told the Dhaka Tribune that the company, along with other affected factories, is in constant communication with Mosaic; however, they have yet to find a solution.
“Most of the senior officials of the brands left them with their own capitals, which left Mosaic in this crisis. The price of share also fell significantly. Moreover, the brand also sought safe harbour provision,” he added.
He also said that the brands received online orders but did not deliver them to the consumers, meaning they are also in crisis domestically.
“Now they offer 60% discount to the factory like us who has a mentionable portion in hand, but 75%-80% discount to the factory who already shipped the entire shipment. They act like a clear fraud,” he added.
Regarding the legal action, he said that it would be difficult as when any exporter tends to take legal action, the brands will demonstrate allegations like lead time, QC issues, etc., even though they have already sold those products to the consumers.
An official from Big Boss Corporation Ltd said that the brand now owes them $3.09 million, which includes $1.63 million for shipped goods and the remaining amount for goods prepared for them.
Experts take
BGMEA's former director, Mohiuddin Rubel, told Dhaka Tribune that the issues should be solved immediately either way, and the high commission has a vital role to play in this regard.
“If the buyer continues to delay payments, these exporters may face difficulties in maintaining their business due to overdue Export Permits (EXP). Anyhow, the businesses must be kept free from any difficulties,” he added.
He also urged Australia's Foreign Ministry and Bangladesh High Commission to play their role.
Moreover, in case of legal action, he urged the BGMEA to provide the affected company with any legal and administrative support.
He also urged all exporters to be cautious about their buyers' credit ratings, history, and background when conducting business.
NRN Knitwear official Moin Uddin urged the brand to provide payment in small installations so that the financial issues are active and they can convince the bank.
