Bangladeshi RMG exporters alarmed as buyers tag conditions over trade restriction fears
Amidst growing concerns over potential trade restrictions imposed by Western nations, global buyers of Bangladesh-made garments are adopting a cautious approach, stipulating in their orders that they will not assume responsibility for goods or payments if such restrictions materialise, according to industry insiders.
This development has sent shockwaves through Bangladesh's garment industry, leaving local exporters staring at uncertainty and potential financial losses.
Bangladesh Garments Manufacturers and Exporters Association (BGMEA) President Faruque Hassan acknowledged this to The Business Standard on Tuesday.
"A buyer has already included a clause in its new letters of credit [LCs] that if Bangladesh faces any sanction, it will not receive those goods or if it happens after shipments of goods, it will not be able to pay for those goods," he said on the sidelines of a views-exchange meeting with stakeholders at the BGMEA's office in Chattogram yesterday.
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"A buyer has already included a clause to their new LCs that if Bangladesh faces any sanction, they will not receive those goods or if it happens after shipments of goods, they will not be able to pay for those goods."
Faruque said RMG entrepreneurs are already facing some challenges ahead of the elections and the latest development arising from the buyers has made them alarmed.
"Alarming issue"
"It is an alarming issue for the apparel exporters. Now banks may not be willing to open back-to-back LCs against such master LCs or export orders," said the BGMEA president, adding that this is happening at a time when the global apparel business is waiting for a rebound.
Referring to the USA's retail growth during the last Black Friday, Thanksgiving Day and Cyber Monday, he said sales of apparel items saw a big jump.
Faruque also said if the apparel exporters survive the next six months, there is an opportunity for them to bounce back strongly in the coming days.
The BGMEA held the meeting with stakeholders from the Bangladesh C&F Association, Bangladesh Freight Forwarders Association, Bangladesh Ship Handling and Berth Operators Association, Bangladesh Shipping Agents Association, Bangladesh Containers Shipping Association, and Bangladesh Inland Container Depot Association.
While the meeting was ostensibly convened to address the concerns of customs officials and port service quality, the topic of Western sanctions or restrictions took centre stage, overshadowing the original agenda.
The BGMEA president has sought all stakeholders' cooperation to face the challenges as the global market is going to recover.
BGMEA Senior Vice President SA Mannan Kochi and first Vice President Syed Nazrul Islam also spoke at the meeting.
US sanctions could mean empty shelves in Europe too
In a recent conversation with TBS, a representative of a well-known European brand voiced particular apprehension regarding potential negative actions (sanctions) by the United States, noting that such measures could have a detrimental impact on their business, potentially leading to empty shelves in their stores.
Anticipating a ripple effect, the representative suggested that most countries including those in Europe, would likely follow the lead of the United States, with the exceptions of China and Russia.
"Customers purchasing extremely affordable apparel from Bangladesh may remain, but those with more robust buying practices may explore alternatives in other countries. If a buyer decides to shift elsewhere, returning to the previous country may take three to five years," he added.
Mounting pressure from rights groups, Western govts
Pressures have mounted on Bangladesh from global rights groups, institutions and governments. The most concerning one comes from the US administration warning of trade penalties and visa restrictions on "those who threaten, who intimidate, who attack union leaders, labor rights defenders, and labor organizations".
Secretary of the US Department of State Antony J Blinken in his statement named Bangladeshi garment activist Kalpona Atker and pledged to use the US voice to make sure labour rights defenders are protected.
On 16 November, the US issued a new warning against those countries and businesses that undermine labour rights. It carries significant implications for Bangladesh as the US accounted for one-fifth of the country's $47 billion RMG exports in FY2022-23.
The European Union and the United Kingdom also expressed similar concerns about labour and human rights in Bangladesh in recent days. The EU and UK collectively accounted for 50% of Bangladesh's apparel exports in the last fiscal year.
Exports grew by only 1.30% in Jul-Nov of FY24 compared to the same period a year ago. Total exports in November this year were $4.78 billion, 6.05% lower than $5.09 billion in the same period of last fiscal.
