Concern and confusion caused by a clause of LC for RMG is not correct

A US apparel company has recently set a certain condition in the letter of credit (LC) sent to a Bangladeshi garment factory, saying they would not receive any product if Bangladesh faces any sanction.

"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," the buyer said.

Speaking to Prothom Alo about the matter on Wednesday, Bangladesh Garment Manufacturers and Exporters Association (BGMEA) president Faruque Hassan said the new condition would raise concerns a bit.

He also sent a clarification to the media on Wednesday.

"A copy of a letter of credit (LC) from a foreign buyer to one of the Members of BGMEA has come to our attention," the clarification adds.

The clarification says individual buyers/entities may have their own internal policies and protocols, but a LC copy or a private commercial instrument is not an official declaration.

It also adds concern and confusion caused by interpretation of this clause that a sanction might have been imposed against Bangladesh, which is not correct.

"This is to be noted that the LC came from a particular buyer, and this is not a statutory order or notice by any country. So this should not be misinterpreted as a measure of trade enforcement or economic sanction on Bangladesh," it adds.

Moreover, BGMEA did not receive any information from our diplomatic mission or from any official source to support any sanction or trade measure, he said.

"We understand that the human rights and environmental due diligence is getting increased importance for many of our export markets. The government of Bangladesh is engaged with our trade partners," BGMEA president said.

Recently, the US presidential memorandum signed on 16 November 2023 to ‘advance worker empowerment, rights, and high labour standards globally’ adds significant weight to the ongoing global labour campaign, as it appears to be quite unique in terms of engagement and enforcement.

Faruque Hassan said, "We respect the spirit of it and find an alignment with its core principles. Though the memorandum stipulates a number of measures including ‘deploying the full range of diplomatic and assistance tools and, as appropriate, financial sanctions, trade penalties, visa restrictions, and other actions’, however, this is not adopted for Bangladesh, rather it is a unilateral stance of the United States of America on worker rights issue."

"We have seen similar instances in the past of quoting a LC clause from a buyer to generalize it as a sanction on Bangladesh, and made our position clear against such misrepresentation of fact. However, we don’t support the inclusion of such clause in commercial instrument if it is practices for trading with Bangladesh only," the BGMEA president adds.

BGMEA urges its members, receiving LCs having such clause as mentioned above, to communicate with the respective brand(s) and solicit a clarification if such clause is mentioned for Bangladeshi suppliers only.
If the clause appears only in the LCs issued in favor of Bangladeshi suppliers, then this violates ethics.

"In such scenario, we would urge our member factories to take the matter with utmost importance, and, if necessary, to review / reconsider continuing business with such buyer(s)," Faruque Hassan added.  
He said 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 is heavily reliant on trade, any development around trade policy concerns us. Therefore, I feel the urge to make this statement to clarify few issues creating confusion," BGMEA president added.

BGMEA points out after the tragic building collapse in 2013, the industry has gone through a major safety overhaul led by the national initiative and complemented significantly by buyers’ driven program the Accord on Fire and Building Safety in Bangladesh, the Alliance for Bangladesh Worker Safety.