The buyer agrees to drop contentious ‘sanction-clause’ from LC: BGMEA

The foreign buyer, that included a clause to a letter of credit (LC) outlining its strategy in dealing with a sanctioned country, has agreed to drop the much-discussed clause from its LC and expressed interest to issue a fresh one if necessary.

Faruque Hassan, president of Bangladesh Garment Manufacturers and Exporters Association (BGMEA), made the disclosure on Thursday and clarified that the clause erroneously led to speculations regarding sanctions against Bangladesh.

The particular LC, initially issued by Standard Chartered Bank Dubai, contained a clause saying, "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."

According to Faruque Hassan, the LC was transferred by the ZXY International against a master LC issued by the French buyer named ‘KARIBAN’.

As the clause and subsequent media reports triggered confusions among the business community as well as the commoners, the BGMEA sought clarification from ZXY in this regard.

“We received a formal clarification from ZXY, as well as a clarification statement by the original buyer KARIBAN,” he said.

It is clear from their response that KARIBAN did not insert the clause in its master LC in favor of ZXY International. Instead, Standard Chartered Bank Dubai had been incorporating this clause in all LCs since 30 November, 2022 and it does not indicate any sanction against Bangladesh.

The BGMEA president said, “ZXY International confirmed that they will remove the clause in the LC, and if required they will issue a fresh LC without that clause.”

The sanction-clause drew the attention of exporters during a meeting in Chattogram on Tuesday.

Asked about the issue, the BGMEA chief told Prothom Alo on Wednesday that a buyer issued an LC with a new condition that it will not receive products or complete payment in the case of a sanction against Bangladesh.

He also clarified that it will surely make the businesses worried. “However, we don’t anticipate any negative impact on the businesses.”

In a separate message on Thursday evening, he confirmed that the bank dropped the clause from the concerned LC.