LPP backtracks from its decision to suspend business with Bangladesh

Poland's clothing brand LPP reversed its decision to suspend business with Bangladesh after it had recently announced the suspension due to payment complexities with Russian buyer FES Retail's pending dues to several exporters from Bangladesh.

Now, they will continue business operations as before.

In a joint statement, the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) and LPP SA announced the change.

The statement was signed by BGMEA President Mahmud Hasan Khan and LPP SA Director Dorota Jankowska-Tomków.

BGMEA officially informed the media of this today, Tuesday.

The joint statement mentions that BGMEA and LPP have agreed to ensure that business with over 350 Bangladeshi garment suppliers is not affected by the third-party dispute.

LPP is not legally obligated to pay FES Retail’s debts. However, maintaining its legal position, LPP will assist in constructive dialogue over the debt settlement.

BGMEA acknowledges LPP’s stance, stating that claims related to FES Retail’s dues should be directed to parties legally responsible for such issues. However, both LPP and BGMEA recognise that the affected factories are facing challenging commercial conditions. Any settlement discussions should occur with the parties legally liable.

The statement further emphasises that both BGMEA and LPP consider it crucial to avoid widespread or misleading information that could inadvertently harm other manufacturers, employees, or the long-standing business relationship between LPP and Bangladesh.

LPP has assured that the recent review of some of their sourcing operations in Bangladesh aimed to ensure the protection of their local employees, legal assurance, and maintaining a stable, predictable, and fair business environment.

This review was not directed against the manufacturers. It does not affect LPP's commitment to fulfilling all their direct contractual obligations.

There have been long-standing export dues of approximately $40 million owed by FES Retail to 40 Bangladeshi exporters. The exporters claim they had shipped garments to the company based on assurances from LPP's Dhaka office.

It has been reported that, last month, due to outstanding payments from Russian buyer FES Retail, owners of two buying houses filed separate cases against several officials from LPP’s Dhaka office in the High Court.

Following these cases, the police conducted night raids at the homes of multiple LPP officials.

On 21 July, LPP informed the BGMEA, the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), and the buying house owners’ association BGBA in writing that they had decided to gradually reduce their orders in Bangladesh.

On 31 July, LPP informed Bangladeshi suppliers via a letter that new orders would be halted and the development of new products with suppliers would be suspended.

Some suppliers of LPP have reported that the company purchased garments worth $700 million in the last fiscal year. LPP planned to import garments worth $770 million from Bangladesh in the current fiscal year. Based on this, they had begun placing orders.