Bangladesh’s readymade garments (RMG) industry, a major source of revenue for the country, is grappling with a new phase of anxiety over the “possible” economic sanctions imposed by the country’s Western partners.
The U.S. sanctions threat comes after Dhaka announced national elections for January 7 in what could be another seemingly one-sided vote. Analysts say the United States and the European Union together account for more than 80% of Bangladesh’s billions of dollars in apparel sales, and any sanctions on the garment industry would severely weaken its already struggling economy.
These concerns were heightened in early December when a major U.S. apparel supplier received a sanctions warning in a letter of credit (LC) from a foreign apparel buyer. Letters of credit are issued by financial institutions or similar parties to guarantee payment to sellers of goods and services upon presentation of appropriate documentation. Help avoid risk by ensuring appropriate payments to intermediary buyer and seller banks.
According to LC, a copy from Western Buyers said: “We will not process transactions involving any country, region or party subject to UN, US, EU, UK sanctions. We will not be responsible for any delays, non-performance or/disclosure due to sanctions. We do not assume any responsibility for the information.”
If this clause is implemented, garment manufacturers in Bangladesh may suffer huge losses as the buyer will not have to pay any money for the order placed with the garment manufacturer.
But industry leaders and government officials dismissed the threat as “rumors” and “anti-government” propaganda, saying such economic sanctions cannot be imposed, especially against the apparel industry, as it is a fully compliant industry and adheres to all International Labor Organization regulations. law.
An office-bearer of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) said the letter of credit was from a specific buyer and was not a legal order or notification from any particular country or country.
He said the association has contacted the buyer and the issue has been resolved. This is simply a warning clause inserted by the bank to prepare the letter of credit on behalf of the buyer and is not a condition of the buyer. He said this does not indicate that any country plans to impose some sanctions on our industry.
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