New LC clause by US apparel buyer raises concern

Garment factory owners are concerned as a US clothing retailer recently said it will not "process transactions involving any country, region, party" sanctioned by the UN, US, EU, or the UK.

It mentioned it in a Letter of Credit (LC) issued last month for an apparel exporter in Bangladesh.

Garment factory owners association BGMEA yesterday urged its members to "take the matter with utmost importance".

Those receiving LCs with such a clause should ask the retailer if they are mentioning this for Bangladeshi suppliers only, reads a statement issued by BGMEA President Faruque Hassan.

"If the clause appears only in the LCs issued in favour of Bangladeshi suppliers, then this violates ethics."

BGMEA members should reconsider doing business with such buyers, adds the statement.

However, the clause mentioned in the LC from one particular retailer should not be interpreted as a sanction of any form against Bangladesh, because this is not a statutory order or notice by a country, it says.

"Moreover, the BGMEA did not receive any information from our diplomatic missions or from any official source to support any sanction or trade measure."

The factory owner who received the LC from the US buyer notified the matter to the BGMEA earlier this week. Sources said the owner fears that such clauses may badly affect his business.

This is the first time the particular US buyer has mentioned the clause in the LC, BGMEA President Hassan told The Daily Star yesterday. He had not disclosed the names of the local supplier or the buyer.

Last week, the Bangladeshi mission in Washington sent a letter to the commerce ministry, highlighting the possibility of Bangladesh being slapped with a trade sanction over labour rights.

Two major RMG exporters who deal with US retailers regularly said they had not seen such a clause before.