BGMEA and BKMEA preparing a buyer list who added 'sanction clause' in LC
- Arif Uz Zaman
Another buyer list is being prepared who demands unsolicited discounts on the products
Buyers are adding new clauses in the letter of credit (LC) for buying clothes from Bangladesh, where the sanction of various countries has come up. The commercial banks of the country have also taken a cautious stance. As part of awareness and caution, BGMEA and BKMEA have taken the initiative to prepare a list of buyers who have added 'sanction clause' in the LCs.

In addition, the two organizations are continuing to negotiate with the buyers to not give these conditions.
Recently, a 'sanction clause' was added to a letter of credit (LC) sent by a foreign buyer. It states, "We will not process transactions with any country, region or party sanctioned by the United Nations, United States, EU, United Kingdom. We are not responsible for any delay, non-performance or disclosure of information for reasons of prohibition."
The commercial banks of the country have paid special attention to the verification process as soon as that section of the LC is discussed. From the head office of the banks, the guidelines have been given to accept the loan subject to the details of the clause. Welcoming this precautionary step of the bank, BGMEA requested to complete the verification as soon as possible.
However, those concerned in the garment sector say that there is no reason or possibility of sanctions on Bangladesh. Despite this, BGMEA has warned its members not to take purchase orders through the letter of credit if any sanctions clause is invoked.
Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) Executive President Mohammad Hatem said, "LCs with sanctions clauses will not be accepted. A list is being made and action will be taken against those who send LCs with unwanted clauses. LCs containing sanctions clauses will not be accepted."
The executive president of BKMEA also said, "The bank adds clauses to the loan. But it is done when the buyer says. In many cases, banks also add clauses related to sanctions on their own initiative. In that case, the bank does not send it if the buyer prohibits it. We have discussed with the BGMEA president that we will take action against those who send loan letters containing such clauses."
BGMEA president Faruque Hassan said, "Buyers are being told not to give such clauses. The members of our organization have also been told not to take the LC if any buyer gives such a clause. If necessary, the issue of the order has also been asked to be reconsidered."
He said, "Purchase orders may be less due to caution about sanction clauses in the loan but its risk-free. Even if it takes a bit more time to verify the LCs with such adverse clauses, we need to be aware and careful. If payment is not made in international business, its effect is very much negative. A situation like business closure may also arise. All in all, one must be aware and careful about adverse clauses."
BGMEA and BKMEA have also taken an initiative of preparing the list of buyers demands unsolicited discounts on the products. It is reported that the 77th meeting of the Bangladesh Bank Discount Committee was held on December 11 to implement this decision. Later on December 21, BGMEA issued a notification in this regard. The notification highlighted that unscrupulous foreign buyers demand discounts from exporters through various unreasonable means.
Among these are non-receipt of goods after preparation for export as per contract or LC, recourse to court to declare voluntary bankruptcy after release of goods from port and they claim discount after goods reach foreign port.
Exporter pays the bank loan and interest, and if the export declaration (EXP) is overdue, various complications arise, including the possibility of closing down factory. Therefore, the exporters accepted the discount demand of the buyer, forced at one stage of long negotiations.
The notification also mentions the contact details of BGMEA if any information or cooperation is required regarding the working procedure of Discount Committee. BGMEA and BKMEA will jointly take action against them. It has been decided in the meeting of Bangladesh Bank's discount committee to blacklist them or what other steps can be taken against them.