Indian RMG Importer Takes BD Exporters For A Ride

[CaPtAiN_pLaNeT]

Indian RMG Importer Takes BD Exporters For A Ride


Indian RMG Importer Takes BD Exporters For A Ride

Dated- 20 Sep , 2012 - India

As many as nine local medium-category apparel (RMG) factories have been closed down and thirteen others are on the verge of closure as their Indian buyer did not settle their export earnings, industry people said.

The exporters-mostly new, enthusiastic and energetic, have become hapless victims of the importer. The letter of Credit (L/C) opening banks are putting pressure on the exporters to clear the funds the banks have already invested, it has been learnt.

"I have been cheated by the Indian buyer. I am ruined now and unable to offset my losses," said an exporter preferring anonymity.

According to a letter written to the commerce minister by BGMEA on September 12, twenty-two Bangladeshi garment manufacturers have shipped their products to 'Liliput Kidswear Ltd' of India last year but none of them could realise any payment until now due to evasive attitude by the importer.

The letter also said that the importer has even failed to comply with its written commitment to make the payment within July 10, 2012 in phases.

At a bilateral meeting on the issue between the commerce ministry officials of the two governments last March, the owners of 'Liliput Kidswear Ltd' submitted a bank guarantee stating that it would start paying the dues to Bangladeshi exporters from July 25 and would complete it within August 10, 2012.

"My total capital was Tk 30 million, whereas Tk 25 million has got stuck up with the Indian importer which has compelled me to close down my factory after trying several times to realise the payment," Managing Director of Panshi Knitwear Pvt Ltd, Md Jamal Hossain told the FE.

Mr Hossain further said that if he fails to realise the payment immediately, it would become a threat to the livelihood of 1,500 workers of his factory and their dependants as they have been living an inhuman life since the factory was shut.

Another victim of the payment-dodging, Mamun Islam Khan, chairman of Anupan Fashionwear Ltd, said that he had exported goods worth Tk 41 million to the same importer and the rest Tk 14 million's worth goods were now lying in his warehouse, which prompted him to close one of his garment units last month.

"Moreover, the banks have treated the L/C value as classified loan against our factories," he said.

President of Bangladesh Garment Manufacturers and Exporters Association (BGMEA) Shafiul Islam Mohiuddin said that the association in cooperation with the officials at the Bangladesh High Commission in New Delhi and the Indian Ministry of Commerce are trying to recover the money.

"The small exporters may become defaulters to their banks failing to get the payment. Some of them have already become unable to make payment of regular wages to the workers, which may flare up labour agitation in the sector, the BGMEA wrote in a recent letter to the Ministry of Commerce of Bangladesh and to the High Commission of India in Bangladesh to resolve the issue.

Since November last year, Bangladesh has been enjoying duty-free facilities while exporting apparel items to India. Before that India had been accepting no more than 10 million pieces of apparel items under duty-waiver facility.

Statistics show that export of Bangladeshi apparel items marked a significant growth of over 70 per cent since the duty-free facility for entire apparel items came into effect late last year.

 

[notsuperstitious]

The letter of Credit (L/C) opening banks are putting pressure on the exporters

'Liliput Kidswear Ltd' submitted a bank guarantee

Now my knowledge of trade finance is not as good as captain planet, but in this matter very important for BD defence, the above two sentences do not make sense.

Why would LC opening banks put pressure on the exporter?

Also, if there is a bank guarantee furnished by Liliput Kidswear, then what is the problem? Is the bank defaulting as well?

This is why I come to BD section, there's always something new to learn.

 

[TopCat]

Now my knowledge of trade finance is not as good as captain planet, but in this matter very important for BD defence, the above two sentences do not make sense.

Why would LC opening banks put pressure on the exporter?

Also, if there is a bank guarantee furnished by Liliput Kidswear, then what is the problem? If the bank defaulting as well?

This is why I come to BD section, there's always something new to learn.

L/C is a bank assurance to the exporter that the money will be paid according to the terms and condition of the L/C and its fulfillment. So the importers bank has to pay the money once the condition are met which is the rule.

Now, in practice sometimes the importers bank issue L/C to the exporter's bank without actually getting the deposit from the importer rather they issue a loan to the importer and start charging the interest. When the condition were met the exporters bank will ask the importers bank to transfer the money. The importer's bank then ask the importer to deposit the money so that they can transfer. But when the importer fails then the L/C payment becomes stuck and the payment can not be made. But regardless at the end importer's bank has to pay to the exporters bank which is the international law. But as it is an Indian deshi bank you can only pray. Indian bank not going to pay to the exporter until and unless they realize the money from importer.


Why L/C opening bank put pressure on the exporters? Well once a L/C is received the exporter apply for a loan against it and the bank allow up to 75% of the money that could be drawn to manufacture the product. The money is later realized by the bank once L/C is cleared. As the L/C is not cleared so the bank money got stuck with the exporter and the bank is asking to get their money from the exporter. Simple

The bank guarantee part could be a later deal where the importer agreed to pay a bank guarantee that they will pay on above mentioned date directly to the exporter outside the L/C deal. I am not sure.

 

[idune]

The way indians tried to dupe local garments owners is that they came to Bangladesh purchased small consignment and paid cash to build some trust (trademark of indian deception). Then they placed big order and convinced local owner why go through bank hassle and pay bank fees we will pay you in same manner. But when time came to pay indians disappeared without payment. But Awami stooges keep issuing visa for these indian thugs and robbers into Bangladesh. And indian domesticated FBBCI leaders and more specifically BGMEA leader and know indian dalal Anisul Huq are all quiet on indian robbery. Indians has been doing the same robbing elsewhere as well, lately in China indians were caught.

 

[TopCat]

The way indians tried to dupe local garments owners is that they came to Bangladesh purchased small consignment and paid cash to build some trust (trademark of indian deception). Then they placed big order and convinced local owner why go through bank hassle and pay bank fees we will pay you in same manner. But when time came to pay indians disappeared without payment. But Awami stooges keep issuing visa for these indian thugs and robbers into Bangladesh. And indian domesticated FBBCI leaders and more specifically BGMEA leader and know indian dalal Anisul Huq are all quiet on indian robbery. Indians has been doing the same robbing elsewhere as well, lately in China indians were caught.

Its not only Indian, but every time you try to bend the rule you are in risk of loosing all your money. I experienced with the western buyer as well even though I learned my lesson for small loss. I will never go outside the established norm anymore.