A US buyer has dealt a serious blow to 11 Bangladeshi garment exporters as it refused to accept goods worth $2.6 million (more than Tk 22 crore) although the shipment reached the port on time.
As a result, the garment companies are not just losing the money, they will have to bear the freight charges for shipping the goods back and face compensation claim from US retailer Kontoor Brands, the exporters said.
Kontoor, however, refuted the claims of the exporters. The retailer said it sent back the goods as the shipment missed the sales season.
The goods were shipped from Bangladesh in January this year.
Of the 11 companies, Nassa Apparels lost $998,110.
“I can’t afford the loss and it was not my fault,” said Mohammad Nazrul Islam Mazumder, chairman of Nassa Group, a leading garment exporter.
“The goods reached the port as per schedule. There was a fire in the ship but the goods were unaffected,” he said.
The exporter said the goods were shipped on free on board (FoB) basis, meaning the senders do not have any liability after the shipment. Now Kontoor Brands is lying, he said.
Apart from inflicting nearly $1 million in direct loss on Nassa, the American buyer has already deducted $4 lakh from other consignments as compensation as a payment of adjuster, Mazumder said.
An adjuster determines how much an insurance company should pay if a claim is made.
The owner of another victim company, asking not to be named, said he had lost $4.30 lakh.
He said the brand should stand by the exporters as a longtime business partner. But buyers do not support suppliers when the latter are in trouble.
In this type of case, small suppliers lose everything and only big companies can afford such losses, he said.
The ship is now in Singapore and is waiting to return to the Chattogram port.
In a statement, Scott Deitz, vice president for global corporate relations of Kontoor Brands, said the fire affected finished goods being shipped by multiple vendors in Bangladesh that were to be available for sale to consumers in time for the Spring 2019 selling season.
In this case, the vendors were fully responsible to deliver the garments to the US or Canadian port terminal in the spring.
“As a result of the fire, delivery of the apparel was delayed by nearly six months, an entire season too late,” he said in a statement.
“This was a very unfortunate incident for everyone involved,” Deitz said, refuting claims made by Nassa Group.
He said Kontoor’s contract terms with its vendors clearly stipulate that the vendor bears all risk of loss of the goods until the goods reach the destination terminal and transfer of the title of goods to Kontoor takes place.
He said many of the vendors involved with the shipment did have the necessary insurance, while others chose not to protect themselves from the potential risk of loss.
“And while we understand the concerns of the vendors now affected by their choice not to protect themselves through risk-of-loss insurance, we are properly abiding by governing law and previously agreed upon contracts.”
“We can report that we have taken some actions to assist the affected uninsured vendors as they continue to produce goods on our behalf,” Deitz said.
Such assistance includes paying demurrage fees, costs to loss adjustors to prevent the goods from becoming abandoned, and return-to-origin transportation fees on behalf of the vendors to limit their further losses.
Fees will be collected for these costs in due time, according to the statement.
Deitz said Kontoor is helping to arrange for the now distressed goods to be sold through other channels to mitigate the losses for these affected vendors.
Rubana Huq, president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), said the fire incident at the vessel was beyond the control of the vendor.
But the goods under question were unaffected and therefore there was no cause for initiating an action for an insurance claim.
She said the vessel owners declared general average (GA) and everyone in the trade understood its implications that the voyage will have been frustrated and therefore, the vessel and its cargoes will face considerable delays to relay the goods to final destinations.
She said the goods were relayed once the freight and the GA contributions were paid directly by Kontoor Brands, and the vendors were confirmed of the release of the payments.
This clearly demonstrates that the intent was for the goods to have been received or accepted by them, Huq said.
So, the unilateral and arbitrary change of mind by Kontoor to refuse to accept the goods while on way to the final destination is totally beyond moral justifications and unfair, she said.
Huq said the vendors are out of pockets with the costs of the goods and the non-payment will severely affect the sustainability of some of these companies.
“The return of the goods to the shippers is definitely considered a breach of trust and against the fundamentals of ethical and responsible sourcing.”