US seeks list of apparel brands that cancelled orders

The US Trade Representative (USTR), the chief trade negotiator for the Trump administration, has sought a list of retailers that cancelled work orders with Bangladeshi firms due to the ongoing coronavirus pandemic.

After securing the list, the US government is expected to urge the retailers to accept their shipments of previously cancelled work orders.

A senior official of the USTR expressed his organisation's willingness to carry out this initiative during a virtual meeting of the Trade and Investment Cooperation Forum Agreement (TICFA) Council with Bangladesh's representatives on Tuesday.

The fifth round of meeting under TICFA, which was signed in November 2013 in a bid to create a platform for two countries to negotiate trade and investment, was held in Dhaka in March.

A considerable number of work orders for garment items totalling $3.2 billion have either been cancelled, deferred or withheld at various seaports as retailers in the US are reluctant to accept deliveries amid the current economic uncertainty, according to the Bangladesh Garment Manufacturers and Exporters Association (BGMEA).

However, the international buyers who did not cancel or defer their work orders are demanding unusual payment terms.

For instance, most of the retailers complete payment within 90 days after placing an order as per the contract outlined in the letter of credit. Now, buyers have asked for up to 180-210 days to complete their payment.

Since many local garment manufacturers are giving in to these demands in a bid to keep their operations afloat amid the economic maelstrom, the sector has run into a liquidity shortage and numerous workers have lost their jobs in the process.

During the meeting, Bangladesh said that US investors could help set up manufacturing plants for coronavirus vaccines as it would make the highly sought-after drug more affordable and available for the country.

"We need a lot more foreign direct investment to spur on our country's development," said Commerce Secretary Md Jafar Uddin, who led the Bangladesh delegation.

Christopher Wilson, an assistant USTR representative for South and Central Asia, led the US delegation.

Entrepreneurs from the US are the largest investors in Bangladesh, with the heaviest investments being made in the country's energy sector.

But now, Bangladesh is seeking more American investment in the pharmaceutical sector, which has grown rapidly over the years.

"If US investors set up vaccine manufacturing plants in Bangladesh, it might be a timely decision because the demand for it is very high right now," Uddin said after the meeting.

The Bangladesh team also demanded more American investment in non-coronavirus-related pharmaceutical industries.

"We told the US to invest in contract-manufacturing of medicine so that they can produce various pharmaceutical products here and later ship some back home," Uddin added.

Investing in Bangladesh's pharmaceutical industry could indeed be lucrative for foreign investors as the country is eligible to produce patented drugs cheaply without securing a licence until 1 January 2033.

This is due to a decision made by the World Trade Organisation under the Trade-Related Intellectual Property Rights (TRIP) agreement.

Thanks to this facility, the local pharmaceutical industry has thrived, meeting 98 per cent of the domestic demand.

As a result, many local drug makers are now exporting their products to nearly 150 destinations, including the US, Canada, the UK and the EU.

In fiscal 2019-20, Bangladesh's pharmaceutical exports grew by 4.5 per cent year-on-year to $136 million, according to data from the Export Promotion Bureau (EPB).

Bangladesh could also be a prime location for American companies to relocate to as many Japanese and Chinese firms are moving to the country due to its trade privileges and competitive production costs.

In a virtual presentation during the meeting, the Bangladesh Investment Development Authority detailed the country's initiative to launch One-Stop Service centres that would help both local and international investors.

The issue of reinstating the Generalised System of Preferences (GSP) for certain Bangladeshi products bound for US markets was also raised.

Under the facility, Bangladeshi goods such as dry fish, tobacco and ceramics would enjoy duty-free access.

Before the country's GSP status was suspended, Bangladesh shipped products worth $24 million to the US each year under the preferential trade treatment.

The current GSP scheme's tenure will come to an end in December either way, the US delegation said.

Therefore, Bangladesh could apply to the USTR for renewal of its GSP status when the next phase comes, according to a statement from the commerce ministry yesterday.

The US government suspended Bangladesh's GSP status back in June 2013, citing poor labour rights and working conditions following the nation's deadliest industrial accident, the collapse of Rana Plaza, in April that year.

About 1,138 workers in the commercial complex were killed while 2,500 were left severely injured.

After that, the US government outlined 16 terms and conditions to be fulfilled by its Bangladeshi counterparts before the country could regain its GSP facility.

Bangladesh has achieved the conditions, which mainly relate to improving labour rights, workplace safety and remediation of garment factories by the Accord and the Alliance.

The country has since applied twice for the reinstatement of its GSP status but the USTR is yet to give the all-clear as a lot more improvements to the country's labour laws need to be made.

"Nonetheless, we are hopeful that the US will consider our appeal items this time as Bangladesh has already fulfilled all the conditions," Uddin said.

Locally made apparel items should also be given duty-free access to the US even though it does not provide this scope for any other country other than a few African nations under the African Growth and Opportunity Act.

Bangladesh imports tonnes of cotton from the US each year and so, these garment products should get the duty-free facility, he added.

During the meeting, the US delegation demanded cotton imported from the US be not fumigated upon arrival as it had already gone through the process before being shipped.

Double fumigation deteriorates the cotton's quality and also causes a delay in the manufacturing process.

The double fumigation method was introduced in the 1950s, during Ayub Khan's tenure as leader of East Pakistan, now known as Bangladesh, to prevent bollworm attacks.

The US is Bangladesh's single largest export destination but about 95 per cent of all exports to the nation are garment products.

As many as 97 per cent of the goods of Bangladeshi origin had enjoyed duty-free access to US markets due to the country's classification as an LDC.

Under the LDC category, Bangladesh products still get tax-free entry to several other destinations, as per the decision taken during the Hong Kong Ministerial Meeting of the WTO in 2005.

However, the country's main export item, garment, was not included in the 97 per cent package even back then.

Garment exports account for 95 per cent of Bangladesh's overall shipments to the US.

With the existing regulations, Bangladeshi apparel items are subject to 15.6 per cent upon arrival in the US.