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Bangladesh drafts policy to register apparel buying houses

Apparel Buying House
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Bangladesh Government is moving to bring discipline and accountability in the line of apparel buying houses.

Ministry of Commerce has prepared a draft policy which has been forwarded to all stakeholders to shed light on its proposals. Apparel Resources has obtained insights into contents of the draft policy.

The policy entitles all buying houses to register with the Export Promotion Bureau (EPB). Without registration, no house will be able to handover Letter of Credit (LC) from buyers to manufacturers.

Notably, there are over 1,000 apparel buying houses in Bangladesh, about 400 of which are under a structural body Bangladesh Garment Buying House Association (BGBA). These houses obtain orders from buyers abroad, source from local manufacturers and then deliver to apparel buyers abroad.

Up until now, these buying houses have been operating without a legal framework and oversight – which came to light rather badly when Bangladesh’s apparel industry suffered a US $ 72,000 setback, the largest in history, last year on fake orders from a non-existent overseas source.

“We welcome the Government’s move,” Md Anwar Shahid, Vice President of BGBA, told Apparel Resources, adding, “This will be good for those who want to be genuinely involved in the buying house business. In fact, we have been pushing the Government for quite some time for this.” Shahid is also the Managing Director of Shimex International Ltd., a buying house.

Further, Apparel Resources has learnt that the draft policy would entitle both buying houses and apparel manufacturers to enter into a contract before finalising on a business deal. Copies of the draft contracts would then have to be endorsed by their respective organisations.

Buying houses in the country would then have to remain transparent in determining prices while negotiating between garment buyers and exporters.

After handing over the letters of credits to exporters on behalf of buyers, buying houses will have to continue to carry out its responsibilities until the payment is delivered to the exporters.

As per the draft, buying houses or buying agents will have to send statements of order placement of garments export to the BGBA every three months. In turn, the trade association will have to send attested copies of the statements to Bangladesh Bank and EPB.

Additionally, there will be a panel to monitor and supervise the activities of the registered buying houses. It will inform the Ministry of Commerce in case of any discrepancy in following the regulations. It will also recommend necessary actions that need to be taken against a violator.

“Our aim is to expand our apparel export market by creating a good reputation. Until now, there has been no policy for the apparel buying houses, and these houses have been operating without supervision,” Abdur Rahim Khan, Deputy Chief, Textile Cell, Ministry of Commerce, told media.