Textile millers are allegedly facing delay and not getting their payment duly against sale of raw materials to local garment exporters under back-to-back letters of credit (L/Cs).
Ready-made garment (RMG) exporters are buying yarn and fabric from both local and global markets under back-to-back L/Cs.
Banks are making payment to the foreign suppliers just after submitting bill of lading as per conditions of the L/Cs. But the same banks are making delay of up to six months to pay the local suppliers, they alleged.
The Bangladesh Textile Mills Association (BTMA), in a letter to the Bangladesh Bank (BB) on January 23, requested solving the issue.
The trade-body said the local yarn and fabric makers are incurring financial loss due to the unusual delay in making payment by the banks on different excuses.
Majority of the BTMA's spinning, weaving and dyeing mills are supplying yarn and fabric to the local RMG exporters as 'deemed exporters', the BTMA president Mohammad Ali Khokon said in the letter.
After getting a pro-forma invoice from the mills, the RMG exporters open back-to-back L/Cs, and the mills shipped the materials to respective factories through truck receipt and delivery challan.
Despite having signs of factory authorities on truck receipt and delivery challan, the banks force the textile millers to get acceptance of the buyers on bill of exchange, which is unnecessary, the letter read.
Even after fulfilling all the requirements, the banks make delay in paying money. They show a number of excuses, including non-repatriation of export proceeds, partial repatriation of export proceeds, and the buyers' insufficient balance with the banks to pay the suppliers.
The BTMA alleged that in many cases, it took the millers five to six months to get their payment against the 90 days deferred payment duration.
It is a violation of Guidelines for Foreign Exchange Transactions of the BB and the latest version of Uniform Customs and Practice for Documentary Credits (UCP 600).
According to the Article 13 (iii) of UCP-600, an issuing bank will be responsible for any loss of interest, together with any expenses incurred, if reimbursement is not provided on first demand by a reimbursing bank in accordance with the credit terms and conditions, the letter cited.
Talking to the FE, Fazlul Hoque, a former leader of the BTMA, said a total of US$5.0 million payment remained outstanding, while he did not get a payment worth $0.8 million from a public bank despite selling raw material three years back.
Masud Rana, managing director of Asia Composite Mills, said they are facing such dillydally, while the situation has worsened during the Covid-19 pandemic.
He alleged that the banks are paying to the foreign sellers in line with the L/C conditions, while the situation is reverse for the local suppliers.
When asked, the BTMA president said they have sought the central bank's intervention, so that the local textile millers duly get their payment against back-to-back L/Cs from the banks.
Some two dozens of factories have lodged complaints to the association in this connection.
"We have cases, where they are not getting payments although two to three years have passed," he added.
According to the BTMA, some $200 million remained stuck due to non-payment during the Covid-19 period.
The BTMA mills meet about 90 per cent of the yarn and fabric requirement for knitwear, and 30 to 40 per cent for woven.
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