ZXY International, a global apparel buying and sourcing company, has decided to remove the clause in its letter of credit (LC) that states it would not accept any garments from Bangladesh should the country face any sanction.

ZXY International also said that, if needed, it would issue a fresh LC without the clause, according to a statement from the Bangladesh Garment Manufacturers and Exporters Association (BGMEA).

In a recent LC document, the company said would not accept garments sourced from countries that are facing sanctions from the UN, US, EU and UK.

The BGMEA said the much-talked about LC was transferred by ZXY International against a master LC issued by a French buyer, named KARIBAN.

It was initially said that a US retailer was the buyer that inserted the clause, which raised concerns among garment suppliers in Bangladesh.

In actuality, ZXY International had transferred the LC in favour of Knit Concern, a member of the BGMEA.

After collecting a copy of the LC, the BGMEA found that the clause was inserted by Standard Chartered Bank (SCB) Dubai. The SCB later withdrew the clause as concerns were raised.

The BGMEA had sought a clarification from ZXY International after the clause hit headlines in Bangladesh. As such, ZXY International and KARIBAN issued a formal response yesterday.

The BGMEA then informed that KARIBAN did not include the clause in its master LC.

Instead, the clause was inserted by SCB Dubai and the bank has been doing the same in every LC since November 30, 2022, the BGMEA said in a statement.

The BGMEA requested the clarification following widespread criticism over the clause, which created a panic among stakeholders of the country' garments industry.

"The issue brought significant media attention causing panic and confusion. Therefore, I am writing to share the correct information on this matter," said BGMEA President Faruque Hassan.

"So, rumours that a sanction might be imposed on Bangladesh stemming from the LC clause is baseless and incorrect," he added.

It should be noted that LCs are private commercial instruments, not statutory orders or notices.

So, they should not be misinterpreted as a measure of trade enforcement or economic sanctions.

"Moreover, the BGMEA did not receive any information from our diplomatic mission or from any official source to support any sanction or trade measure," Hassan said.

"In this context, we urge all the valued brands, retailers and their agents not to complicate trade with external issues, particularly by inserting any unnecessary clause creating such confusion," he added.

Hassan also urged BGMEA members not to accept any LCs with such clauses, and to communicate with the respective buyer(s), solicit clarification or amendments if any such clause is found in an LC.