Some Bangladeshi factory owners have threatened to take legal action against the American buyer Sears Holdings after it allegedly refused to settle more than $55 million of outstanding debt.
If the buyer does not agree to pay the total outstanding amount within a stipulated time, the suppliers will file a lawsuit against it in court.
Factory owners said they have already shipped $21 million's-worth of their client's products, which are being stored by Transform Co's carriers at US ports.
Sears Holdings owes money to some two dozen companies, among which are: Savannah Fashion Ltd ($6.87 million), Combined Apparels Ltd ($2.68 million), Apparel Sourcing Ltd ($2.52 million), Pimkie Apparels Ltd ($4 million), Starlight ($13.5 million), and Prudent International ($7.4 million).
Some exporters were surprised when Sears told them to cancel orders that had been shipped even three months ago.
Local garment exporters have been facing withholding and cancellation of orders totalling around $3 billion as the Covid-19 pandemic has disrupted the global supply chain since March.
Sears' update came as a big blow to Bangladeshi exporters who are under threat of losing a few hundred million dollars after the bankruptcy moves of another US retailer JCPenney and UK-based Debenhams.
One of the exporters facing this unfortunate situation is Combined Apparels Limited in Chattogram. The company shipped goods to Transform Holdco LLC, a newly-formed concern of Sears Holdings Management Corporation, on February 27.
Sixty-two days after the shipment, the buyer asked for the orders to be considered cancelled, saying the Covid-19 pandemic had affected it badly. It is also dilly-dallying over paying $0.7 million for exports made several months ago.
Earlier, the buyer committed to paying the amount in April. Now its officials say they will pay in installments in May and June, and are also trying to convince Combined to export more.
Rakibul Alam Chowdhury, managing director of Combined Apparels, told The Business Standard, "I asked them [Transform] to inform us of the matter through the banking channel. However, on May 4, they sent us an email asking us to consider all their orders cancelled – including those already shipped. They will not pay for them."
"Already, we appointed lawyers to prepare documents for primary activities. We suffer when, a few months after the shipment a buyer cancels the product order."
He also said, "We entered a dilemma with Covid-19. The buyer would not pay and meanwhile we had to pay for raw materials from China."
He has sent a letter to the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), informing it of the situation and asking for a solution through diplomatic channels.
AM Chowdhury Selim, vice president of BGMEA and managing director of Al-Amin Garment Industries Ltd said, "It is very unfortunate that the company is not paying us. We are in trouble due to the sudden cancellation of orders after shipments of goods during Covid-19 crisis."
BGMEA sources said Sears has the highest outstanding bill of $13.48 million to NASA Group among the Bangladeshi suppliers.
Sears and its concerns also owe a good sum of money to companies owned by incumbent BGMEA President Rubana Huq and former president Abdus Salam Murshedy.
Sears filed for Chapter 11 bankruptcy on October 15, 2018. After that, it is doing business by obtaining permission from the court.
Transform Holdco LLC, formed on February 11 last year and registered as a private company, is to acquire some of the assets of Sears.