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Bangladeshi Suppliers Strike Back As Bills Pile Up

“Bangladeshi factories will not be cheated,” Miran Ali, vice president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), the South Asian nation’s biggest trade group for apparel factory owners, wrote on LinkedIn over the weekend.

Ali, who is also the managing director of Bitopi Group and Tarasima Apparels, made the statement after payment disputes between several factories and their buyers showed no sign of a smooth resolution.

“Our laws and the minimum standards of international commerce must be respected by all those who wish to do business, not only in Bangladesh but throughout the supply chain,” he added.

On Thursday, the Bangladesh Investment Development Authority (BIDA), the country’s apex investment promotion agency, suspended all activities with Newtimes Development, the Bangladesh liaison arm of Hong Kong procurement giant Newtimes Group, until it presented “satisfactory answers” to a show-cause notice that the agency issued early last month.

The notice followed a lawsuit that Bitopi Group’s Croydon-Kowloon Designs filed in July 2020 against Newtimes Development for failing to compensate it in full for a $1.2 million work order it fulfilled the previous year. The supplier said it received less than half—or $454,000—for the shipments, which were destined for Coldwater Creek. The Bangladeshi court later awarded Croydon-Kowloon Designs a $698,000 attachment order against Newtimes Development’s bank account until security for the claim amount could be brought to Bangladesh.

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Responding to a criminal case that Croydon-Kowloon Designs filed against Newtimes Development around the same time, Bangladesh’s Police Bureau of Investigation made a decision in favor of the supplier, saying that it found prima facie evidence of cheating and breach of trust on the part of the buyer.

Imtiaz Moinul Islam Neelim, counsel for the BGMEA, told Sourcing Journal that Newtimes Development “fraudulently bought” hundreds of thousands of dollars worth of product and then used Coldwater Creek’s bankruptcy in 2020 as a reason to renege on payment. It maintained this argument, he said, even though its parent company scooped up the embattled retailer’s assets for $12.2 million shortly afterward.

“Newtimes [Group] bought [Coldwater Creek] but did not even once disclose [that] it acquired Coldwater Creek’s inventory and intellectual property assets,” Neelim said. “This means [it has] become the owner of our products without paying any money.”

Croydon-Kowloon Designs later wrote to BIDA, asking the agency to stop Newtimes Group from “harming national interest and the RMG sector.” Despite business ties with Bangladesh that stretched at least 14 years, Newtimes Group did not register with or submit its particulars to the Registrar of Joint Stock Companies And Firms, a “clear violation” of BIDA guidelines and Bangladesh’s 1994 Companies Act, Croydon-Kowloon Designs said. The fact that it is operating illegally, it added, shows “absolute disregard to the laws of Bangladesh.”

Neelim said he questioned why a company with the financial wherewithal to snap up retailers like Coldwater Creek isn’t willing to resolve its debts. “I think our garments factories should be more careful before doing business with [it] or companies like [it],” he said.

Coldwater Creek and Newtimes did not respond to a request for comment.

Earlier in March, Neelim helped four Bangladeshi suppliers file a case against Edinburgh Woollen Mill, or the EWM Group, the parent company of fashion chain Peacocks, for failing to pay more than $689,000 in goods that they had shipped in 2019.

Designtex Knitwear, Designtex Fashions, Knit Bazaar and Bottoms Gallery Limited were reportedly told by the EWM Group that since it no longer owns Peacocks, which collapsed into administration in 2020, it was not obligated to pay the sum.

But financial documents show that Purepay Retail and Anglo Global, Peacocks’ current owners, are all part of the EWM Group, which is owned by British billionaire Philip Edward Day, Neelim said. Edinburgh Woollen Mill did not respond to a request for a statement.

“​​It has been observed that Peacocks, Purepay and Anglo Global are in fact parts of the EWM Group,” he told Sourcing Journal. “Declaring a company of the same group bankrupt and then purchasing the same through two other companies of the same group in order [to deprive] all creditors of their debts is nothing but fraud and Mr. Philip Day, along with the EWM Group, are obliged to pay the dues owed by EWM and Peacocks.”

Edinburgh Woollen Mill did not respond to a request for a statement.

Bangladesh factories have been bitten by the EWM Group before. In the early days of the pandemic, the BGMEA said it would boycott the company after it allegedly skipped out on $33 million in unpaid bills from a number of suppliers.

Writing to Day in May 2020, the BGMEA said that companies like the EWM Group had been taking “undue advantage of the COVID-19 situation” by demanding deep discounts, canceling orders and withholding payment for finished and shipped goods.

The EWM Group later threatened to sue the BGMEA over accusations that it said were “completely baseless and without merit.” To date, the EWM Group remains under the “unpaid” column of the Worker Rights Consortium “Covid-19 Tracker,” which lists the companies that have taken responsibility for their pre-pandemic orders—and those that have not.

Bangladeshi manufacturers have taken on big-name buyers before and won.

Last February, Sears parent Transformco settled a $40 million lawsuit brought by 19 factory owners after it allegedly refused to compensate them for completed orders. The exact terms of the settlement weren’t revealed, but it was believed to be between 10 percent and 15 percent of the owed amount.

Lawyers representing the suppliers said that more than $21 million in products had already been shipped and were being stored by Transformco’s carriers in U.S. ports when the company unilaterally canceled orders, citing a “force majeure” clause in its contracts after Covid-19 exploded.

Transformco, the lawyers wrote in the suit, “led the suppliers over a financial cliff that has jeopardized their businesses and impacted the jobs of thousands of their employees” who face “severe hardship and even starvation” due to what they described as a “breach of contract.” As such, it has “contributed to an evolving humanitarian disaster in Bangladesh and elsewhere in Asia,” they added.

Editor‘s note: A story was published on May 6, 2022, with Newtimes Group’s comments in detail.