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Kontoor Brands Faces Pending Litigation From Bangladesh Suppliers

Kontoor Brands and a handful of garment factories in Bangladesh are locked in a back-and-forth battle over a shipment that went awry early this year, and Kontoor said Wednesday it has just received word on pending litigation tied to the matter.

In short, Kontoor had been expecting a shipment from several of its vendors in Bangladesh, but a fire on the cargo ship resulted in a nearly six-month delay in receiving the goods. And as such, the company rejected the shipment.

On the supplier side, the vendors in Bangladesh are arguing that the shipment—which they value at $2.6 million—has dealt a serious blow to certain factories that can’t stomach the loss, and some suppliers claim they’ve had to foot the freight charges for bringing the goods back to Bangladesh.

“I can’t afford the loss and it was not my fault,” Mohammad Nazrul Islam Mazumder, chairman of garment exporter Nassa Group, told The Daily Star. “The goods reached the port as per schedule. There was a fire in the ship but the goods were unaffected.”

Kontoor Brands, however, claims that’s not quite how the story went.

“It’s accurate that a shipment of apparel for delivery to Kontoor Brands was affected by a fire on an ocean-faring ship early this year,” Kontoor told Sourcing Journal Wednesday. “The fire affected finished goods being shipped by multiple vendors in Bangladesh that were to be available for sale to consumers in time for the Spring 2019 selling season. As a result of the fire, delivery of the apparel was delayed by nearly six months, an entire season too late. This was a very unfortunate incident for everyone involved.”

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The company said its contract terms “clearly stipulate that the vendor bears all risk of loss of the goods until the goods reach the destination terminal and transfer of the title of goods to Kontoor takes place.”

“In this case, the vendors were fully responsible to deliver the garments to the U.S. or Canadian port terminal in the Spring of 2019,” Kontoor said. “It’s also expected that vendors protect themselves from risk in situations like this by having appropriate business-related insurance. In this case, many of the vendors did have the necessary insurance, while others chose not to protect themselves from the potential for risk of loss.”

Some of the put-out vendors believe, as long-term suppliers for Kontoor, even when its brands still came under VF Corp., that they should benefit from more support than what they’ve seen.

But Kontoor says it’s abiding by both the law and its existing contracts. Still, the company said it has taken some actions to help the uninsured vendors, some of which are claiming this shipment issue could upend their business. So far, those actions include paying demurrage fees, costs to loss adjustors to prevent goods from being abandoned, and return-to-origin fees on behalf of the vendors to “limit their further losses.” It appears, though, that those payments are more loans than true aid.

“Fees will be collected for these costs in due time,” Kontoor told Sourcing Journal.

There’s no telling yet how the pending litigation could impact those efforts and any in the future, as details have yet to be made public.

In the meantime, Kontoor said it’s helping to arrange for the now-distressed goods to be sold through other channels to mitigate the loss for the affected vendors, and will use the whole experience as a teachable moment.

“In future meetings with our vendors, we will use this unfortunate incident as an example of why we advise and strongly suggest our vendors carry protective insurance to cover incidents, such as this ship fire,” the company noted.