Big Brands Cancel Orders And Refuse To Pay For Goods

In 2020, the global epidemic of new crown pneumonia will make many industries suffer great impact, and clothing industry is one of them. Over the past few months, there are always some well-known clothing brand shop closures, layoffs and even bankruptcy news. But behind these well-known brands, there are more small enterprises and workers under greater pressure, and their plight is not known. On October 8, a report in the guardian revealed the crisis chain of the clothing industry under the global epidemic situation.

"As fashion brands refuse to pay $16 billion, workers in global garment factories are facing destruction." Since the outbreak of new crown pneumonia, European and American fashion brands have unilaterally cancelled orders and refused to pay for goods to overseas suppliers, with a total price of more than 16 billion US dollars, according to the guardian.

My life turned into a disaster movie in one day.

Mostafitz Youding is the founder of a clothing production and foreign trade company in Bangladesh, and has a good reputation in the local industry. Most of his customers are European and American clothing brands. In March this year, Youding suddenly received an email from the British customer Acadia, saying that due to the epidemic, all orders will be cancelled and no more goods from the Youding factory will be received.

Youding, a Bangladeshi garment manufacturer: we should be seen as part of the value chain, but the fact is that only one email was sent to our long-term partners saying that the order was cancelled and they didn't want my goods. I've bought the raw materials, and they just don't want them. How can this be done.

In order to make Acadia's new clothes, Youding spent more than $1 million on raw materials, and the brand has about $2.44 million worth of goods in his factory. Today, the goods that should have been sent to the UK are full of udin's warehouses.

Acadia is not the only one to cancel orders. Youding said that since March, 80% of the factory's foreign trade orders have been cancelled, with no further explanation from customers and no compensation. He posted his experience on social networking sites, attracting the attention of major media. Under the pressure of public opinion, Acadia group responded to this.

In a letter to the supplier, Acadia said the new crown pneumonia outbreak was "force majeure" and that the cancellation of the order was in accordance with the terms of the contract. At present, they only accept the goods that have left Hong Kong as of March 17, but can only pay a 30% discount at the preferential price. For other items that have not yet been delivered, the order will be cancelled. The reason is that after the season, customers will no longer buy spring clothing, as the store is still closed, the warehouse can no longer receive new inventory. A spokesman for the company also said they were not obliged to compensate Youding for the cost of raw materials.

For this explanation, Youding is difficult to accept. He believes that when the two sides sign a contract, there is an unequal relationship: "the contract has 33 pages and 300 articles. If I don't sign the contract, the brand chamber of Commerce will say that if you don't sign, I will go to another factory."

According to Youding, the normal operation of the factory depends on a system of debt and mutual trust. After receiving the order, he uses the certificate of the previous shipment to borrow money from the bank to pay for the expenses needed for a new round of production, including raw materials, workers' wages, production costs and transportation costs. When a new batch of goods is delivered, a new certificate will be issued. After the buyer has paid off the full amount, a production and trade cycle will be concluded. Now, due to the cancellation of a large number of orders, the bank is no longer willing to give him loans, and the raw material suppliers are pressing for payment. The previous production mode is difficult to sustain, and it is difficult for him to take orders from new buyers.

Youding, a Bangladeshi garment manufacturer: the whole value chain and the whole supply chain have to rely on trust, but I think after this incident, trust has completely collapsed.

According to the data released by the United States workers' rights alliance, Acadia group has only received 5% of all its orders in Bangladesh. It is estimated that the brand will cancel orders worth 130 million US dollars in the world.

In June, shops on the high streets of England reopened one after another, while Youding was worrying about what to pay the workers. His factory in Chittagong, in the southern city of Bangladesh, has about 2000 workers, most of whom support their families.

As the world's second largest clothing manufacturer, Bangladesh's foreign trade garment production has provided employment for more than 4 million people, mainly women.

Mojit, head of a clothing company in Bangladesh: there are 45 million workers directly working in the clothing trade industry, and 34 million people are engaged in clothing trade related work, such as accessories companies, textile mills, spinning mills and cotton producers.

According to the website of the garment manufacturing and Export Association of Bangladesh, in the fiscal year 2018-2019, clothing exports accounted for 84.21% of the country's total exports, of which 60% were sold to Europe.

Roxana Khan, Bangladesh social development expert: in Bangladesh, the clothing industry is the blood and main engine of the national economy.

Since the outbreak of new pneumonia this year, about $26.7 billion worth of orders have been cancelled or delayed in the country, involving nearly 1000 factories and nearly 2 million workers. 58% of the factories surveyed said they had to close most of their production lines and lay off workers because of the epidemic. To this end, the government of Bangladesh launched a $600 million aid program for the manufacturing industry. But as the epidemic continues, industry insiders worry that the country's garment manufacturing industry is facing a fatal blow.

In March, Huck, President of the garment manufacturing and Export Association of Bangladesh, released a video calling on international customers not to cancel orders.

Rubana hooker, President of the garment manufacturing and Export Association of Bangladesh: I will not question your decision. What I can do is to appeal to you to be sensible and take away all the goods currently being produced or produced. Please ship these goods on normal payment terms. If we don't get this kind of support in the next three months, there will be 4.1 million workers who will be forced to lose their jobs, which will cause social chaos that we can't afford.

In April, economists at the World Bank warned that the new outbreak could send 50 million Bangladeshis back into poverty. In June, a report from the center for policy dialogue, a think-tank in Dhaka, further pointed out that the country's poverty rate may regress to 15 years ago. A study by the global center for labor rights shows that once an order is cancelled, 72.1% of international buyers refuse to pay for the supplier's raw material expenses, and 91.3% are unwilling to pay the supplier's production costs.

Today, European and American countries have begun to restart the economy, but the situation of cancellation and postponement of orders of various brands has not changed. Moreover, Bangladesh is not alone in the crisis of order cancellation. In April this year, the Cambodian Garment Manufacturing Association issued an open letter calling on international brand buyers to abide by the contract and protect the lives of 75000 garment workers in the country.

In Cambodia, clothing processing accounts for 75% of the country's total exports. According to the Ministry of labor, there are about 1100 garment factories in Cambodia, providing 75000 jobs for the country. Since the outbreak of new crown pneumonia, about 250 garment factories have been closed.

In Sri Lanka, another foreign clothing manufacturer, clothing exports this year are also expected to decrease by $2 billion compared with last year.

Affected by the epidemic, since the beginning of this year, the global garment industry has been hit hard

PVH, the parent company of CK, announced that it would streamline its business in North America and close 163 retail stores. More than 60% of gap's stores have been closed. H & M sales fell by 46% and more than 2700 stores were closed. In June, Zara's parent company announced a loss of about 409 million euros in the first quarter and plans to close 1000 to 1200 stores in the next two years.

According to McKinsey's prediction, 20% to 30% of global garment companies will close down due to the epidemic.

But another set of data is equally alarming. Despite the impact of the epidemic on revenue, some brands and retailers are still spending huge sums of money on shareholders' dividends, the Guardian reported. Coll, one of the largest clothing retailers in the United States, paid shareholders a dividend of $109 million after cancelling large orders from Bangladesh and South Korea.

"If our workers don't die of the new coronavirus, they will also die of hunger," the boss of an Indian garment factory whose foreign trade orders were cancelled said in an interview with the media

In this way, the low cost of labor will be transferred to many countries. But when the crisis comes, it's hard to expect them to be able to share the hardships with enterprises and workers in these countries. In this global epidemic that lasted nearly a year, it is often the developing country workers at the bottom of the industrial chain who are really suffering from the disaster.