WASHINGTON — Bangladesh has accepted the U.S. offer to allow the entry of up to 175,230 dozen pairs of cotton trousers that were embargoed at the end of July, with a penalty of three times the amount next year if the entire amount enters before yearend, officials confirmed Friday.
Mohammed G. Hussain, commercial counselor at the Bangladeshi Embassy here, said officials estimate they will need to borrow an extra 105,000 to 140,000 dozen pairs, or 3 to 4 percent against the base limit of 3.5 million dozen pairs. The amount would reach 5 percent if all the embargoed goods are let into the country.
Bangladesh overshipped its 3.8 million dozen quota limit for the year by about 5 percent and the cotton pants have been sitting in warehouses since July 26 at a considerable cost to such U.S. retailers as Sears, Target and Wal-Mart.
The Committee for the Implementation of Textile Agreements made the offer to the Bangladeshis on Wednesday.
“We wanted to minimize as much as possible the financial costs to importers, exporters and retailers,” said Hussain. “If we had not agreed to the proposal, the implication would have been that importers would either have to send the clothes back to Bangladesh or pay to store them in U.S. warehouses until the new quota year on Jan. 1, and that is very expensive.”
He said Bangladeshi officials “were never given the idea that the penalty could be so huge.” He pointed to two similar cases when the Philippines and Egypt on separate occasions were granted additional quota, but received smaller charges against the following year’s quota.
“We never thought it would be so harsh, but then again we didn’t have a choice,” Hussain said, adding he is “grateful” the administration even allowed it.
Michael Hutchinson, director of the Commerce Department’s Office of Textiles and Apparel, said the penalty was so stiff because it was an “egregious case of quota mismanagement.”
“We wanted to send a message to Bangladesh to get its act together,” Hutchinson said. “The other reason is our textile guys are really suffering and we felt we couldn’t go back to the lesser formulas [applied to the Philippines and Egypt].”
Hutchinson also pointed to the Bush administration’s pledge to help U.S. textile makers to compete internationally by forcing foreign countries to follow trade agreements.
He claimed textile makers will benefit next year, since Bangladesh’s quota limits could be lower than this year’s due to the penalty. If Bangladesh ships the entire 175,230 dozen, CITA will deduct 525,690 dozen from next year’s quotas.
Hutchinson insisted this was a “one-time shot.” He said, “We decided to give them an option and an out because a number of people in the import community are really concerned about economic losses sustained if there was not some kind of flexibility offered.”
The problems began in May when the Bangladeshi government found big discrepancies between their quota calculations and a CITA report, according to Hussain. He said the government allocates quota in December for the following year and overallocated it based on its practice of borrowing 15 percent from another quota category for non-cotton vegetable-fiber trousers, such as silk blends and ramie. However, quotas were phased out on that category at the beginning of the year.
Hussain also noted that Bangladesh received unexpected orders from importers who shifted production of cotton trousers out of Madagascar due to civil unrest and into Bangladesh, which contributed to the overproduction of that category. He acknowledged that some business relationships between Bangladeshi makers and U.S. importers have been strained due to the overallocation.
“I think there is already some damage,” Hussain said. “Our goal is to repair the damage as soon as possible and we are working in that direction.”