A $16 billion contract manufacturer facing destruction after its clothing order was reneged

Garment Factory 1

Since the COVID-19 outbreak, major fashion brands in Europe and the United States have unilaterally canceled orders and refused to pay overseas suppliers, totaling more than $16 billion.

Mostafizi Yudin is the founder of a garment manufacturing and trading company in Bangladesh. He is well known in the local industry.Most of his customers are European and American clothing brands.In March, Mr. Yudin suddenly received an email from arcadia, a British customer, saying it was canceling all orders and would no longer accept shipments from the Yudin plant because of the outbreak.

Uddin, Bangladeshi apparel maker: We should be seen as part of the value chain, but the fact is that [the customer] only sent one email to our long-time partner saying that the order had been cancelled and they didn’t want my goods.I’ve already bought the material, they just don’t want it, how can that be.

Mr. Udin spent more than $1 million on raw materials to make new Arcadia clothes, and the brand has about $2.44 million worth of goods at his factories.Now the goods, which were supposed to go to Britain, are filling Yudin’s warehouses.

Garment Factory

Arcadia is not alone in canceling orders.Since March, 80% of the factory’s foreign-trade orders have been canceled, Mr. Yudin said, without further explanation or compensation from customers.He posted his story on social networking sites and attracted media attention.Under pressure from public opinion, the Acadia Group responded.

In a letter to suppliers, Arcadia said the COVID-19 outbreak was “force majeure” and that cancellations were in line with the terms of the contract.At present, they only accept goods that are in transit until March 17, but they can only pay 30% discount on the preferential price.Other orders, including ready-made garments that have not yet been shipped, will be cancelled.The reason was that customers would no longer buy spring clothes after the end of the season, and warehouses could no longer take in new inventory because stores were still closed.A company spokesman also said it had no obligation to reimburse Mr. Yudin for the cost of raw materials.

Garment Factory

But another set of figures is just as striking.Despite the impact on revenues, some brands and retailers are spending heavily to pay dividends to shareholders, the Guardian reported.Kohl’s, one of America’s biggest clothing retailers, paid a $109m dividend to shareholders after cancelling large orders from Bangladesh, South Korea and elsewhere.

The owner of an Indian garment factory with a canceled foreign trade order once said in an interview with the media, “If our worker does not die from a coronavirus, he will die of starvation.”

In the era of globalization, many brands have shifted manufacturing to countries with low labor costs to increase profits.But when crisis strikes, it is hard to expect them to share the pain with businesses and workers in these countries.In a global epidemic that has lasted nearly a year, the real casualties have often been workers in developing countries at the bottom of the industrial chain.


Business Director at Shanghai Fumao Clothing Co.,LTD

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