KARACHI, Jan 26: Exporters of textile and clothing have been advised to be cautious while dealing with US importers, who are presently defaulting owing to all-round recession, particularly in textile apparel sectors.
The advice has been issued by trade bodies after many exporters to US market have lodged complaints with them that the US importers have failed to make huge payments towards export proceeds and this was causing severe liquidity crunch for their operations and export commitments.
As a result the trade bodies have warned their members to desist from entering into any export contract with buyers in cases where payments have been deferred or were made on acceptance of documents.“After receiving complaints from some members we have advised them to enter into export contract only on sight Letter of Credit (L/Cs), which should be backed by master bill of lading,” Jawed Bilwani, chairman Pakistan Hosiery Manufacturers Association (PHMA) told Dawn on Saturday.
He further said, “We have also cautioned our members not to export to US market on DA (document against payment) basis or through DP (Document Acceptance) as both the methods do not only reduce the role of banks but also delays payment of consignments.
According to the latest data released by the US Federal Reserve the output of US textile mills fell by 12.1 per cent in 2007, which is the sharpest drop in 25 years.
The data also showed that the US apparel output was down by 2.5 per cent in 2007, while textile products manufacturers saw their production drop by 4.9 per cent. US trade groups such as the American Manufacturing Trade Action Coalition (AMTAG) say that the decline in US output is directly tied to a “flood of subsidised imports”, especially those from China.
For the 12-month period ending in November 2007, the US textile and apparel imports by volume totalled 53.15 billion square meters (Sme), up from 32.8 billion Sme in 2001, according to the US Commerce Department’s office of Textiles and Apparel (OTEXA). The 20.34 billion Sme increase represents a 62 per cent raise in US imports.
Over the same period, the US textile and apparel imports from China totalled 21.38 billion Sme, up from 2.21 billion Sme in 2001, a rise of 867 per cent.
Similarly, the members have been asked not to export to US market on the basis of DA, which allows defer payment till a mutually agreed period, which may be up to 120 days and under this banks’ role is also reduced to a courier service. The least exporter could do, he said, is to go for legal battle.