INTERNATIONAL BUSINESS PAGES
(notably fabric) needed by exporters
elsewhere, from Bangladesh and Cam-
bodia to Honduras.
According to our survey findings, 93%
of Bangladesh suppliers reported de-
lays in raw material shipments from
China. Of these, 53.4% indicated that
buyers subsequently penalized them
for the resulting delays in their ship-
ments. In addition to the delays in re-
ceiving raw material, 38.3% reported
that the price of their raw material in-
creased by ‘a lot,’ and 47.7% reported
prices increased ‘some’ as a result of
the crisis in China. When asked if buy-
ers adjusted their prices in response
to a large increase in raw material
prices, 91.9% said no. [See Figure 1.]Figure 1:Figure 2:
Did Buyers Adjust Prices
to Help Cover Cost of
Raw Material Increase?Have Buyers Delayed their
Payments to You for
Completed Orders?
Yes, adequately2.96%Yes, by 1-10 days10.87%
Yes, but only a little5.19%Yes, 11 or more days68.84%
No91.85%No20.29%
Table 1
Since the Outbreak of the Coronavirus, Have You Had In-Process
Orders (e.g., Orders That Are Near Completion or Ready to be
Shipped) Cancelled Prior to Shipment?
Number of
FactoriesPercent
(%)
Some (up to 25%)13247.0
Crisis Phase Two: Delayed Pay-
mentsA lot (26% to 50%)6423.3
Most (over 50%)6123.7
As the Covid-19 pandemic began to
hit the bottom line of buyers, suppliers
reported increased delays in payments.
Our survey confirms these reports.
10.9% of suppliers said they experi-
enced delays of 1 to 10 days in pay-
ments, relative to contractually stipu-
lated terms, and 68.8% said they ex-
perienced delays of more than 10 days.
[See Figure 2.] Indeed, according to
Mostafiz Uddin, some buyers were
pushing back payments by 30 days or
more.All165.9
Crisis Phase Three: Cancellation of
Orders in Progress
By mid-March 2020, an even deeper
crisis began to hit the industry. Buyers
began to abruptly cancel (or put on
hold) not only future orders, but orders
already in process. Some of these or-
ders were entirely finished and ready
to be shipped, but the buyers refused
to accept order shipments or honor
their contractual obligations to pay for
these orders. At the time of the sur-
vey, 23.4% of suppliers indicated that
“a lot” of in-process orders had been
canceled, 22.3% had “most” of their in-
process orders canceled, and 5.9%
had all of their inprocess orders can-
celed. [See Table 1.]
According to press reports, Primark –
which last year posted operating prof-Figure 3aFigure 3b
When buyers have cancelled
orders, have they agreed to pay
for raw material (fabric, etc.)
that you already purchased?When buyers have canceled
orders, have they agreed
to pay for production
(cut-make) costs?
No72%No91%
Yes13%Yes3%
Some cases15%Some cases6%
Figure 4:
Buyer Order Cancellations Impact on Operations
No major impact for the moment19.9%
Partial cut in employment22.2%
Most operations are shutdown53.4%
Factory closure4.5%
Figure 5:
Impact of Crises on Incomes of Workers
YesNo
Some income for furloughed workers27.56%72.44%
Severance pay for dismissed workers19.60%80.40%
its of $1.07 billion – is one example of
a buyer that canceled all its orders with
its suppliers. This includes “orders al-
ready in production at factories” (em-
phasis mine).
NCM-APRIL 2020
78Many buyers are evoking the force
majeure clause in their contracts to
justify the breaking of their binding
obligation to pay for orders in produc-
tion. But, for fashion law expert Alan