Apparel sector eyes export boost in US market

The Bangladesh-US agreement that reduces the reciprocal tariff and introduces duty-free facilities for using American inputs to manufacture garments will boost local apparel exports to the country's single-largest destination, industry leaders say.

They, especially spinners, however, say as US cotton is higher-priced, of superior quality, and requires a long lead time to bring into the country, required measures, including setting up a warehouse at the Chittagong Port, to ensure proper valuation and traceability of US-origin raw materials used in production are essential.

The Agreement on Reciprocal Tariff between the two countries signed on Monday reduces the reciprocal tariff imposed on Bangladeshi products in the US market from 20 per cent to 19 per cent.

Garments produced using cotton and man-made fibres imported from the United States will not be subject to any reciprocal tariff.

Welcoming the agreement, Bangladesh Garment Manufacturers and Exporters Association (BGMEA) in an immediate reaction said the provision of duty-free facilities for using US inputs would further enhance Bangladesh's access to the US market.

It also stressed ensuring proper valuation and traceability of US-origin raw materials used in production for effectively utilising this opportunity.

Terming US cotton comparatively costly, the BGMEA said significant export opportunities could be created if local spinners were able to ensure competitive yarn pricing.

It said it had not yet been formally informed of the complete terms and conditions of the agreement.

When asked, AK Azad, managing director of Ha-Meem Group that ships more than 80 per cent of its total exportable garments to the US, said exports to the US would rise, but the volume of increase would depend on the terms and conditions of the degree of value addition.

Terming the reduction and duty-free provision a good one, he further stressed grabbing the opportunity.

Shovon Islam, managing director of Sparrow Group, said buyers had already started working on sourcing US materials and were expecting a boom in work orders for the next spring season, for which production was scheduled for next September.

He exports up to $175 million to the US out of his total $300 million annual figure.

Raw materials for the current work orders were in production, he said, adding they needed innovative initiatives to use more US cotton and fibres to remain competitive mostly with India, with 18 per cent tariff, that was offering its local exporters a number of incentives.

Talking to The Financial Express, Bangladesh Knitwear Manufacturers and Exporters Association Executive President Fazlee Shamim Ehsan said a 1 per cent tariff cut put Bangladesh in the same position as Pakistan, Cambodia, and Indonesia.

He said it was good unless competitors struck the same duty-free facility deal using US cotton and fibres.

Syed Ershad Ahmed, president of the American Chamber of Commerce in Bangladesh (AmCham), said this agreement underscored the importance of continued dialogue between the government and the private sector.

"We believe this outcome can serve as a platform for deeper economic cooperation, increased US investment, and diversification beyond traditional sectors. Looking ahead, consistent implementation, clear communication of rules, and the ongoing stakeholder engagement will be critical," he said.

Bangladesh Textile Mills Association (BTMA) President Showkat Aziz Russell said the Rules of Origin had not yet been clearly defined, which created uncertainty regarding the effective application of the benefit of zero reciprocal duty for garments manufactured using cotton and synthetic fibres imported from the United States.

"If the Rules of Origin are clarified and made practical, Bangladesh's readymade garment (RMG) and textile sector stands to gain significantly," he said.

Echoing the BTMA chief, its former president M Matin Chowdhury said the reduction was only 1.0 per cent, but it was still "significant".

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