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Under Declining Export Prices, the Ministry of Commerce Must Suspend Knit Fabric Import Restrictions

Situation

Bangladesh apparel exporters face a severe operational and margin crisis caused by falling prices in primary export destinations, domestic utility disruptions, and sudden regulatory restrictions on essential raw materials. On August 24, 2026, the Ministry of Commerce published the Import Policy Order 2026-2029 in an official gazette [The Business Standard, September 5 & 6, 2026]. This gazette introduced Sub-clause 12 of Clause 25, establishing that knit fabrics shall not be eligible for import [The Business Standard, September 5 & 6, 2026; Dhaka Tribune, September 6, 2026]. The order provides only a narrow carve-out, permitting imports of specialized knit fabrics not manufactured locally only when tied to explicit buyer requirements, supported by lien bank certification, and endorsed by recommendations from respective trade associations [The Business Standard, September 6, 2026].

This import bar arrived while ready-made garment exporters were already absorbing price reductions and reciprocal buyer-side tariffs in key markets [The Daily Star, September 6, 2026]. With high raw material costs and reduced pricing power, manufacturers are shipping apparel below production cost simply to sustain factory lines and retain workers [The Daily Star, September 6, 2026; The Business Standard, September 6, 2026]. Over the past three years, 402 readymade garment units have shut down under the weight of escalating operating expenses, utility tariffs, and eroded buyer pricing power [The Daily Star, September 5, 2026].

The regulatory ban immediately disrupted production chains. Several exporters opened letters of credit before the gazette appeared on August 24, 2026, leaving consignments stranded at Chattogram Port in open-air storage or trapped in transit as customs clearance stalled [Dhaka Tribune, September 6, 2026; The Business Standard, September 5, 2026]. On September 1 and September 2, 2026, the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) and the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) submitted formal letters to Commerce Minister Khandakar Abdul Muktadir demanding the immediate suspension or repeal of Sub-clause 12 [The Business Standard, September 5, 2026; Dhaka Tribune, September 6, 2026]. While the Bangladesh Textile Mills Association (BTMA) supports the import ban to protect domestic mill capacity, citing Bangladesh as the king of knitwear [The Business Standard, September 6, 2026], severe gas shortages have crippled local textile mills, leaving domestic fabric producers incapable of satisfying buyer lead times, volumes, customized designs, or specialized grades [The Business Standard, September 5, 2026; Dhaka Tribune, September 6, 2026].

Evidence

United States Office of Textiles and Apparel (OTEXA) trade data reveals the deteriorating commercial environment confronting exporters:

  • Contraction in United States shipments: Ready-made garment shipments from Bangladesh to the United States fell 6.50% year-on-year during January-July 2026, dropping to $4.66 billion from $4.98 billion in the corresponding period of 2025 [Dhaka Tribune, September 6, 2026; The Daily Star, September 6, 2026; The Business Standard, September 6, 2026]. In July 2026 alone, garment shipments to the United States plunged 10.73% year-on-year [Dhaka Tribune, September 6, 2026; The Daily Star, September 6, 2026; The Business Standard, September 6, 2026].
  • Volume and unit price erosion: Bangladesh export volume to the United States contracted 4.34% to 1.53 billion square metres equivalent (SME) during January-July 2026 [Dhaka Tribune, September 6, 2026; The Daily Star, September 6, 2026]. Concurrently, the average unit price realized by Bangladesh exporters fell 2.26% to $3.05 per SME, down from $3.12 per SME in the corresponding period of 2025 [Dhaka Tribune, September 6, 2026; The Daily Star, September 6, 2026; The Business Standard, September 6, 2026].
  • Global price divergence: While Bangladesh realized unit prices declined by 2.26% to $3.05 per SME, the overall average unit price across all global apparel suppliers to the United States increased 0.84% to $3.17 per SME over the same period [Dhaka Tribune, September 6, 2026].
  • Structural market position: Although Bangladesh maintained its position as the No. 2 supplier to the United States, exporters accepted lower unit realizations because they absorbed reciprocal buyer-side tariffs and price cuts [The Daily Star, September 6, 2026].
  • Industrial attrition: Margin compression, elevated utility and operating costs, and reduced buyer pricing power have forced 402 readymade garment units to close permanently over the past three years [The Daily Star, September 5, 2026].

Prescription

The Ministry of Commerce, the National Board of Revenue (NBR), and Bangladesh Bank must implement four sequenced decisions to prevent further factory closures and clear stranded trade flows.

  1. Immediate administrative stay on Sub-clause 12 of Clause 25 (Ministry of Commerce): Commerce Minister Khandakar Abdul Muktadir must issue an executive statutory regulatory order staying the enforcement of Sub-clause 12 of Clause 25 of the Import Policy Order 2026-2029 [The Business Standard, September 5, 2026; Dhaka Tribune, September 6, 2026]. The stay must run until domestic gas supply to local spinning and weaving mills stabilizes sufficiently to ensure reliable production, specialized finishing, and adherence to tight buyer delivery windows [The Business Standard, September 5, 2026; Dhaka Tribune, September 6, 2026].
  2. Emergency customs clearance for pre-gazette commitments (NBR and Chattogram Customs House): The National Board of Revenue must instruct Chattogram Customs House to release all knit fabric consignments currently stranded in open-air port storage or afloat in transit that were financed through letters of credit opened prior to August 24, 2026 [The Business Standard, September 5, 2026; Dhaka Tribune, September 6, 2026]. Clearance must proceed under the rules in effect at the time of letter-of-credit establishment, exempting these shipments from post-facto trade association recommendations or lien bank non-local manufacturing certificates.
  3. Streamlined trade association certification protocol (Ministry of Commerce, BGMEA, and BKMEA): For specialized fabrics imported during any transition period under the existing carve-out, the Ministry of Commerce must designate a unified electronic verification window managed jointly by BGMEA and BKMEA [The Business Standard, September 6, 2026]. When an export contract requires specialized grades, textures, or customized designs not supplied locally due to mill outages, associations must deliver certification within a standardized administrative window to avoid shipment delays [The Business Standard, September 5 & 6, 2026].
  4. Working capital and cost-absorption surveillance (Bangladesh Bank): Bangladesh Bank must direct commercial banks to review export credit facilities for RMG units facing cash-flow deficits from below-cost shipments and reciprocal tariff absorption [The Daily Star, September 6, 2026]. Lien banks must safeguard working capital credit limits for compliant manufacturers to prevent order cancellations and limit further factory liquidations beyond the 402 readymade garment units already closed over the past three years [The Daily Star, September 5, 2026].

Risks and Tradeoffs

Suspending the import ban introduces explicit domestic tradeoffs. The BTMA maintains that domestic mills possess sufficient capacity to supply the knitwear market, warning that unrestricted imports undermine backward linkage investments and weaken domestic industry protection [The Business Standard, September 6, 2026]. However, maintaining the ban while severe gas shortages paralyze domestic mills leaves fabric producers unable to deliver required lead times, volumes, and specialized textures demanded by overseas buyers [The Business Standard, September 5, 2026; Dhaka Tribune, September 6, 2026]. Enforcing import restrictions under current energy deficits risks immediate cancellations of export orders, deepening the 10.73% year-on-year drop recorded in July 2026 sales to the United States [Dhaka Tribune, September 6, 2026]. Conversely, a blanket, unmonitored opening could risk displacement of domestic knit production once utility supplies normalize. The policy compromise requires linking fabric import eligibility directly to active export letters of credit and verified domestic energy supply constraints.

Bottom Line

The Ministry of Commerce must immediately suspend Sub-clause 12 of Clause 25 to release stranded port consignments and permit apparel manufacturers to fulfill export contracts amid severe domestic gas shortages. Forcing exporters to rely entirely on disrupted domestic mills while unit prices decline will accelerate garment factory closures and deepen export losses in primary Western markets.

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Sources

  • The Import Policy Order 2026–2029 was published in an official gazette by the Ministry of Commerce on August 24, 2026, introducing Sub-clause 12 of Clause 25 stating that knit fabrics shall not be eligible for import. [The Business Standard, September 5 & 6, 2026]
  • The Import Policy Order 2026–2029 introduced an explicit restriction under Sub-clause 12 of Clause 25 stating that knit fabrics shall not be eligible for import. [Dhaka Tribune, September 6, 2026]
  • The order only permits imports of specialized knit fabrics that are not manufactured locally, provided they are tied to explicit buyer requirements and obtain certification from the lien bank along with recommendations from the respective trade associations. [The Business Standard, September 6, 2026]
  • On September 1 and September 2, 2026, BGMEA and BKMEA sent formal letters to Commerce Minister Khandakar Abdul Muktadir demanding the immediate suspension or repeal of Sub-clause 12. [The Business Standard, September 5, 2026]
  • On September 1 and September 2, 2026, BGMEA and BKMEA sent formal letters to Commerce Minister Khandakar Abdul Muktadir demanding the immediate suspension or repeal of Sub-clause 12. [Dhaka Tribune, September 6, 2026]
  • BKMEA President Mohammad Hatem warned that imported knit fabric consignments were left stranded in open-air storage at Chattogram Port or in transit due to LCs opened before the gazette was issued, stalling customs clearance. [Dhaka Tribune, September 6, 2026]
  • Several apparel exporters had opened letters of credit before the gazette was issued, leaving imported knit fabric consignments stranded at Chattogram Port or in transit. [The Business Standard, September 5, 2026]
  • BGMEA President Mahmud Hasan Khan highlighted that global buyers demand specialized grades, textures, customized designs, and short lead times that the domestic market cannot satisfy, and severe gas shortages have crippled local textile mills. [The Business Standard, September 5, 2026]
  • Severe gas shortages have crippled local textile mills, rendering domestic fabric producers incapable of meeting buyer lead times or volume needs. [Dhaka Tribune, September 6, 2026]
  • BTMA President Showkat Aziz Russell stated that domestic mills possess sufficient capacity to supply the knitwear market, calling Bangladesh the 'king of knitwear' and advocating for domestic industry protection. [The Business Standard, September 6, 2026]
  • Bangladesh's RMG shipments to the US fell 6.50% year-on-year during January–July 2026 to $4.66 billion from $4.98 billion in the corresponding period of 2025, garment sales to the US plunged 10.73% year-on-year in July 2026 alone, Bangladesh's average unit price fell by 2.26% to $3.05 per SME from $3.12 per SME while total export volume fell 4.34% to 1.53 billion SME, and overall average unit price across global suppliers rose 0.84% to $3.17 per SME. [Dhaka Tribune, September 6, 2026]
  • US OTEXA figures showed Bangladesh's RMG shipments to the US fell 6.50% year-on-year in January–July 2026 to $4.66 billion, July 2026 sales dropped 10.73%, average unit price fell 2.26% to $3.05 per SME, and export volume fell 4.34% to 1.53 billion SME. [The Daily Star, September 6, 2026]
  • US OTEXA data showed Bangladesh's RMG shipments to the US dropped 6.50% to $4.66 billion in Jan–Jul 2026, July sales contracted 10.73%, and unit price declined 2.26% to $3.05 per SME. [The Business Standard, September 6, 2026]
  • Shovon Islam, Managing Director of Sparrow Group, noted Bangladesh retained its No. 2 supplier position in the US, but average prices declined because local exporters were forced to absorb parts of reciprocal buyer-side tariffs and price cuts. [The Daily Star, September 6, 2026]
  • BGMEA President Mahmud Hasan Khan and BKMEA President Mohammad Hatem stated that many exporters are shipping goods below production cost simply to keep factory lines running and workers employed. [The Daily Star, September 6, 2026]
  • Exporters are unable to make even minimal profits due to high raw material costs and are shipping goods below production cost to keep factory lines running and workers employed. [The Business Standard, September 6, 2026]
  • 402 readymade garment units have shut down over the past three years due to high operating and utility costs coupled with shrinking buyer pricing power. [The Daily Star, September 5, 2026]

Grounded in 10 source documents in the evidence record.

Today's other watched topics

  1. 2. Fast-Tracking Central Bank Stimulus Disbursements and Digital Lending Channels Bangladesh Bank is disbursing 25% of its Tk 60,000 crore stimulus pre-finance package in September to boost credit to CMSMEs and agriculture, alongside launching an interest-free digital e-payment credit facility.
  2. 3. Export Price Margin Squeeze and Fabric Import Restrictions A 2.26% contraction in realized US export prices and procedural restrictions on specialized fabric imports threaten readymade garment export competitiveness, prompting industry appeals to ease raw material import controls.
  3. 4. Infrastructure Financing for Private Economic Zones and Industrial Allotments Private zone developers have requested a Tk 10,000 crore concessionary refinance fund to address critical utility bottlenecks, while the government readies half of the Jashore EPZ plots for industrial allotment.
  4. 5. Persistent Food Inflation, Household Erosion, and Import Tariff Rationalization Persistent food inflation is severely eroding middle-class purchasing power and depressing domestic demand, driving policy calls for essential import tariff rationalization amid a projected 4.4% GDP growth rate.

Topics ranked by gemini-3.8-flash; prescription drafted by gemini-3.8-flash; grounding verified by gemini-3.8-flash. Generated 2026-09-06T11:36:12.145085+00:00.