Bangladesh apparel eyes U.S. market despite costly cotton route

In a potential game‑changer for Bangladesh’s apparel sector, the United States has imposed a fresh 20% countervailing duty on ready‑made garment imports. However, under an exemption clause, garments made with at least 20% U.S.-sourced raw materials—such as American cotton—are eligible for a full waiver of this added duty. This exemption has alleviated immediate tariff risks for compliant exporters, but it also introduces significant complexity, lead-time issues, and cost pressures to sourcing strategies.The new tariff structure raises the stakes substantially. Products previously facing a 15% tariff may now face up to a 35% combined duty. Polyester‑based garments, already under a 32% duty, may end up with total tariffs of around 52%. These elevated figures visibly impact cost structures, buyer confidence, and Bangladesh’s competitiveness in its largest export market. The United States remains the top destination for Bangladeshi apparel exports—deteriorating competitiveness here risks employment, investment, and national export income.

Yet the 20% exemption carve‑out injects a strategic opportunity: exporters sourcing ≥20% U.S. raw materials avoid the additional duty altogether. This compels a shift in Bangladesh’s sourcing model, centering on American cotton—renowned for its quality and traceability but typically 15–20% more expensive than African or Indian cotton, around $300/ton FOB compared to $200–220/ton.

Industry analysts suggest that incorporating U.S. cotton could escalate production costs by over 20%, potentially negating the duty benefit. Added logistics, longer lead times (up to three months), and constraints in warehousing further compound the burden—raising questions around just-in-time manufacturing viability.

Still, aligning with U.S. traceability and sustainability expectations offers longer-term value. Garments with certified American cotton may resonate with U.S. brands prioritizing ethical sourcing—potentially driving market share even beyond the tariff window.

BGMEA President Mahmud Hasan Khan called the exemption a “game‑changing development,” noting that “if we use at least 20% American raw materials … the additional 20% countervailing duty will be completely waived,” highlighting strategic potential for Bangladesh’s apparel sector.

He emphasized that roughly 75% of U.S.-bound apparel is cotton‑based, and the exemption opens a tactical route to mitigate tariff impact.

Miran Ali, BGMEA support‑committee member, warned that “Jordan, Egypt and Kenya” might emerge as winners if Bangladesh couldn’t adjust supply chains, given their favorable tariff treatments.

Mahir Ahmed, Director at Apex Holdings (supplier to Walmart, Gap, Target), expressed caution: “For a country investing in sustainability, this development feels like a curveball that could affect everything from cost structures to international competitiveness.”

Mohiuddin Rubel, Additional MD at Denim Expert Ltd (making jeans for H&M), added to Reuters: “While the 20% tariff will cause some short‑term pain, Bangladesh remains better positioned than many of its competitors.”

Strategic considerations

Cost-Benefit Tension: American cotton’s premium cost and logistics challenges risk eroding the duty savings, especially for smaller producers.

Traceability & documentation: To qualify, manufacturers must maintain robust tracking systems to prove ≥20% U.S.-origin input—creating administrative complexity.

Longer lead times: Shipping American cotton can take up to three months due to limited regional warehousing—and may disrupt supply chain timing unless new systems are established.

Sectoral disparity: Larger exporters with scale and resources can adapt; small and medium producers may fall behind unless coordinated support is provided.

BGMEA is already negotiating with U.S. authorities to clarify implementation mechanisms, traceability standards, and certification/Customs compliance.

Proposals include setting up bonded warehouses in regional hubs like Colombo, Singapore, or Malaysia to reduce lead time and ease logistics.

Some suggest broader negotiation paths with U.S. policymakers—which might yield longer-term trade frameworks, potentially easing tariff rates even further.

In summery

Bangladesh finds itself at a critical crossroads. The new exemption offers a strategic lever—but only for manufacturers able to rapidly pivot procurement toward American raw materials and build traceable, compliant supply chains. Those who succeed could gain a competitive edge, brand alignment with U.S. sustainability demands, and tariff mitigation benefits. But others may struggle with increased costs, administrative burdens, and delayed deliveries.

With clear planning, government coordination, and sector-wide infrastructure support, this policy shift may become a long-term advantage—but without them, benefits may accrue only to the largest players, widening gaps within the industry.