Bangladesh’s garment industry is largely in a position to meet the United States’ proposed requirement of 40% local value addition for certain export categories such as knitwear and denim. However, meeting this benchmark remains a concern for many woven garment products, say industry insiders.
According to sources familiar with ongoing trade negotiations, the US has proposed that Bangladeshi ready-made garments (RMG) must demonstrate at least 40% local value addition to qualify for the “Made in Bangladesh” label. This condition comes alongside a 35% tariff imposed by the Trump administration, which Bangladesh is currently trying to renegotiate.
Former BKMEA President Fazlul Hoque explained that the 40% criterion implies that out of a garment priced at Taka 100, at least Taka 40 worth of inputs must be locally sourced. While the US demand is not yet confirmed to be product-specific or averaged across all exports, he noted that knitwear and denim—which primarily rely on local yarn and fabric, already meet or exceed this threshold.
“Knit and denim segments are relatively secure, as around 90% of their raw materials are sourced locally,” Hoque said. “But in the case of woven garments, where a large portion of inputs are imported, meeting 40% local value addition could be problematic.”
Echoing this concern, Shovon Islam, Managing Director of Sparrow Group, highlighted the specific difficulties faced by woven exporters. He noted that key items like twill pants, shirts, and synthetic-based casual wear rely heavily on fabrics imported from countries such as India and China. While average value addition of 40% might be technically feasible across product categories, item-level assessments could pose major hurdles for woven manufacturers.
Out of Bangladesh’s annual RMG exports valued at approximately US $ 47 billion, between US $ 3 billion and US $ 4 billion is attributed to denim and knitwear products—segments well-positioned to comply with the US requirement. The rest, particularly woven garments, would require time and investment in developing backward linkage capacity to reduce dependence on imported inputs.
