When a clothing order goes wrong: who pays, and what to sign

When a clothing order goes wrong, who pays is decided mostly by documents both sides signed before production: the purchase order or sales contract, the Incoterm, the letter of credit if you pay by one, and the cargo insurance policy. Incoterms 2020 says who carries the risk of loss or damage in transit, but nothing about late or faulty goods: the US International Trade Administration lists delayed delivery and goods that do not conform to the contract among the things the rules do not cover. That is the contract’s job, and where the contract is silent the answer depends on whose law applies. Bangladesh is not a party to the UN Convention on Contracts for the International Sale of Goods (CISG), so no single sales law applies by default. This guide takes six common failures, from a missed ex-factory date to a carton crushed in transit, and sets out who usually carries the cost, the deadlines for claims, and what to write into your order before you pay a deposit. We read every source on 17 October 2026. It describes general trade practice, not any one supplier’s policy, and it is not legal advice: have your terms of purchase checked by a lawyer in your country.

What decides who pays?

Four documents, read together:

• The purchase order or sales contract, with the documents it names: the tech pack revision, the sealed sample, the inspection standard and the packing instruction. This is where lateness, inspection failures, quantities and claims are settled, or left open.
• The Incoterm. It decides where the risk of loss or damage passes from seller to buyer. Under FOB, the ICC Academy explains, the seller delivers the goods loaded on board the vessel and the risk passes to the buyer at that point. Under DDP the seller carries it to your door. Incoterms do not decide ownership, payment or what happens when goods are late or wrong.
• The letter of credit, if you pay by one. UCP 600, the ICC rules most credits follow, makes it a separate transaction from the sale (Article 4): banks deal with documents, not with goods (Article 5).
• The cargo insurance policy, which pays for loss or damage in transit to whoever holds the risk, on the clauses it names.

Where the contract says nothing, the law fills the gap, and here the parties’ countries matter. The CISG, the UN sales convention, has 97 parties on UNCITRAL’s status page, including Australia, Canada, New Zealand, the United States, Germany, France and the Netherlands. Bangladesh is not one, and neither is the United Kingdom. Between a seller in Bangladesh and a buyer elsewhere, the CISG applies only if the rules of private international law lead to the law of a state that has joined it, and the United States has declared that it is not bound by that route. So write two things into the contract: which country’s law governs it, and how a dispute is decided.

Arbitration is the usual answer for cross-border sales, because an award is easier to enforce abroad than a court judgment. Bangladesh acceded to the New York Convention on foreign arbitral awards in 1992, with effect from 4 August 1992, and its Arbitration Act 2001 provides for recognising and enforcing awards made abroad; enforcement still goes through the Bangladeshi courts. For smaller disputes there is mediation: in January 2022 BGMEA and the Bangladesh Garment Buying House Association formed a seven-member committee to mediate disputes among buyers, buying houses and exporters. It can bring the parties together; it cannot order anyone to pay.

Finally, check who your seller is. Your claim for faulty goods is against the company on the commercial invoice. With a true sourcing agent, that is the factory, and the agent answers only for its own services, as our sourcing agent page explains. A buying house that buys from the factory and sells to you at its own price is your seller, and the claim is against it; our buying house guide sets out the difference.

What happens when the goods are late?

Separate two kinds of late. An ex-factory delay means the goods were not ready on the agreed date: a fabric delivery slipped, a line was overbooked, a reworked lot took longer. A transit delay happens after the goods have left: a missed feeder connection at Colombo or Singapore, a congested port, a flight that was offloaded. A contract can sensibly put the first on the supplier. The second sits with the carrier or with nobody, and under FOB it is yours.

For an ex-factory delay, purchase orders usually name one of three remedies:

• Air freight at the supplier’s cost. The goods fly to meet your date, and the supplier pays either the whole air bill or the difference over the sea freight you budgeted. Say which. Air freight is billed on chargeable weight, the greater of the actual weight and the volume in cubic centimetres divided by 6,000 (the IATA divisor most airlines use; express couriers often use 5,000), so a cubic metre of cartons is charged as about 167 kg. Garments are light and bulky, and our sea vs air freight guide shows why the air bill per piece is many times the sea bill.
• A discount for each week the goods are late, up to a cap.
• A cancellation date, after which you may refuse the order. Our purchase order template has a line for the late-delivery remedy and one for the cancellation date, beside the ex-factory and latest shipment dates.

A fixed sum for lateness is enforceable only within limits, and the limits depend on the governing law. In England and Wales, the Supreme Court in Cavendish Square Holding v Makdessi (4 November 2015) held that a clause triggered by a breach is a penalty if it imposes a detriment on the party in breach out of all proportion to the other party’s legitimate interest in performance. In the United States, section 2-718 of the Uniform Commercial Code allows liquidated damages only at an amount that is reasonable, and makes an unreasonably large one void as a penalty. Have a lawyer word the clause for the law you choose.

Not every delay is the factory’s. Late approval of a sample, a lab dip or a trim card, a late deposit, and under CMT late delivery of your own fabric all hold the order up. A fair contract says the dates move day for day with delays the buyer causes, and a supplier that wants to keep its date will chase approvals in writing. Then decide what counts as force majeure. The ICC published model force majeure and hardship clauses on 24 March 2020, including a short form written for smaller companies. Events you can see coming are not force majeure: the Eid closures are on the calendar a year ahead, as our production calendar shows, and the gas shortages of 2026 are covered in our sourcing risks guide. Plan buffers for those rather than arguing about them later.

For a transit delay there is little to recover. Cargo insurance excludes loss caused by delay, even on the widest standard clauses (clause 4.5 of the Institute Cargo Clauses (A) and (C), 2009). An air carrier is liable for delay under the Montreal Convention, within its weight-based limit, unless it proves it took all measures that could reasonably be required to avoid the damage (Article 19), and only if you complain in writing within 21 days. By sea, every container from Chattogram changes ship at a hub, as our shipping page explains, so the practical protection is a buffer between the latest shipment date and your launch.

If you sell to retailers, lateness can cost you twice. Designer Brands’ vendor chargeback policy, revised in June 2026, charges US$250 per purchase order plus all freight charges when merchandise whose freight an international vendor controls arrives after the purchase order’s cancel date, and those goods are subject to cancellation. If a retailer can charge you, decide whether your purchase order passes the charge on, and give the supplier the retailer’s manual before it accepts the order: a supplier cannot meet rules it has not seen.

Under a letter of credit, the credit’s latest shipment date does the work. A bill of lading dated after it makes the presentation discrepant, and the bank may refuse to pay, or ask you whether you will waive the discrepancy (UCP 600, Article 16).

What happens when the final inspection fails?

The lot should not ship as it is. The usual routes are to rework the defective pieces and re-inspect, to sort the lot so that good pieces ship while the rest are repaired, or to remake the goods when the fault runs through the whole order, such as wrong fabric or a grading error in every size. Our quality control page describes each. In general trade practice the supplier pays to put its own goods right, because goods that fail the agreed standard are not what was ordered. The costs that cause arguments are the ones around the rework: the second inspection, the lost time, and what happens if the lot fails again. Write these into the order:

• The standard. Who inspects, when, and to what: the sampling standard (ISO 2859-1:2026), the inspection level and the AQL for each defect class, as our AQL guide explains, plus your defect list (see defect classification) and the sealed sample everything is judged against.
• Who pays for a re-inspection. Inspection firms charge by the inspector-day. V-Trust, for example (naming it is not a recommendation), publishes all-inclusive rates in Bangladesh of US$268 per man-day in the areas it highlights and US$298 elsewhere (read 17 October 2026); other firms quote on request. Our template’s example line puts a re-inspection after a failure at the supplier’s cost.
• How many attempts. Say how many re-inspections are allowed before you may cancel, and how long rework may take before the latest shipment date is missed.
• Who may accept a failed lot. Only you, in writing, and at a price you agree. An inspector who “passes it this once” has changed your contract without you.
• A full check of reworked pieces for the defect that caused the failure, so the second inspection is not just another sample of the same problem.

Repeated failures are information. ISO 2859-1 switches to tightened inspection after lots are rejected, as the AQL guide describes, and the same defect at the inline and the final inspection means the line was never corrected. Hold the balance payment until a passed report is in your hands, and if you pay by letter of credit, make an inspection certificate from a named inspector one of the documents the credit requires. Our final inspection report template records the plan, the defects and the result.

Short shipments, over shipments and the wrong size breakdown

Count before you judge quality: a lot short of the ordered quantity, beyond the tolerance in the order, is a finding however well it is sewn. A purchase order should say how far the shipped quantity may differ from the ordered one and how it is invoiced. Our template’s example is “± 3% per colour, invoiced on the quantity shipped”. Per colour matters, because a shipment can be right in total and still 10% short in your best-selling colour.

If you pay by letter of credit, the credit needs the same tolerance. UCP 600 allows 5% more or less than the quantity in a credit only when the credit does not state the quantity as a number of packing units or individual items (Article 30(b)). Garments are ordered in pieces, so that 5% does not apply, and a shipment that is correct under your purchase order can still be a discrepant presentation. The words “about” or “approximately” before a quantity allow 10% either way (Article 30(a)); a stated tolerance is clearer. Partial shipments are allowed unless the credit says otherwise (Article 31), so if you want the order in one shipment, the credit must say so.

For an over shipment, write what happens to pieces beyond the tolerance: whether you may refuse them, return them at the supplier’s cost or simply not pay for them. Retailers police this too: the same Designer Brands policy charges US$25 per carton in error when the quantity shipped differs from the quantity routed.

A wrong size or colour breakdown is avoided on paper. Give each style and colour its own order line with the quantity per size, name the assortment per carton in the packing instruction, and specify the carton marks; the final inspector opens cartons and checks them against the packing list. Under a letter of credit, the description of the goods on the commercial invoice must correspond with the credit (UCP 600, Article 18(c)), so if the credit lists the colours, a substituted colour shows up at the bank as well as in your warehouse.

One shortage is hard to recover from anyone but the seller: cartons missing from a full container that arrives with its seal intact. Container bills of lading often describe the contents as “said to contain” a number of cartons, the Lloyd’s cargo claims manual notes, and English law recognises the disclaimer “weight, measure, quantity… unknown”, so the carrier has not signed for your count. A shortage behind an unbroken seal points back to loading. That is why a check at the container during loading matters, with the cartons counted, photographs taken and the seal number recorded; our shipping page lists it among the checks to ask for.

What if you find defects after the goods arrive?

A passed final inspection is a decision about a sample, not a guarantee for every piece, and some faults only show later: shrinkage after the first wash, a dye that bleeds, a seam that opens under wear. The seller can still be responsible for a fault that existed when the goods left, but the burden of showing it is yours, and time works against you.

Where the CISG applies, the buyer must examine the goods within as short a period as is practicable, and may wait until they arrive when the contract involves carriage (Article 38). The buyer loses the right to rely on a defect if it does not notify the seller, saying what the defect is, within a reasonable time after finding it or when it ought to have been found, and in any event within two years of the goods being handed over (Article 39). Where the CISG does not apply, national law and your contract set the time, so set your own: a claims window in days from delivery, long enough to open and check cartons from every style and colour.

Build the claim on evidence the seller cannot dismiss:

• Photographs of each defect next to the carton label, with the carton numbers, style, colour and size
• How many pieces you checked and how many were faulty, chosen at random across the cartons, not only the worst ones
• The sealed sample or the approved specification the goods fail against
• A laboratory report where the fault is measurable, such as shrinkage or colour fastness (our lab testing guide explains what a usable report shows)
• For a large claim, an independent inspection at destination, so the count is not your word against the factory’s

Then agree the remedy: a refund, a credit against the next order, replacement pieces, or repair near you at the seller’s cost. Returning garments to Bangladesh means paying freight in both directions, so a credit or a local repair is usually cheaper; write in the order which remedy you may choose, and whether a credit is cash or only against a future order.

If the goods paid duty and you reject them, you may be able to recover it, but only on the customs authority’s conditions, and usually only if customs see the goods exported or destroyed. Talk to your customs broker before you destroy or return anything:

• United States. Rejected merchandise drawback, 19 U.S.C. 1313(c), covers goods that do not conform to sample or specifications, were shipped without the consignee’s consent or were defective at import. They must be exported or destroyed under CBP supervision within five years of import, and the refund is generally 99% of the duties, taxes and fees eligible for drawback (19 CFR 190.51). Ask your broker which of the additional tariffs on your entry qualify.
• United Kingdom. HMRC repays or remits import charges on goods rejected as defective, damaged before customs clearance or not meeting the conditions of the contract. The claim must be made within one year. A VAT-registered importer recovers import VAT through its VAT return instead.
• European Union. Under the EU’s Union Customs Code, import duty is repaid or remitted on goods the importer rejects because they were defective or did not comply with the terms of the contract at the time of release, provided they have not been used and are taken out of the EU, or destroyed or placed under another procedure with customs’ permission (Article 118). The application is due within one year of the date the customs debt was notified (Article 121).
• Canada, Australia and New Zealand have their own refund and drawback rules and deadlines; your broker will know which form applies.

Who pays for goods damaged or lost in transit?

Whoever carries the risk at the time, and under FOB and CIF that is you from the moment the goods are on board at Chattogram. For containers, the ICC Academy recommends FCA rather than FOB, because a container is handed over at the terminal, often days before it is loaded. Under DDP the seller carries the risk to your door. Whoever holds the risk then recovers from cargo insurance or, less often, from the carrier.

CIF insurance is minimum cover. Under Incoterms 2020 the seller on CIF must insure only on the Institute Cargo Clauses (C) or similar, unless you agree more; the 2020 rules raised CIP to clauses (A), but not CIF. Clauses (C) cover loss or damage reasonably attributable to fire or explosion, the vessel being stranded, grounded, sunk or capsized, a land vehicle overturning or derailing, collision with an external object, and discharge at a port of distress, plus general average sacrifice and jettison. They do not list theft, rain or seawater getting into a container, or rough handling. Clauses (A) cover all risks of loss or damage, subject to exclusions. Both exclude loss caused by delay, and loss caused by packing that is insufficient or unsuitable for the journey, where the packing was done by the insured or before the cover started; “packing” includes stowage in a container. Where a letter of credit does not say how much cover it needs, UCP 600 requires at least 110% of the CIF or CIP value (Article 28).

So under FOB, buy your own cover; under CIF, ask the seller for (A) clauses or buy cover on top. The standard clauses end when the goods are unloaded at the final warehouse named in the policy, or 60 days after they are discharged from the ocean vessel at the final port, whichever comes first, so a container left at the port for weeks can run out of cover. The policy also makes it your duty to take reasonable steps to limit the loss and to preserve your rights against carriers, which in practice means giving the notices below on time.

Insurance also pays for something many importers have never heard of: general average. When a ship’s owner sacrifices cargo or spends money to save the voyage, every cargo owner contributes in proportion to value, even if its own goods arrived undamaged. Before releasing your goods, the shipowner’s average adjuster collects security: an average bond signed by you, with a guarantee from your insurer or, if the cargo is uninsured, a cash deposit, and the shipowner holds a lien on the cargo until it is given. Clauses (A) and (C) both cover general average and salvage charges.

SDR, the Special Drawing Right, is the International Monetary Fund’s unit of account; its value in dollars is published daily. Late notice to a sea carrier is not always fatal, the Lloyd’s manual notes, but accepting goods without comment is evidence they were delivered sound, and the one-year time bar is strictly enforced. The Montreal Convention is stricter: if no written complaint is made in time, no action lies against the air carrier except for fraud. Bangladesh has been a party to it since 1 November 2022, as are Australia, Canada, New Zealand, the United Kingdom, the United States and the European Union. A house bill of lading issued by a forwarder can set a shorter time bar than the ocean carrier’s, so read the back of yours.

Letters of credit: when the documents are wrong

Under a letter of credit, “wrong” means the documents, not the garments. Each bank has at most five banking days after the documents are presented to decide whether they comply (UCP 600, Article 14(b)), and documents including an original transport document must be presented within 21 calendar days of shipment and before the credit expires (Article 14(c)). If they do not comply, a bank may refuse to pay, giving a single notice that lists every discrepancy, and the issuing bank may ask you, the buyer, whether you will waive them (Article 16). The discrepancies that come up in garment orders are the ones this guide has already covered:

• A bill of lading dated after the latest shipment date
• A quantity outside the tolerance the credit allows, often because the credit allows none
• An invoice description that does not correspond with the credit
• A missing inspection certificate or proof of origin
• Documents presented late, or after the credit has expired

A discrepancy gives you a choice, not a remedy. Waive it and you pay for goods you may not have checked; refuse and the goods may sit at your port with no one paying. Decide on the evidence: the inspection report first. Our guide to payment terms explains how to write the credit so that the documents prove what matters.

What to write into your purchase order

1. The seller as a legal entity, the factory where the goods are made, and no subcontracting without your written approval.
2. The Incoterm with its version and a named place, such as FOB Chattogram, Incoterms 2020, or FCA for a container; our FOB vs DDP guide compares the common ones.
3. The ex-factory date, the latest shipment date and a cancellation date, each written in full, and which buyer delays move them.
4. The remedy for a late ex-factory date: air freight at the supplier’s cost (the whole bill or the difference), a discount, or cancellation.
5. The product standard: tech pack revision, sealed sample, colour standards and trim card.
6. The inspection: who, when, ISO 2859-1 level and AQL, the defect list, who pays for a re-inspection, how many are allowed, and that only you may accept a failed lot, in writing.
7. The quantity tolerance per colour, invoicing on the quantity shipped, and what happens to pieces beyond it.
8. The packing instruction and carton marks, and any retailer manual whose charges you will pass on.
9. Claims after arrival: the window, the evidence, the remedies and who pays return freight.
10. Insurance: who insures, on which clauses, and for how much.
11. Payment tied to a passed inspection, and, for a letter of credit, the latest shipment date, the quantity tolerance and an inspection certificate among the documents.
12. The governing law, how disputes are decided, and a force majeure clause.

Our purchase order template has a field for most of these, with a worked example. It is a starting point, not legal advice.

Where a buying house fits

A buying house cannot change who carries the risk at sea, and it cannot make a carrier or an insurer pay faster. What it changes is who you deal with: one company that knows the factory and can see the goods in person. Whether that company is also the one you claim against depends on whether it sells to you or acts as your agent, so ask before you order.

Ask any supplier, us included, to answer these in writing before you pay a deposit: who pays to rework a failed lot and to re-inspect it, what happens if the ex-factory date is missed, what quantity tolerance applies, and how long you have to claim after the goods arrive. We do not publish standard answers to these questions; like our payment terms, they are agreed for each order and confirmed in writing before production. If you would like them for your order, tell us what you want to make. We reply within one working day, and our own orders start at 500 pieces per style and colour.