Most Recent Articles In Government and Trade
Latest Government and Trade Articles
- Customs Seizes $1 Million in Bogus Designer Handbags
- Gap Settles ITC Laser Denim Case
- Froman Cites U.S.-Africa Trade Potential at AGOA Forum
More Articles By
The pressure for action to prevent another tragic factory fire in Bangladesh and in the region is growing, and a call to take a serious look at the global sourcing system is getting louder.
This story first appeared in the January 29, 2013 issue of WWD. Subscribe Today.
The most recent blaze on Saturday swept through the Smart Export Garment Ltd. factory in Mohammadpur in the western part of Dhaka, Bangladesh, killing seven workers and injuring more than 15, mostly women and teenagers.
Holding placards such as “Safety for life for garment workers,” a protest outside the office of the Bangladesh Garment Manufacturers & Export Association in Dhaka on Monday was an expression of the continuing anger in the country’s garment industry.
Israfil Alam, chairman of Bangladesh’s Parliamentary Standing Committee on Ministry of Labor and Employment, said factory owners in past incidents at garment factories had never taken responsibility, and that “unless they are brought to justice and given due punishment, such incidents will continue to happen.”
In response to the latest incident, Spain’s Inditex SA, the owner of the Zara retail chain, said Monday that it broke links with two suppliers because of suspicions that they illegally subcontracted some of its business to the factory in Bangladesh where seven workers were killed on Saturday. Clothing labels from Bershka and Lefties, two brands owned by Inditex, were found on the scene after the fire, according to the Institute for Global Labor and Human Rights, a Pittsburgh-based advocacy group.
A spokesman for Inditex, which is based in Arteixo, Spain, denied having dealings with Smart Export Garment Ltd. and said the company has dispatched a team to Bangladesh to investigate.
A U.S. Congressional delegation composed of Reps. Jack Kingston (R., Ga.), Scott Tipton (R., Colo.), Adam Schiff (D., Calif.) and Ed Whitfield (R., Ky.) met with Bangladesh Prime Minister Sheikh Hasina on Sunday, a day after the fire at Smart Export, a Congressional aide confirmed.
While the aide could not provide details of the meeting, a Bangladeshi news report said the U.S. lawmakers told the prime minister that Bangladesh has a negative image because of labor rights and the recent fatalities due to fires at garment factories that needs to be addressed by the government. Home Minister Muhiuddin Khan Alamgir told the press that a preliminary investigation had concluded that the fire was caused by an electrical short circuit.
The blaze follows on the heels of the Tazreen factory fire in late November that claimed the lives of more than 111 workers in Ashulia, Bangladesh. Last week, apparel industry workers in Dhaka demonstrated against Wal-Mart Stores Inc., criticizing the retailer for not doing enough to protect their rights. Wal-Mart has revealed a “zero-tolerance” policy to subcontracting that is scheduled to go into effect March 1.
A number of industry executives believe the fire at the Tazreen factory — which manufactures garments including sleepwear, robes and daywear for companies including Wal-Mart, Target Corp., H&M, Kohl’s Corp., Zara, Li & Fung, and German mass-retailer C & A — could be the tipping point for importers and Western government to take action.
A group of House lawmakers is pressing the office of the U.S. Trade Representative to complete its review of Bangladesh’s compliance with labor eligibility requirements under the Generalized System of Preferences, a program that provides duty-free benefits for about 4,800 products from 131 designated countries. The legislators are stepping up the pressure on the Obama administration to consider whether to remove trade benefits for Bangladesh under the U.S. trade program, saying they are concerned that labor rights are “deteriorating” in the East Asian nation. Apparel, textiles and footwear imports from Bangladesh and all GSP countries are not eligible for the duty-free benefits but hundreds of other import categories are.
Labor and human rights groups said more extensive reform at the retailer and brand level, as well as at the government level in Bangladesh, and a rethinking of U.S. and European Union trade policy toward the country needs to be taken to help put a stop to the rampant fires in Bangladesh.
In Bangladesh, the $19.1 billion garment industry accounts for 13 percent of gross domestic product and more than 78 percent of total exports. The prevalence of fires among Bangladesh’s 5,000 factories has killed at least 1,071 workers and injured 3,127 in 279 incidents since 1990, despite the codes of conduct and corporate social responsibility programs adopted by apparel brands and retailers.
The Institute for Global Labor and Human Rights released an update on the Smart Export fire on Monday, reporting that 400 to 450 workers were in the factory when the fire broke out and were forced to break open locked window grates and jump from the second floor to escape the flames because at least one of the factory’s two main exits was allegedly locked. The institute provided eyewitness accounts from two female sewing operators who claimed one of the gates was locked and the factory had no exterior fire escapes. They also claimed that, in addition to seven fatalities, 20 to 25 workers were critically injured and are receiving medical treatment.
The institute reported that the government of Bangladesh has offered the families of the deceased and injured workers 20,000 taka, or $252 at current exchange, for workers killed and 10,000 taka, or $126, for workers who were injured.
Charles Kernaghan, executive director of the institute, said all but one of the labels found at Smart Export so far were European. Labor groups have said at least one U.S. company has shown up in factory documents, swimwear brand Hawaiian Authentics, which is produced by New York-based M. Hidary & Co. Inc.
Kernaghan said Bangladesh exports apparel to the EU duty free under the “Everything but Arms” preference program and noted the EU should reevaluate that program.
“The EU has to review their duty-free policies,” Kernaghan said. “They should be limited to factories that obey the law. The EU can talk all they want about upholding freedom of association and workers’ rights. But they should send a significant delegation to Bangladesh to inform the government that in order to keep up this collaboration, workers need to have the basic internationally recognized labor standards. All they have done is talk for the last 20 years and nothing has changed.”
Kernaghan said there also needs to be more pressure by the U.S. government, although he credited some in the U.S. for taking a strong stance.
“The U.S. ambassador to Bangladesh has been very strong in saying there will be no duty-free access to the U.S. until conditions improve,” Kernaghan said. “That is a step forward. The U.S. is also taking a serious look at getting rid of small duty-free access to Bangladesh through the GSP program and that would be important symbolically to cut back.”
Scott Nova, executive director of the Worker Rights Consortium, said fundamental reform in Bangladesh cannot advance without retailers and brands taking more responsibility and being held accountable for the inadequate fire safety protection in the Bangladeshi garment industry.
“When there is a fire or an embarrassment, brands and retailers do whatever they have to do to weather that particular storm and then they move forward with business as usual,” Nova said. “That is why we’ve asked brands and retailers to sign an enforceable agreement that will compel them to undertake the fundamental reforms in their supply chains in Bangladesh that are necessary to make these factories minimally safe. What is needed is a renovation of the entire industry in Bangladesh because most factories are not structurally safe. If they were located in the U.S., they would be shut down tomorrow and it is not just at the subcontractor factories but at the top-tier suppliers that many brands and retailers use.”
Nova said many of the buildings can be retrofitted, which would cause a temporary suspension in production, but he stressed that the factories cannot be renovated without financial support from foreign retailers and brands. He said for the cost of 10 cents more a garment, the factories can be renovated and made safe.
The consortium is part of a coalition of prominent labor and human rights groups that say the solution lies in more transparency and collaboration that gives workers more involvement in the safety of their workplaces. The coalition is pressing brands and retailers to sign on to the “Bangladesh Fire and Building Safety Agreement” that aims to implement an independent fire and building safety program in Bangladesh apparel factories. It would establish a two-year program to enact in-factory enforcement, develop a worker complaint process and mechanisms for workers to report health and safety risks, set up inspections by independent experts, implement public reporting of all inspections, establish a central role for unions and create a binding contract between the brands and worker representatives.
So far, only two companies — PVH Corp. and German retailer Tchibo — have signed it. The agreement will not take effect until at least two more major companies sign on.
Wal-Mart sent a letter to its worldwide suppliers on Jan. 21 stating it was adopting tougher rules on fire safety at its contractors and would have zero tolerance for suppliers that used unauthorized subcontractors. In a move it said was aimed at increased transparency and accountability, Wal-Mart told vendors it was adopting a zero-tolerance policy to subcontracting in which they must “fully and accurately disclose” in advance any factories they or any of their subcontractors plan to use or will be subject to termination even if an undisclosed factory is used “without the supplier’s knowledge” by anyone in the supplier’s supply chain.
Peter Klestadt, a partner in Grunfeld, Desiderio, Lebowitz, Silverman and Klestadt, specializing in trade and customs issues, said, “I don’t know if unknown subcontractors is so much of a reality anymore. Legally, the import company is required to declare to customs who the manufacturer of the product is and it creates an obligation to not just turn a blind eye anymore. As a result, there is a greater transparency, and certainly the Wal-Marts and Kohl’s of the world know that.”
Despite the challenges of corporate social responsibility and supply chain security, there are observers familiar with international business practices who are skeptical of companies that claim to be blameless.
A solution to greater clarity when dealing with foreign firms is to have company-paid managers on location — not local factory supervisors who share cultural and financial ties with factory owners — who can report on safety measures for workers at vendor-approved sites throughout the entire production process. But that is an area few companies have invested in since the Nineties when cost-cutting measures such as moving production overseas for cheaper labor costs kicked into high gear, said Janet Labuda, former director of the Textile and Apparel Policy and Programs division at U.S. Customs & Border Protection.
“Who’s the culprit?” said Labuda. “I know U.S. companies respond to the worker factory conditions, but ultimately, the importer will be responsible for supply chain security and the law, and Customs has no rule on it. Some companies switch sourcing partners every season.…It’s always driven by the bottom line and the brands. There are companies that take into consideration overall compliance and promote decent employment opportunities, and most companies have reasonable compliance programs. But then if you have unapproved partners in your supply chain, your brand can go down the tubes.”
Ken Sitomer, chief executive officer of Skin LLC, and a former principal of Caribbean Joe who also served as ceo of Biedermann Industries, said, “I believe there is a system in place for oversight and it’s a very good system. But it gets exploited. You can have an inspection company go to a factory and leave.…If you want to get around it, you get around it.…But the possibility of losing a big customer is a really big incentive to do it right.”
Richard Leeds, chairman of Richard Leeds Intl., said inspections at factories are often sloppy and inaccurate.
“We’ve been to Bangladesh and seen those factories,” Leeds said. “Our production manager walks in and walks out, because in the 24 years we’ve been in business we’ve required our level of factory compliance and have wanted to be assured that workers are being treated properly. We have full-time people stationed from northern China to central Indonesia who do just that. You can’t employ local managers because they get too close to factory management, so we bring in foreigners.”
Ray Nadeau, former president of Sara Lee Intimate Apparel and Hosiery and currently ceo of White Space Marketing, said, “Out of sight, out of mind is obviously an issue for many manufacturers. If a factory is overcapacity, they will want to farm out work to subcontractors and they are required to let importers know what they are doing. All of the major players will have in-country management to make sure it’s done the right way. But there are definitely cultural issues and the biggest issue is making sure company managers are on the up-and-up and not being influenced by the factory.”
Meanwhile, the number of start-up factories willing to work at the cheapest rate are on the rise, said Heidi Lehmann, a former designer for Triumph International and Sara Lee Intimate Apparel, and an industry consultant.
“There are a lot of new manufacturing companies rising in the Third World that have a lack of expertise and experience, are eager to make money and promise everything to their demanding customers. They work for less and less money, mainly to the disadvantage of their poor workers, who don’t have a choice,” said Lehmann.
International Intimates received unwanted press following the Tazreen factory fire when documents uncovered at the scene indicated that company was among American apparel makers supplying goods for Wal-Mart. The documents revealed that a subcontractor for International Intimates was producing nightgowns and robes made at the factory for Wal-Mart and women’s sleepwear for Sears.
A spokesman for René Rofé, ceo of International Intimates, said, “We are conducting a thorough review of this incident, but it is critical to note that Tazreen Fashions is not one of our approved partners and no one was authorized to make our products there.”
Guido Campello, vice president of innovation, sales and marketing at Miami-based Cosabella, said brands should take an organic approach to protect itself from liability in an uncertain marketplace overseas.
“We count on working as close as we can with the fewest amount of suppliers who we know the best,” Campello said. “But it is still really hard to verify all the way down. I think this is what everyone is really trying to change — true transparency from raw materials to the final product, like how we are seeing now in the food industry with garden-to-market foods like Whole Foods and garden-to-table restaurants.”