THE APPAREL INDUSTRY AND CODES OF CONDUCT: A Solution to the International Child Labor Problem?
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I. Introduction

A. Overview

B. International Child Labor

C. Child Labor In Apparel Sector

D. Codes of Conduct : A recent Innovation

II. Codes of Conduct in the U.S. Apparel Industry

A. Introduction

B. Corporate Codes of Conduct

C. The Apparel Industry

D. Codes of Conduct of the Largest U.S. Retailers and Manufacturers of Apparel

E. Development of Apparel Industry Codes of Conduct

F. Implementation of Apparel Industry Codes of Conduct

III. Implementation Experiences of Codes of Conduct in the U.S. Apparel Industry

A. Introduction

B. Field Visits

C. Child Labor in the Apparel Industry

D. Transparency

E. Monitoring

F. Enforcement

IIII. Conclusion

A. Child Labor in the Apparel Industry

B. Codes of Conduct in the Apparel Industry

C. Transparency of Codes of Conduct in the Apparel Industry

D. Monitoring and Enforcement of Codes of Conduct in the Apparel Industry

E. Recommendations

V. Appendices

Appendix A: List of Companies Surveyed

Appendix B: Company Questionnaire

Appendix C: Codes of Conduct Provided by Companies Surveyed

Appendix D: Site Visits

Appendix E: U.S. Apparel Imports, by Region and Country (1985-1995)

Appendix F: ILO Convention 138


Executive Summary

A. Congressional Mandate

This report is the third volume in ILAB's international child labor series. It focuses on the use of child labor in the production of apparel for the U.S. market, and reviews the extent to which U.S. apparel importers have established and are implementing codes of conduct or other business guidelines prohibiting the use of child labor in the production of the clothing they sell. The report was mandated by the Omnibus Consolidated Rescissions and Appropriations Act of 1996, P.L. 104-134.


B. Overview

A recent development, corporate codes of conduct and other business guide lines prohibiting the use of child labor are becoming more common, as consumers as well as religious, labor and human rights groups are increasingly calling upon companies to take responsibility for the conditions under which the goods they sell are being manufactured. Many U.S. companies that import apparel have adopted codes of conduct that prohibit the use of child labor and promote other labor standards. For purposes of this report, the term "codes of conduct" is used generically to refer to various types of corporate policies and standards on child labor and other working conditions. These instruments take different forms codes of conduct, statements of company policy in the form of letters to suppliers, provisions in purchase orders or letters of credit, and/or compliance certificates.

1. Child Labor in the Apparel Sector

The term "child labor" generally refers to any economic activity performed by a person under the age of 15. Not all work performed by children is detrimental or exploitative. Child labor does not usually refer to "light work" after school or legitimate apprenticeship opportunities for young people. Nor does it refer to young people helping out in the family business or on the family farm. Rather, the "child labor" of concern is generally employment that prevents effective school attendance, and which is often performed under conditions hazardous to the physical and mental health of the child.

There are no reliable statistics on the rate of child employment in any particular economic activity, including the apparel sector. Most information on child labor in the garment industry comes from eyewitness accounts, studies by non -governmental organizations (NGOs) and academicians, reports by journalists, and studies by the International Labor Organization (ILO).

Anecdotal information gathered during the preparation of this report indicates that in some of the countries examined, fewer children may currently be working on garment exports for the U.S. market than two years ago. A dramatic example involves Bangladesh, where large numbers of children worked in garment factories as recently as 1994. International media attention and threats of boycotts and can celled work orders led to the dismissal of thousands of child workers from the garment sector unfortunately with no safety net in place for them. Thus, it is possible that in the absence of government programs to assist the children, the precipitous dismissal of child workers can endanger, rather than protect them. More research is needed so that governments, industry, international organizations, and others concerned with the welfare of children are better equipped to design appropriate programs. It is clear, however, that local and national commitments to universal and free education for children are immediate and positive steps which can and should be taken.

One reason for any potential downward trend in the use of children in the garment industry may be the widespread adoption in the last several years of U.S. company codes of conduct prohibiting child labor. This potential downward trend may also be the result of (1) greater public awareness about child labor and its use in export industries; (2) changes in the garment industries of exporting countries tending to eliminate subcontractors where the use of child labor is most likely to occur coupled with policies to the same effect by U.S. importers; and (3) concerns that importing countries could enact legislation banning the importation of products made by children. Most likely all of these factors have worked in a mutually-reinforcing way to reduce the use of child labor in the export sector. On the other hand, there remains continuing evidence of child labor in the apparel industry of some countries, including the use of child labor in homework. To be any more definitive, further information is needed.

2. Codes of Conduct

Voluntary codes of conduct have become increasingly common among U.S. corporations in recent years, particularly in the apparel sector. They have their roots in ethical guidelines for multinational corporations developed in the 1970s and voluntary codes of conduct developed by private groups during the 1980s. The first apparel company code of conduct was adopted in 1991. Most other codes have been developed in the last two or three years.

United States corporations have adopted corporate codes of conduct for a variety of reasons, ranging from a sense of "social responsibility" to pressure from competitors, labor unions, the media, consumer groups, shareholders, and worker -rights advocates. The U.S. Government has also encouraged U.S. corporations to adopt model business principles for their overseas operations.

3. The Apparel Industry

The U.S. is the world's largest importer of garments. Imports of garments have been increasing steadily since the 1970s. Between 1985 and 1995, U.S. imports of apparel grew in current dollars by 171 percent, reaching nearly $34.7 billion. In that year, the U.S. imported apparel products from 168 countries.

The U.S. apparel industry is made up of a complex chain of actors whose functions often overlap. The industry includes the following entities:

  • Apparel manufacturers are primarily engaged in the design, cutting, and sewing of garments from fabric. Some manufacturers are contractors or sub contractors, which generally manufacture apparel from materials owned by other firms. Larger manufacturers often contract production to many such contractors and subcontractors in the U.S. and abroad. Some manufacturers are vertically integrated, producing the textiles from which they make garments, or even operating retail outlets.
  • Apparel merchandisers generally design and market clothing, but contract the actual production to manufacturers.
  • Buying agents locate, qualify and inspect foreign suppliers/producers of garments, negotiate with suppliers/producers, and often monitor production for quality control and compliance with other standards. They may be used by U.S. companies that do not have a large presence abroad, or in addition to a U.S. company's buying staff.
  • Retailers are primarily engaged in the distribution, merchandising, and sale of garments to consumers. Apparel retailers include department stores, mass merchandisers, specialty stores, national chains, discount and off-price stores, outlets, and mail-order companies. A relatively new development is the rise of electronic forms of retailing such as interactive TV and on-line shopping services. Some retailers who sell their own private labels go beyond their traditional role as distributors and become directly involved in the design and sourcing of garments from manufacturers and contractors.

C. Codes of Conduct in the U.S. Apparel Industry

In order to gather information on the extent and implementation of U.S. garment importers' codes of conduct containing child labor provisions, the Department of Labor conducted a voluntary survey of the largest U.S. retailers and apparel manufacturers, based on their level of sales in 1995 as reported in publicly available documents.

  • A questionnaire on import sourcing and child labor policies was sent to 48 companies, representing U.S. apparel manufacturers, department stores, mass retailers, specialty stores, and non-store direct marketers (mail order and electronic home shopping).
  • Forty-five companies responded to the questionnaire, three of whom said that they regard all information provided as confidential. The remaining 42 companies all indicated that they acquire foreign-produced apparel, the majority as direct importers (i.e., purchasing apparel directly from abroad for their own account), others as indirect importers (i.e., purchasing apparel domestically from U.S. companies that have imported the goods), or in both forms. Follow-up telephone interviews were conducted with respondents to obtain additional information.

     1. Existence and Scope of Codes of Conduct

Thirty-six of the 42 companies indicated that they have adopted a policy specifically prohibiting the use of child labor in the manufacture of goods they import from abroad. These policies take different forms:

  • special documents (typically referred to as "codes of conduct") outlining their values and guidelines in a variety of areas, including child labor. These documents are a means for companies to clearly and publicly state the way in which they intend to do business to their suppliers, customers, consumers and shareholders;
  • letters stating their policies on child labor circulated to all suppliers, contractors and/or buying agents;
  • compliance certificates, which typically require suppliers, buying agents, or contractors to certify in writing that they abide by the company's stated standards prohibiting the employment of children;
  • clauses in formal documents such as purchase orders or letters of credit, which make compliance with the policy a contractual obligation for suppliers;
  • a combination of the above.

Corporate codes of conduct that address labor standards vary from company to company with regard to the specific labor standards included. Some or all of the following elements are found in various codes: (1) prohibitions on child labor; (2) prohibitions on forced labor; (3) prohibitions on discrimination based on race, religion, or ethnic origin; (4) requirements to ensure the health and safety of the work place; (5) provisions on wages, usually based on local laws regarding minimum wage or prevailing wage levels in the local industry; (6) provisions regarding limits on working hours, including forced overtime, in accordance with local laws; and (7) support for freedom of association and the right to organize and bargain collectively.

U.S. corporate codes of conduct in the garment industry also differ with respect to how the labor standards are defined. The standards used to define child labor vary significantly from company to company. For example, a company's policy statement may:

  • state a minimum age for all workers who make their products
  • refer to the national laws of the host country regarding the minimum age of employment or compulsory schooling;
  • refer to international standards (e.g., ILO Convention 138); or
  • use some combination of the three.

In some cases, companies' policies prohibiting child labor in the production of their goods do not contain any definition of child labor.

     2. Transparency

An important issue regarding implementation of corporate codes is their transparency, or the extent to which foreign contractors and subcontractors, workers, the public, NGOs and governments are aware of their existence and meaning. Transparency reinforces the message of codes and leads to more credible implementation. When transparency is lacking, interested parties cannot benefit fully from a code of conduct.

  • Most of the respondents with child-labor policies indicated that they had distributed copies of their policies to all suppliers, but few stated that they had communicated their existence to a wider audience or engaged in educational efforts. Many respondents stated that they did not know whether workers were aware of the existence of their codes.
  • A small group of companies indicated that they have tried to ensure that production workers in overseas facilities know about their code or policy by specifically requiring that copies of such a statement be posted in the foreign factories from which they purchase.
  • Only a few respondents solicited input from international organizations, labor unions, NGOs, or government agencies in developing or implementing their codes of conduct.

     3. Monitoring

Monitoring is critical to the success of a code of conduct; it also gives the code credibility. Yet, most of the codes of the respondents do not contain detailed provisions for monitoring and implementation, and many of these companies do not have a reliable monitoring system in place.

Respondents indicated that they utilize a variety of means to monitor that their codes of conduct or policies on child labor are respected by their suppliers.

  • Some companies use a form of active monitoring, which involves site visits and inspections, by company staff, buyer agents or other parties, to verify that suppliers are actually implementing the importing company's policy on child labor.
  • Some use contractual monitoring, whereby they rely on the guarantees made by suppliers, usually through contractual agreements or certification, that they are respecting a company's policy and not using any child labor in production. This may be seen as "self-certification" by contractors or suppliers. Companies that use contractual monitoring in some cases have no mechanism for ensuring compliance.
  • Some respondents indicated that they use a combination of active and contractual monitoring.

Active monitoring may be done through regular checks, formal audits or evaluations, or special visits by corporate staff. The frequency and intensity of visits vary greatly from company to company. For example, some companies may focus their site visits on their larger suppliers or suppliers where there have been alleged problems, or may only monitor those facilities from which they import directly or which manufacture their private-label merchandise.

Contractual monitoring shifts at least part of the burden of responsibility for ensuring compliance with codes of conduct onto the foreign manufacturer, the supplier or the buying agent. Even when monitoring is primarily contractual, there are instances in which the U.S. corporation requires documentary proof of compliance or reserves the right to carry out on-site inspections.

While technically not a monitoring activity, evaluation of prospective con tractors with regard to labor standards is becoming an important aspect of code implementation. Seventeen of the companies that responded to the survey stated that they have a process in place to evaluate overseas facilities before they establish a business relationship with them. Such on-site evaluations or inspections have long been made primarily to verify whether the facilities have the physical capacity to meet quality and quantity specifications. Increasingly, the working conditions and employment practices of prospective contractors are also being evaluated, screening out companies that are violators or have the potential for being so in the future.

  • Several of the companies that conduct such evaluations indicated that compliance with their policies on working conditions is an important factor in the decision to place a production program with a contractor. These evaluations, according to many, enable them to screen out contractors who do not com ply with applicable legal or company standards.
  • A few respondents indicated that such pre-contract inspections had enabled them to avoid doing business with a facility that appeared to employ under -age children, but most reported that when facilities were rejected, it is usually for other reasons.

     4. Enforcement

Enforcement of codes of conduct refers to how U.S. companies respond to violations of their codes of conduct. The vast majority of respondents stated that they have never found any violation of the child labor provisions of their codes; some companies attributed this to their efforts to evaluate and carefully select suppliers before entering into contracts with them, while others indicated that child labor violations of their codes are less common than other types of violations, such as safety and health.

Most respondents stated that, faced with an allegation of violation of their code of conduct, they would first investigate to confirm the use of child labor and then impose enforcement measures. Enforcement policies range from the more severe immediate termination of the business relationship to more tempered responses, including demand for corrective action (e.g., dismissal of under-age workers), cancellation of specific orders, and placement of the violating supplier on probation.

D. Implementation Experiences of Codes of Conduct in the U.S. Apparel Industry

Department of Labor officials visited six countries where there is extensive production of garments for the U.S. market the Dominican Republic, El Salvador, Guatemala, Honduras, India, and the Philippines. The objective of the visits was to learn about foreign suppliers' approaches to the implementation of the established child labor policies of U.S. importers. Interviews were held with as many relevant persons or organizations as possible associated with the apparel industry, i.e., Labor Ministry officials, manufacturers, plant managers, buyers, trade associations, unions, workers, community activists, human rights groups, organizations concerned with children's issues, and other NGOs. At the beginning of each interview, Department of Labor officials indicated that the purpose of the interview was to gather information for a public report, and any information collected could be used for that purpose.

The central element of the field visits was the opportunity to discuss matters related to the existence and implementation of codes of conduct with managers and workers of plants producing apparel for the U.S. market. Department of Labor officials visited 74 apparel-producing plants and 20 export processing zones and met with key representatives of the garment industry and more specifically of the garment export industry in all six countries. The results of interviews regarding the 70 plants determined to be exporting to the U.S. market at the present time are reported in the study.

     1. Child Labor in the Apparel Industry

The consensus of government officials, industry representatives, unions and NGOs interviewed by the Department of Labor in the Dominican Republic, El Salvador, Guatemala, and Honduras is that child labor is not now prevalent in their garment export industries. In the very few cases where child labor was mentioned, the children were 14 or older. However, the use of workers 15 to 17 is common and there may be extensive violations of local laws limiting the hours for workers under 18.

There was some anecdotal information about the prior use of child labor in the garment industry in Central America. Labor union representatives stated that about two years ago, the garment export industry began to dismiss young workers to avoid adverse publicity in importing countries. Often plant managers no longer hire young workers (14-17 years of age) even if they meet domestic labor law or company code of conduct requirements. However, there are also some reports of fraudulent proof-of-age documents being used by child workers to seek jobs in the garment industry. There continue to be allegations in Guatemala of children working for small subcontractors or in homework in the San Pedro de Sacatepequez area.

Meanwhile, it is clear that children continue to work for subcontractors and in homework in the Philippines and India. They perform sewing, trimming, embroidering and pleating tasks. It is also the case that children are not prevalent in the larger factories in the Philippines, and that recently plant managers in India have become more concerned about not using child labor.

     2. Transparency

While most survey respondents indicated they have distributed their code of conduct to all suppliers, many said they were not certain if workers knew about their code. Field visits in six countries revealed that:

  • Managers of two-thirds of the plants visited indicated that they were aware of codes of conduct prohibiting the use of child labor, particularly of the codes issued by their U.S. customers. However, not all of the companies that indicated they were aware of codes of conduct had available a copy of the code of conduct (or contractual provision) that they could show and discuss with the visiting Department of Labor official.
  • Formal training of plant managers and supervisors about the codes of con duct was not common in the six countries visited. About 30 percent of the facilities visited where managers indicated awareness about codes of con duct stated that they had received some formal training regarding the U.S. companies' code of conduct. However, more than half of these facilities produced for just two companies. Also, it was evident that the intensity of the training varied widely from company to company.
  • Posting of a U.S. garment importer's code of conduct is not commonplace in most of the countries visited. In all, 21 of the 70 plants visited by the Department of Labor officials had posted a code of conduct of a U.S. customer; 7 of such plants (out of 8 visited in that country) were in El Salvador. The number of plants visited in each of the other countries where codes of conduct were posted was: Dominican Republic, 2; Honduras, 1; Guatemala, 2; India, 2; and the Philippines, 7.
  • Although a significant number of suppliers knew about the U.S. corporate codes of conduct, and codes were posted at 30 percent of the plants visited, meetings with workers and their representatives in the six countries suggested that relatively few workers are aware of the existence of codes of conduct, and even fewer understand their implications.
  • Department of Labor officials found a mixed record regarding the extent to which host governments, NGOs, and business organizations were familiar with codes of conduct and their implications.

     3. Monitoring

While most respondents monitor foreign suppliers for quality of product and scheduling coordination, monitoring of child labor policies is far less common. Field visits revealed that:

  • All plants exporting garments to the U.S. that were visited confirmed that they are subject to regular visits by their U.S. customers or their agents to verify product quality and to coordinate production and delivery schedules. About 90 percent of the companies visited stated that monitors/inspectors verifying product quality generally also examined "working conditions" in the plant, with emphasis on safety and health issues (climate control, ventilation systems, fire escapes, etc.).
  • Monitoring for compliance with provisions of the codes of conduct of U.S. garment importers dealing with labor standards and child labor in particular is less common. Foreign suppliers that are wholly owned by a U.S. corporation, or contract directly with a U.S. corporation with a presence abroad, seem to be subject to the most frequent and most thorough monitoring of codes of conduct, including child labor and other labor standards.
  • A few U.S. corporations particularly manufacturers tended to have structured monitoring of all aspects of their codes of conduct and subjected their foreign subsidiaries to such disciplines.
  • There was also evidence from the field visits of numerous instances of contractual monitoring of codes of conduct. A reliance upon a form of contractual monitoring is most prevalent in the case of U.S. retailers which do not have a significant presence abroad. In these situations, the burden of monitoring compliance with the U.S. importer's child labor policies rests with the foreign agent, contractor or subcontractor, typically through a certification process. The role of the U.S. importers in monitoring these situations is minimal.
  • Site visits confirmed that some U.S. importers screen foreign garment con tractors prior to entering into a supply relationship.

     4. Enforcement

Foreign plant managers said factories that have passed the screening process and have become contractors of U.S. apparel importers may face a range of corrective measures should they fall short in complying with codes of conduct. Examples of corrective measures cited included changes to the physical plant (improvement of bathrooms, eating facilities, lighting, ventilation), monetary penalties, immediate dismissal of young workers, and termination of contracts.

Foreign plant managers and other industry officials stated continued access to the U.S. market is a very large incentive for overseas garment producers to meet quality/timeliness requirements and comply with codes of conduct.

E. Conclusions and Recommendations

Based upon the information collected from the voluntary survey of 48 U.S. apparel importers and site visits to six countries producing garments for the U.S. market, the Department of Labor found that codes of conduct can be a positive factor in solving the global child labor problem. Most of the large U.S. apparel importers responding to the voluntary questionnaire have adopted codes prohibiting child labor in garment production and some are clearly committed to their implementation. This is a remarkable change in a matter of just a few years.

Codes of conduct are not a panacea. Child labor remains a serious problem, with hundreds of millions of working children around the world. However, the presence of children in the garment export industry may be reduced by the implementation of codes of conduct. It is also possible that changes induced by codes of conduct could have positive spillover effects for children more generally, e.g., a greater commitment of a foreign country to compulsory education for children. However, this relationship requires further study.

Finally, because codes of conduct seem to be tools used by large apparel importers, there may remain smaller importers without codes of conduct still willing to overlook the working conditions of the plants in countries from where they purchase their garments. This question also deserves further study.

Consistent with the important efforts already undertaken by many U.S. apparel importers, the Department of Labor recommends that U.S. companies consider whether some additional voluntary steps might be appropriate:

1. All actors in the apparel industry, including manufacturers, retailers, buying agents and merchandisers, should consider the adoption of a code of conduct.

If all elements of the apparel industry have a similar commitment to eliminating child labor, this would have a reinforcing impact on the efforts that the leaders in the industry have made. Trade associations should consider whether they could increase their technical assistance to help assure that the smaller companies in the industry can achieve this objective.

2. All parties should consider whether there would be any additional benefits to adopting more standardized codes of conduct.

There is a proliferation of codes of conduct. Some foreign companies and producer associations are even drafting their own codes. The definition of child labor differs from code to code, thereby creating some uncertainty for business partners and workers as to what standard is applicable.

3. U.S. apparel importers should consider further measures to monitor subcontractors and homeworkers.

Since most of the violations of labor standards, including child labor, occur in small subcontracting facilities or homework, U.S. apparel importers should consider further measures to monitor subcontractors more closely.

4. U.S. garment importers particularly retailers should consider taking a more active role in the monitoring/implementation of their codes of conduct.

The implementation of codes of conduct is a complex matter, and a relatively recent endeavor. Implementation seems best and most credible when U.S. companies get directly involved in the monitoring. There is little incentive for foreign companies to comply with a U.S. importer's code of conduct if there is no verification of actual behavior.

5. All parties, particularly workers, should be adequately informed about codes of conduct so that the codes can fully serve their purpose.

In the supplying countries, managers of enterprises are generally familiar with the codes of their clients. Workers, however, are seldom aware of codes of conduct of the U.S. corporations for which they make garments. NGOs and foreign governments are also not fully informed about codes of conduct.

This report was developed and provided by the U.S. Labor Department

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