THE APPAREL INDUSTRY AND CODES OF CONDUCT:

A Solution to the International Child Labor Problem?

United States Department of Labour

C. 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.4 In India and the Philippines, it was generally acknowledged that most of the child labor in the garment industry is found in subcontracting shops or in homework situations.

There was some anecdotal information about the prior use of child labor times in the garment export industry and currently in subcontracting and homework:

The field visits also revealed some problems in these countries with the systems normally used to verify the age of workers. In some countries, birth registries are not common and therefore there is no demonstrable method to determine age. In other countries, youths below the legal minimum age procure fraudulent identification cards or fake government permits required to prove that they have permission to work.8

As stated in Chapter I, the ILO notes that children still work in the garment industry worldwide. However, it is more common to find children in small workshops or in homework. Working conditions are generally worse than in larger formal factories, and the number of hours may be more and amount of pay less. During the course of the Department of Labor field visits, a number of allegations were made that children work in these smaller operations.

D.Transparency

As has been stated in Chapter II, an important issue regarding the implementation of codes of conduct 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.

Information gathered by Department of Labor officials during field visits regarding transparency of U.S. corporate codes of conduct is reported in this section, grouped around the following issues:

1. Foreign Suppliers' Awareness About Codes of Conduct

The voluntary survey of U.S. retailers and garment manufacturers indicated that most U.S. corporations with policies regarding labor standards and child labor had distributed them to their suppliers. A smaller set of respondents indicated that they had actively engaged in communicating their policies to contractors, plant managers, employees, and workers.

In the six countries, Department of Labor officials visited 70 producers of garments currently exporting - or producing for contractors who are exporting - to the United States to learn their degree of awareness about codes of conduct. The majority of the suppliers interviewed produced for one or more U.S. importers identified - either from the survey described in Chapter II or from other public information - as having codes of conduct.

Managers of two-thirds (47 out of 70) of the plants visited that currently export to the United States 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. Based on the company visits, awareness among managers about codes of conduct was highest in El Salvador (all 8 companies visited knew about the codes) and Guatemala (6 out of 9 companies knew); in three other countries visited - the Dominican Republic, Honduras, and the Philippines - managers interviewed were more evenly divided between those who were aware and those who were not; in India, only 2 out of 7 producers visited were aware of U.S. codes of conduct. However, only 34 of the 47 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. Thus, managers at less than half of the plants visited were able to produce a code of conduct upon request.

2.Training and Supplier Certification

Several U.S. corporations responding to the survey said that they held training sessions with suppliers about their codes of conduct. Others - particularly retailers - said they inform foreign contractors about their policies/codes of conduct and require each foreign producer to sign a document stating that it has been informed about the code of conduct and its meaning.

Department of Labor officials found that formal training of plant managers and supervisors about the codes of conduct was not common in the six countries visited. Only 14 out of the 47 companies visited where managers indicated awareness about codes of conduct stated that they had received some formal training regarding the U.S. companies' codes of conduct, although it was evident that the intensity of the training varied widely from company to company.13

Some suppliers indicated that they had to certify in writing to their U.S. clients that they had received and understood the codes and agreed to abide by them.14 For example:

3.Posting of Codes of Conduct

A concrete example of transparency of codes of conduct is the voluntary posting of codes of conduct at the workplace, preferably in the native language of the workers. In two of the countries visited - El Salvador15 and Honduras - there is a legal requirement that companies post their internal regulations, including starting and ending time, rest periods, and disciplinary rules. These internal regulations tend to be very detailed and instruct workers on a range of issues such as rest periods, talking, use of bathroom facilities, and penalties for offenses such as tardiness, absences, or not meeting their production quotas. Thus, workers perceive internal regulations as rules to which they are bound in the workplace.

The plant visits by Department of Labor officials suggest that while posting of a U.S. garment importer's codes of conduct seems to be common practice in El Salvador, it is not the norm in the garment industries of the other 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, 7.16

Some foreign producers with multiple U.S. clients each with different codes of conduct stated that the proliferation of codes of conduct - often with different definitions of standards and monitoring requirements - created confusion with regard to implementation. This view was expressed most clearly in the Dominican Republic:

4.Workers' Awareness of Codes of Conduct

Although a significant number of suppliers knew about the U.S. corporate codes of conduct, 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.

The lack of awareness on the part of workers about codes of conduct may be in part attributable to the relatively low level of effort on the part of producers to inform their workers about the codes. Management regards codes of conduct - and compliance with labor law - to be a management problem, and approaches monitoring and supervision of these matters as management responsibilities. Workers are not seen by management as having a role in these activities.

Department of Labor officials were told by management of 22 of the companies visited that they informed their workers about codes of conduct; 13 of the companies indicated that they inform their workers about codes of conduct orally, while only 9 stated that they do so both orally and in writing.

Out of all of the plants that were visited in the six countries, there was only one example of a producer that had an explicit policy of informing workers about the code of conduct of its U.S. customer:

The following examples illustrate the general lack of awareness about the codes of conduct among workers in the six countries visited:

The alleged low literacy level of garment workers is sometimes used to justify the non-posting of codes of conduct within factories. In the case of the Dominican Republic, Mr. Eddy Martµnez, Executive Director, Dominican Association of Free Trade Zones (ADOZONA), stated that since the literacy level of free trade zone workers is low, communication is often conducted orally. This sentiment is obviously held by many free trade zone employers; seven out of 10 companies (70 percent) visited in the Dominican Republic that informed workers about codes of conduct did so orally. In contrast with these statements, employers also stated that they prefer to hire workers who are able to read and write, as they are better equipped to follow directions.

In fact, all workers interviewed by the Department of Labor official in the Dominican Republic were shown copies of a sample code of conduct and their reading skills were sufficient to understand its contents. Although the argument of illiteracy as a reason for not making copies of codes of conduct available to workers has been raised in the case of the Dominican Republic, it is clear that it is a pervasive one and probably applies to the garment industries of most developing countries. Whether it has merit, however, is doubtful.

As was discussed in the previous section, codes of conduct are sometimes posted in factories. Yet discussions with workers and their representatives revealed a lack of awareness of codes of conduct and their implications for workers. Possible explanations for this apparent contradiction may be that:

It is quite clear from the field visits that posting of codes of conduct alone has not had the desirable effect of making workers aware of their existence, and active steps to educate workers about the codes of conduct is required.

5.Dissemination of Codes of Conduct

While it is most critical that overseas contractors, subcontractors and their workers be familiar with corporate codes of conduct, knowledge about their existence and implications by others - host governments, NGOs, business organizations - can also be helpful in enhancing their effectiveness. Department of Labor officials found a mixed record regarding the extent to which these entities were familiar with codes of conduct and their implications.

E. Monitoring

U.S. corporations responding to the Department of Labor survey described a variety of ways their codes of conduct were monitored. Several of the respondents referred to "pre-contract" evaluation of prospective contractors to identify and screen out potential violators of codes of conduct. Others referred to active monitoring schemes conducted internally, externally, and by outside auditors or NGOs. Still other respondents said that monitoring of their codes of conduct is carried out through contractual arrangements, whereby the contractor guarantees or certifies (in writing) that the goods have been produced in accord with the child labor policy of the importing firm.

Information regarding the monitoring of codes of conduct gathered by the Department of Labor during field visits is reported in this section, clustered around the following issues:

1.Monitoring for Quality

Monitoring of foreign producers - including plant visits - by U.S. importers is a routine procedure in many industries. The garment industry, where the appearance of a product and timeliness of orders are critical, is well-known for the close monitoring of foreign producers by importers and their agents.

a. Purpose of Monitoring

All 70 plants exporting garments to the United States visited by Department of Labor officials 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.). Among the exceptions were:

b. Previous Knowledge About Monitoring Visits

Whether monitoring visits are announced or unannounced differs widely from company to company. In 41 of the companies interviewed (58 percent), monitoring visits by the U.S. importer or its agent or representatives were announced in advance, in 13 (18 percent) they were unannounced, and in 16 (23 percent) there were both announced and unannounced visits.

c. Pre-Contract Inspections

Consistent with the information provided by U.S. garment importers (Chapter II), foreign producers interviewed that operate as contractors indicated that, prior to receiving an order from a U.S. corporation, they were subjected to qualification inspection, which extended to working conditions. For example:

2.Monitoring for Codes of Conduct

While monitoring for product quality, and even for health and safety conditions, is customary in the garment industry, the field visits by Department of Labor officials suggest that monitoring for compliance with provisions of the codes of conduct of U.S. garment importers dealing with other labor standards - and child labor in particular - is not. Where it does occur, the degree to which such monitoring extends to all labor standards addressed by the codes - as opposed to exclusively safety and health issues - seems to vary widely across suppliers. 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.

Monitoring for implementation of child labor provisions of codes of conduct is a very challenging undertaking. As has been discussed in Chapter II, the garment industry is made up of a complex chain of actors, domestic and foreign.

Implementation of the child labor policies of U.S. apparel importers involves communication and interaction between many of these actors. The very long chain of actors and transactions in U.S. importers' procurement of foreign apparel products is illustrated in Box III-7 with an example drawn from the field visit by the Department of Labor to the Philippines. In the example, the procurement/manufacturing process of apparel imported by a U.S. retailer involved five different actors, each farther removed from the U.S. importer.

Generally, the closer the relationship between a U.S. company importing garments and the actual producer of the items, the greater the ability of the U.S. company to influence labor standards, including prohibitions on child labor, in the production process. Conversely, the longer the chain of procurement/production (five steps in the above example drawn from the Philippines), and the more levels of buying agents, contractors, and subcontractors, the more complex and challenging is the implementation of the labor standards policies and the less the ability of the U.S. importers to influence them.

BOX III -7

Organization of Production and Implementation of Codes of Conduct:
An Example from the Philippines

U.S. retailer JCPenney has "Foreign Sourcing Requirments" that apply to all of its suppliers. Among other provisions, the sourcing requirments state that " JCPenney will not knowingly allow the importation into the United States of merchandise manufactured with illegal child labor." With regard to the Philippines:

  1. JCPenney purchases infant and children's apparel from Renzo, a U.S.-based importer. Pursuant to its sourcing requirements, JCPenney requires Renzo to certify that its imports are not made with child labor.
  2. Renzo imports from its Philippines agent, Robillard Resources. Renzo communicates to Robillard the JCPenney sourcing requirements and its obligations and requires Robillard to sign a certificate that its products are not made with child labor.
  3. Robillard purchases from a number of contractors in the Philippines, one of which is Castleberry. Robillard requires Castleberry to certify that its products are not made with child labor. The owner of Robillard visits Castleberry from time to time monitoring for quality control, but also for compliance with the sourcing requirements. Occasionally, a representative from JCPenney also visits.
  4. Contractor Castleberry does cutting, finishing, and packing. its subcontracts sewing to about thirty plants.
  5. The thirty or so subcontractors who do the sewing do not sign a certificate stating that no child labor has been used, but are supervised by Castleberry line supervisors, who are each responsible for several subcontractors. They spend almost their entire time with the subcontractors. Occasionally, a production supervisor from Castleberry also visits. Its is apparent that their primary interest is quality control, but they also monitor compliance with other standards, including child labor requirements. It is safe to say, however, that none of these supervisors are familiar with the code of conduct other than an understanding that they are not supposed to allow child labor. Embroidery and "smocking" (a form of very small and intricate pleating, sometimes combined with embroideries) is subcontracted out to home workers; some is done within the plants as well.
  6. Homework contracts - piece work contracts - are made with heads of households. Children may help their parents with some of the simpler embroidery and smocking and with the trimming. This is not monitored by any company.

a. Monitoring Methods

As discussed in Chapter II, U.S. companies utilize a variety of means to monitor their codes of conduct or policies on labor standards and child labor.

All three of these monitoring strategies were found in the field visits.

b. Active Monitoring

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. Based on the plant visits, instances of active monitoring by U.S. corporations of their foreign subsidiaries include:

Some U.S. companies (manufacturers or retailers) that contract directly with foreign suppliers also appear to play an active role in monitoring their codes of conduct. In some instances, companies interviewed said that the monitoring activities by the U.S. importer covered all aspects of codes of conduct, including child labor policies. Responses from others were less categorical, suggesting that the emphasis of monitoring may have been only on safety and health issues.

While most monitoring visits by U.S. corporations or their agents appear to be regularly scheduled or announced in advance, there are some instances of unannounced visits:

c. Contractual Monitoring

There was also evidence from the field visits of numerous instances of contractual monitoring of codes of conduct. Contractual monitoring of codes of conduct 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 self-certification process. In these instances, the role of the U.S. importers in monitoring compliance of their codes of conduct is minimal.23 For example:

d. Contractual and Active Monitoring

In some instances, U.S. importers use a combination of contractual and active monitoring, using auditors from the U.S. importer (or its agents) to verify compliance.

3.Monitoring Procedures

Closely related to the above issues is how the monitoring of the codes of conduct is undertaken, specifically whether workers and members of the community in which plants are located are also approached by the monitors, whether monitors are able to speak with workers outside the presence of company officials, the ability of monitors to speak the language of the host country and workers, and the extent to which monitors are trained to review implementation of labor standards.

Based on the field visits, it appears that most monitoring conducted by U.S. corporations primarily covers quality control issues. As such, there seems to be relatively little interaction between, on the one hand, monitors, and on the other hand, workers and the local community. It also appears that monitors have a technical background in production and quality control and are relatively untrained with regard to implementation of labor standards.

Department of Labor officials found the following exceptions to these generalizations, however:

F. Enforcement

As discussed in Chapter II, enforcement of corporate codes of conduct depends on the system used by U.S. corporations to ensure compliance. Corporations responding to the survey indicated that they used a graduated system to respond to violations, including: a) monetary fines or penalties; b) probationary status; c) demand for corrective action; d) providing education (particularly where child labor violations are involved); e) cancellation of an individual contract; and f) severance of the relationship. Positive reinforcement included: a) retention of current contracts; and b) awarding of additional contracts.

Information regarding enforcement of codes of conduct is reported in this section, arranged around the following issues:

1.Corrective Measures

As has been discussed above, Department of Labor officials learned that many U.S. corporations engage in extensive screening of foreign garment contractors prior to entering into a supply relationship. The purpose of the screening process is primarily to set aside companies that did not have the ways and means to carry out quality production. The contractor's ability to comply with labor standards provisions in codes of conduct - and child labor provisions in particular - is increasingly part of the screening process.

Companies that have passed the screening process and have become contractors of U.S. corporations may face a range of corrective measures should they fall short in complying with the code of conduct. For example:

2.Positive Reinforcement

Respondents to the voluntary survey of U.S. retailers and garment manufacturers made extensive reference to the streamlining of the supplier base that is taking place in the industry. In part because of the priority to improve quality, but also because of a concern about violations of labor standards - and child labor provisions more specifically - U.S. garment importers have cut back sharply on subcontracting and also reduced the number of their foreign suppliers. From the point of view of foreign garment producers, the streamlining of suppliers carried out by the U.S. garment industry has resulted in clear winners and losers.

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. Thus, the prospect of the continued ability to ship to the U.S. market reinforces compliance with appropriate standards. Foreign countries also have a great deal at stake, as unused quota allocations translate into the loss of export revenue to the nations in the short term and loss of quota in the longer term.

Endnotes

1 The majority of the field visits took place over the period September 3-14, 1996.
2 The companies found not to be exporting apparel to the United States at this time (or at least no doing so directly) are Duke Fabrics and R.B. Knit Exports, both located in Ludhiana, India, and Tokyo Dress Corporation and Ten Bears, Inc, located in Cebu, the Philippines.
3 Three of the subcontracting firms were located in Guatemala and the other six in the Philippines. In Guatemala, they were sub-maquilas producing for Camisas Modernas, a contractor for Phillips-Van Heusen. In the Philippines, three subcontracting firms did sewing for Castleberry, a contractor to JCPenney; A La Mode Garments was a subcontractor to Triumph, Ltd., in Hong Kong, which sells to The Gap; Ten Bears and Go-Thong are subcontractors to Nike. Ten Bears was not producing for export to the United States at the time the company was visited. See Boxes III-3 and III-6.
4 ILO Convention 138 states that the minimum age for work should be not less than the age of compulsory schooling, and in any case not less than 15 years for developed nations and 14 years for developing nations (with some exceptions regarding conditions and hours of work). See Appendix F for full text of ILO Convention 138.
5 In 1994, Lesly Rodriguez, a fifteen year old who had been working for two years in a Honduran maquiladora producing for Liz Claiborne, traveled to the United States under the auspices of the National Labor Committee to present testimony at a Congressional hearing about labor practices in the Honduran garment industry. At the hearing, information was provided that 2% of the Honduran maquila workforce were between the ages of 12-13; 11% were between the ages of 14-15. The figures were based upon a survey of women maquila workers conducted by the Honduran Committee for the Defense of Human Rights (CODEH) between November 1992 and March 1993.
6 In September 1996, representatives of CODEH told a Department of Labor official that there has been a significant reduction recently in the use of 14-15 year olds, and that most maquilas now hire teenagers 17 years or older. A recent New York Times article on the labor situation in the Honduran garment industry supports the observation that children have been removed from the industry over the past two years. See Larry Rohter, "Hondurans in `Sweatshops' See Opportunity," The New York Times, July 13, 1996 [hereinafter "Hondurans in Sweatshops"].
7 Guatemalan labor law provides that 14-15 year olds may work a maximum of six hours per day; 16-17 year olds a maximum of seven hours per day. The labor code prohibits unhealthy or dangerous work by children under 16, as well as night work and overtime.
8 This was observed in Honduras by a New York Times reporter who wrote that " . . . children . . . are buying fake documents in an effort to sneak their way back into the apparel plants." See "Hondurans in Sweatshops."
9 The minimum age for work in El Salvador is 14, with a few exceptions. Children under 16 are only permitted to work 6 hours per day, 34 hours per week. Night work is not permitted for children under eighteen.
10 A 1996 ILO study reported that in the Filipino clothing industry, "there are an estimated 214,000 workers in small family enterprises, mostly clandestine, in addition to the 450,000 to 500,000 homeworkers who also work in local subcontracting systems for national export industries." See ILO Textile Report at 72. There is no oversight of these firms because they are clandestine; labor conditions are notoriously worse in these areas than in the formal factories. The actual number of children found in garment subcontracting shops and in home settings needs further investigation.
11 Although these producers indicated that they were not aware of the concept of codes of conduct, two workers - and union officials - at these two plants said to a Department of Labor official that they had provided copies of the "Codes for [Korean] Overseas Investment Companies" to the managers of the two plants. The "Codes of Conduct for [Korean] Overseas Investment Companies" were adopted by the Economic Organizations Council of Korea on February 23, 1996. The five economic organizations forming the Council are the National Businessmen Association, Korea Commercial and Industrial Office, Korea Trade Association, Center of the Medium/Small-Sized Enterprises Cooperative, and the Korea Employers' Federation. Department of Labor officials learned that representatives of the American Institute for Free Labor Development (AIFLD) made this document available to the Federation of Unionized Workers of Honduras (FESITRANH).
12 However, all seven Indian apparel exporters (as distinguished from manufacturers) visited were aware of U.S. buyers' policies that child labor not be used.
13 The companies indicating they received some training in the codes of conduct from U.S. importers are: Dominican Republic - Hanes Caribe, Grupo M, Interamericana Products, D'Clase Corporation, and RK Fashions; El Salvador - Textiles Lourdes Limitadas; Guatemala - Camisas Modernas and Villa Exportadora; India - Ambattur Clothing Company and Orient Craft; and Philippines - Levi Strauss, Prago-Praxis, Mactan Apparels, and Globalwear Manufacturing.
14 In a short plant visit, it was difficult for Department of Labor officials to determine how seriously the foreign producers took this certification step. Some companies interviewed had difficulty finding copies of the applicable codes of conduct or the certificates they signed. In the Dominican Republic, for example, Denisse Fashion, located in the Zona Franca San Francisco de Macorµs, and Polanco Fashion, located in Zona Franca La Vega, stated that they signed and faxed to their U.S. purchaser [Dave Goldberg Industries] a document certifying that they were aware of, and had complied with, the code of conduct. However, company officials stated that they had not retained copies of the signed document.
15 The Labor Code of El Salvador requires that every private sector employer with more than 10 employees as well as government organizations develop internal work rules, which have to be approved by the Ministry of Labor (Article 302). Rules must be in accord with the Labor Code (Article 303) and address the following topics: a) hours of work; b) rest periods; c) place and time for receiving pay; d) person with whom complaints may be filed; e) disciplinary provisions; f) activities that women and children may not perform; g) medical examinations; h) safety and health; and i) other topics that the Ministry of Labor might direct. Employers are required to inform workers about the rules and post them in places that are easily accessible to workers (Article 306).
16 Department of Labor officials conducting the field visits did not ascertain for how long the codes of conduct had been posted. In some instances, the copies that they viewed appeared to be very new, suggesting that posting might have been a recent action.
17 In the summer of 1995, the U.S.-based National Labor Committee publicized allegations of violations of worker rights in the Mandarin plant. As a result of the adverse publicity generated, The Gap and other U.S. companies sourcing from Mandarin canceled their orders. In December 1995, The Gap agreed to source again from Mandarin under a system of safeguards that includes independent monitoring for its code of conduct.
18 This startling result may be explained by two factors: 1) workers in the age group that was surveyed by CENTRA typically have very short job tenure and may not yet have been exposed to codes of conduct in their workplace; and 2) the study may have posed the question about codes of conduct using the term "codigos de conducta," which young workers may have interpreted as a code of ethical behavior of workers in the workplace rather than as guidelines on the behavior of employers.
19 As mentioned above, the policy of only hiring workers who are 18 or over seems to be a voluntary decision taken by El Salvador's garment export industry and is higher than the legal minimum age for employment set out in the Salvadoran Labor Code.
21 The reference is to the code being developed by the Apparel and Textile Industry Commission of the Association of Exporters of Non-Traditional Products (VESTEX).
22 During an interview with Mr. Francisco Polanco, Human Resources Manager of RK Fashion (Zona Franca La Vega) - a Levi Strauss contractor - he stated that Levi Strauss' monitors have asked many of the same questions regarding the implementation of its code of conduct as the Department of Labor official visiting the plant.
23 U.S. companies interviewed in Chapter II stated that even where there is contractual monitoring, representatives of the importer verifying quality of product would get involved in addressing violations of labor standards that might come to the inspector"s attention during the visit.
24 In a follow-up telephone interview with management of D'Clase Corporation, the Department of Labor was informed that California Safety Compliance Corporation (CSCC) had been hired to audit the Kellwood contract. CSCC auditors have already interviewed 8 workers at the D'Clase plant.

Conclusion

Corporate codes of conduct are a new and promising approach that can contribute to the elimination of child labor in the global garment industry. They involve the private sector - rather than governments and international organizations - in developing solutions to this complex problem.

It is important to keep in mind, however, that codes of conduct are not a panacea. Child labor remains a serious problem - with hundreds of millions of children working around the world. However, their presence in export industries 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 in the plants of countries from which they purchase their garments. This question also deserves further study.

A. Child Labor in the Apparel Industry

There is a growing public awareness of the exploitation of child labor. Much attention has focused on children working in the export sector of developing countries. This awareness has contributed to the development and increased use of codes of conduct by apparel importers in the United States.

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 currently not 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 15-17 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. For example, in Honduras, labor union representatives said 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 plant managers in India recently have become more concerned about not using child labor.

Codes of Conduct in the U.S. Apparel Industry

There is a growing awareness among many of the largest U.S. apparel importers about the conditions under which apparel sold in the U.S. market is produced. This is a major change from just a few years ago, when importers were more inclined to avoid any responsibility on this matter. Codes of conduct are increasingly common in the U.S. apparel industry. This is a positive sign.

Thirty-six of the 42 U.S. retailers and apparel manufacturers that provided reportable responses to the survey conducted for this study 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 - codes of conduct, statements of company policy in the form of letters to suppliers, provisions in purchase orders or letters of credit, compliance certificates.

There are marked differences in the codes of conduct prohibiting the use of child labor among the U.S. companies responding to the survey. A primary difference with regard to such codes is their definition of child labor.

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

A proliferation of codes, with differences in some key areas (e.g., the definition of child labor), leads to some uncertainty. This is particularly a problem where foreign contractors produce garments for more than one U.S. importer. During field visits conducted as part of this study, Department of Labor officials were informed by foreign suppliers that the variety of codes can cause confusion. Some multi-customer suppliers said that to address this problem they are coming up with their own codes of conduct.

It also emerged from the field visits that there is confusion among suppliers about whether national labor law or a company's policy (as set out in a code of conduct) should be applied. This is highlighted in cases where the company standard is more rigorous than national law. The problem is compounded by the fact that in some instances, owners and plant managers are not familiar with the national law on child labor, despite the fact that their customers' codes stipulate they must follow national law.

Transparency of Codes of Conduct in the Apparel Industry

Most survey respondents who have child labor policies indicated that they have distributed copies of their policies to all suppliers, including contractors and subcontractors. A few said they also communicate the policy to a wider audience. On the other hand, many respondents said they were not certain whether workers know about their codes of conduct.

Field visits conducted in six countries revealed that:

Monitoring and Enforcement of Codes of Conduct
in the Apparel Industry

Creating a corporate code of conduct is an easy task. There are many models - developed by individual companies or trade associations - to draw upon. Monitoring and enforcement are much more complicated. Yet all parties recognize that monitoring and enforcement are key to the success of a code of conduct. Without credible monitoring and enforcement, corporate codes of conduct are little more than expressions of good intentions.

By far the most frequent monitoring of foreign contractors that occurs in the industry is for quality of product and scheduling coordination. All of the foreign plants visited stated that they are visited by the representative of a U.S. company, a buying agent, or someone else for these purposes. Most (about 90 percent in the case of the plants visited by Department of Labor officials) also monitor for safety and health conditions. In far fewer instances is there any clear evidence of monitoring of child labor policies contained in codes of conduct.

Apparel importers responding to the survey revealed that they use several means to monitor their codes of conduct.

Generally, the closer the relationship between a U.S. company importing garments and the one actually producing the items, the greater the ability of the U.S. company to influence labor conditions, including prohibitions on child labor. Conversely, the longer the chain of production, and the more levels of contractors, subcontractors and buying agents used, the more complex and challenging is the implementation.

Plant visits (inspections) are one of the main monitoring mechanisms of codes of conduct by U.S. garment importers. Visits are most likely announced in advance, but sometimes are unannounced. However, when checking for codes of conduct, monitors often do not speak with workers - either inside or outside the worksite.

Among subcontractors, the evidence suggests that monitoring of codes of conduct is spotty. This confirms statements from industry representatives that U.S. importers exert less control over the labor practices of subcontractors.

Many questions remain about the practice of contractual monitoring. In some instances, contractual monitoring seems to be tantamount to self-certification. If there is no active, on-site monitoring to verify conditions, it is not clear that there is an incentive to change behavior.

Many U.S. corporations have made it clear to suppliers that willful violations of codes of conduct - including child labor provisions - can lead to monetary penalties, cancellation of contracts, or severing of a relationship. The main motivation for compliance by foreign suppliers is the fear of losing access to the U.S. market, a form of enlightened self-interest. A potential loss of revenue from the lucrative U.S. market arguably far outweighs any potential gain to be made by hiring lower-cost child labor.

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. 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 implement 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.

V. Appendices

Appendix A: List of Companies Surveyed

Top U.S. Retailers and Manufacturers of Apparel

(Source: Kurt Salmon Associates, Financial Profile for Fis cal Year 1995, July 1996)

Apparel Manufacturers
  1. Fruit of the Loom
  2. Hartmarx Corporation
  3. Jones Apparel Group
  4. Kellwood Company
  5. Levi Strauss & Company
  6. Liz Claiborne
  7. Nike
  8. Oxford Industries
  9. Phillips-Van Heusen
  10. Russell Corporation
  11. Salant Corporation
  12. Sara Lee Corporation
  13. Tultex Corporation
  14. VF Corporation
  15. Warnaco Group

Department Stores

  1. Dillard Department Stores
  2. Federated Department Stores
  3. J.C. Penney Company
  4. Kohl's Corporation
  5. May Department Stores
  6. Mercantile Stores Company
  7. Montgomery Ward Holding Co.
  8. Neiman Marcus Group
  9. Nordstrom
  10. Sears Roebuck & Company
Mass Merchandisers
  1. Ames Department Stores
  2. Dayton Hudson Corporation
  3. Dollar General Corporation
  4. Family Dollar Stores
  5. Kmart Corporation
  6. Price Costco
  7. ShopKo Stores
  8. Venture Stores
  9. Waban Inc.
  10. Wal-Mart Stores

Specialty Stores

  1. Burlington Coat Factory
  2. County Seat Stores, Inc.
  3. The Dress Barn, Inc.
  4. The Gap
  5. The Limited
  6. The Marmaxx Group
  7. Ross Stores, Inc.
  8. Stage Stores, Inc.
  9. The Talbots, Inc.
  10. Woolworth Corporation

Non-Store/Direct Apparel Marketers

  1. Home Shopping Network, Inc.
  2. Land's End, Inc.
  3. Spiegel, Inc.

Appendix B: Company Questionnaire

Company Name:________________________________

Address:________________________________________

Contact Person:________________________________

Telephone:________________

1. Approximately how much apparel do you import annually (in dollar value)?

2. From what countries do you import apparel?

3. Can you provide us with the names and locations of:

(i) foreign facilities that you own or have an ownership interest in from which you import apparel;

(ii) foreign contractors and subcontractors from which you import apparel.

4. Does your company have a code of conduct or policy regarding labor prac tices in overseas production? Does it contain a provision on child labor? If so, please provide us with a copy.

5. If you use a third party purchaser to import apparel for you, do you require them to comply with or enforce your code of conduct or policy on child labor? Do you know if your third party purchaser has its own code of con duct or policy on child labor?

6. How does your company implement your code of conduct or policy on child labor? Do you monitor overseas production facilities for compliance with your code of conduct or policy on child labor? Who does the monitoring for your company, how is monitoring carried out, and how often is it done? What problems have you encountered in implementing your code of con duct or policy on child labor?

7. Has your company ever found child labor in any overseas production facili ties from which you import? If so, please provide specific instances and the actions that you took.

Please send us your most recent annual report.

Go to Appendix E    Table of contents