Defense Management: Industry Practices Can Help Military Exchanges Better Assure That Their Goods Are Not Made by Child or Forced Labor
Published: 2002-01-31T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The military exchanges operate retail stores similar to department stores in more than 1,500 locations worldwide. The exchanges stock merchandise from many sources, including name-brand companies, brokers and importers, and overseas firms. Reports of worker rights abuses, such as child labor and forced overtime, and antilabor practices have led human rights groups and the press to scrutinize working conditions in overseas factories.
section_title: What GAO Found
paragraphs: GAO found that the military exchanges are not as proactive as private sector companies in determining working conditions at the overseas factories that manufacture their private label merchandise. Moreover, the exchanges have not sought to verify that overseas factories comply with labor laws and regulations. A single industrywide standard for working conditions at overseas factories was not considered practical by the 10 retailers GAO contacted. However, these retailers have taken the following three steps to ensure that goods are not produced by child or forced labor: (1) developing workplace codes of conduct that reflect their expectations of suppliers; (2) disseminating information on fair and safe labor conditions and educating their employees, suppliers, and factory workers on them; and (3) using their own employees or contractors to regularly inspect factories to ensure that their codes of conduct are upheld.

section_title: Letter
paragraphs: The military exchanges operate retail stores similar to department stores  at 1,552 locations worldwide, selling apparel, footwear, household  appliances, jewelry, cosmetics, food, and other merchandise. Their  mission is to (1) provide quality merchandise and services for active duty  military personnel and certain other persons affiliated with U.S. armed  forces at uniformly low cost and (2) generate reasonable earnings for the  support of the Department of Defense’s morale, welfare, and recreation  programs. With sales of $9 billion a year, the military exchanges, as a  group, are comparable to some of the largest general retail chains in the  nation. The military exchanges sell name brand items (such as Nike, Levi’s,  and Liz Claiborne), as well as apparel and other merchandise under their  own private labels.
Like leading retailers in the private sector, the exchanges do not  manufacture the merchandise they sell but, instead, rely on independent  suppliers, including national name brand companies, brokers and  importers, and overseas companies. With globalization, U.S. businesses  have increased their reliance on the latter—importers and overseas  companies—and, at the same time, have encountered a growing number of  allegations that overseas factories manufacture merchandise under  sweatshop conditions. In various countries, there are reports of worker  rights abuses (such as child labor, forced overtime work, and workplace  health and safety hazards) and of antilabor practices. Such issues have led  human rights organizations and the news media to scrutinize working  conditions at overseas factories. Because of this situation, you requested  that we examine the overseas buying practices of the Army and Air Force  Exchange. On June 20 and 21, 2001, we briefed the staff of Representatives  Cynthia McKinney and Sherrod Brown and the Morale, Welfare, and  Recreation oversight panel of the House Armed Services Committee,  respectively, on the progress of our work. As a result of our briefings, the  House Armed Services Committee Report for the Fiscal Year 2002  National Defense Authorization Act directed the Secretary of Defense to  ensure that the military exchanges implement a program to assure that  their private label merchandise is not produced by child or forced labor.
As agreed with your office, we continued with our work to identify  industry practices that might provide a framework for or prove beneficial  to the Navy, Marine Corps, and Army and Air Force exchanges in  establishing their program. In this report, we (1) compare military  exchanges with the private sector in terms of the methods used to identify  working conditions at the overseas factories used by their private label  suppliers and (2) address whether a single industry standard exists to  promote adequate working conditions at such factories, identify the steps  the private sector has taken to promote adequate working conditions at  overseas factories that could serve as a framework for the exchanges’  efforts, and identify assistance available to the exchanges to initiate steps  similar to those of the private sector.
In conducting this review, we analyzed 10 leading private sector  companies’ efforts to identify working conditions in overseas factories. We  chose seven of the companies from the National Retail Federation’s list of  the 2001 Top 100 Retailers (in terms of sales) in the United States. The  retailers and their ranking on the Federation’s list are Federated  Department Stores, Inc. (15); JCPenney (8); Kohl’s (36); Kmart (5); The  Neiman Marcus Group, Inc. (64); Sears, Roebuck and Co. (4); and Wal- Mart (1). The remaining three companies—The Walt Disney Company,  Levi Strauss & Co., and Liz Claiborne, Inc.—were chosen on the basis of  recommendations from government agencies, nongovernmental  organizations, and industry associations as being among the leaders in  efforts to address working conditions in overseas factories. In addition,  we interviewed officials and reviewed documents from the Departments of  State and Labor, the Office of the United States Trade Representative, and  the International Labor Organization, which provided perspective on  government and industrywide efforts to address working conditions in  overseas factories. We also interviewed industry associations and labor  and human rights groups. We did not independently evaluate the private  sector programs to determine their effectiveness or to independently  verify specific allegations of worker rights abuses. Instead, our results rely  on independent analyses (such as reports from the State and Labor  Departments and the International Labor Organization), interviews with  industry associations and labor and human rights groups, and statements  made by and documentation provided by the retailers’ officials. More  information on the scope and methodology of our work is presented in  appendix I.
subsections: section_title: Background
paragraphs: Protections for workers in the United States were enacted in the Fair  Labor Standards Act of 1938, which established three basic rights in  American labor law: a minimum wage for industrial workers that applied  throughout the United States; the principle of the 40-hour week, with time- and-a-half pay for overtime; and a minimum working age for most  occupations. Since 1938, the act has been amended several times, but the  essentials remain. For many years, the act (combined with federal and  state legislation regarding worker health and safety) was thought to have  played a major role in eliminating sweatshops in the United States.  However, we reported on the “widespread existence” of sweatshops  within the United States in the 1980s and 1990s. Subsequent to our work,  in August 1995, the Department of Labor and the California Department of  Industrial Relations raided a garment factory in El Monte, California, and  found sweatshop working conditions—workers were confined behind  razor wire fences and forced to work 20 hours a day for 70 cents an hour.  Leading retailers were found to have sold clothes made at this factory.  According to the National Retail Federation, an industry trade association,  the El Monte raid provoked a public outcry and galvanized the U.S.  government’s efforts against sweatshops.
Concern in the United States about sweatshops has spread from its shores  to the overseas factories that supply goods for U.S. businesses and the  military exchanges. With globalization, certain labor-intensive activities,  such as clothing assembly, have migrated to low-wage countries that not  only provide needed employment in those countries but also provide an  opportunity for U.S. businesses to profit from manufacturing goods abroad  and for consumers to benefit from an increasing array of quality products  at low cost. Various labor issues (such as child labor, forced overtime  work, workplace health and safety, and unionization) have emerged at  these factories. In May 2000, for example, the Chentex factory in  Nicaragua—which produces much of the Army and Air Force exchange’s  private label jeans and denim product—interfered in a wage dispute  involving two labor groups, firing the union leaders of one of the groups.  Subsequently, much publicity ensued over working conditions at this  factory.
International labor rights were defined in the Trade Act of 1974 as the right  of association; the right to organize and bargain collectively; a prohibition  on the use of any form of forced or compulsory labor; a minimum age for  the employment of children; and acceptable conditions of work with  respect to minimum wages, hours of work, and occupational safety and  health. As globalization progressed, U.S. government agencies,  nongovernmental organizations, industry associations, retailers, and other  private organizations began addressing worker rights issues in overseas  factories. For example, the International Labor Organization, a United  Nations specialized agency that formulates international policies and  programs to help improve working and living conditions, has endorsed  four international labor principles: (1) freedom of association and the  effective recognition of the right to collective bargaining, (2) the  elimination of all forms of forced or compulsory labor, (3) the effective  abolition of child labor, and (4) the elimination of discrimination in  employment. Appendix II provides additional information on  governmental agencies’, nongovernmental organizations’, and industry  associations’ efforts to address worker rights in overseas factories.
subsections: section_title: The Military Exchanges and Their Private Label Merchandise
paragraphs: The military exchanges are separate, self-supporting instrumentalities of  the United States located within the Department of Defense (DOD). The  Federal Acquisition Regulation, the Defense Federal Acquisition  Regulation supplement, and component supplements do not apply to the  merchandise purchased by the exchanges and sold in their retail stores,  since the purchases are not made with appropriated funds. The Assistant  Secretary of Defense (Force Management Policy) is responsible for  establishing uniform policies for the military exchanges’ operations. The  exchanges are managed by the Army and Air Force Exchange Service  (AAFES), the largest exchange, and by the Navy Exchange Service  Command (Navy Exchange) and Marine Corps Community Services  (Marine Corps Exchange). The exchanges operate retail stores similar to  department stores selling apparel, footwear, household appliances,  jewelry, cosmetics, food, and other merchandise. For the past several  years, about 70 percent of the exchanges’ earnings from these sales  revenues were allocated to morale, welfare, and recreation activities—  libraries, sports programs, swimming pools, youth activities, tickets and  tour services, bowling centers, hobby shops, music programs, outdoor  facilities, and other quality of life improvements for military personnel and  their families—and about 30 percent to new exchange facilities and  related capital projects.
The number of retail locations and the annual revenues and earnings  reported by the exchange services for 1999 and 2000 are shown in table 1.
The exchanges have created private label products, which generally carry  their own name or a name created exclusively for the exchange. The  exchanges began creating private labels in the mid-1980s to provide lower  prices for customers, to obtain higher earnings margins for the exchanges,  and to remain competitive with major discount retailers. Private labels are  profitable for retailers because their costs do not include marketing,  product development, or advertising, which are used by companies to  position national brands in the marketplace and to maintain the market  share. In 2000, AAFES reported purchases of $44.8 million in private label  merchandise from overseas companies, and the Navy Exchange reported  purchases of $11.6 million in private label merchandise from importers.The Marine Corps Exchange only recently created its private label and did  not purchase any private label merchandise from importers or overseas  companies in 2000, but it reported purchases of about $350,000 of AAFES’  and the Navy Exchange’s private label merchandise for resale in its stores.  The private label goods sold by the military exchanges are shown in  table 2.
section_title: Military Exchanges’ Efforts to Identify Working Conditions in Overseas Factories Not As Proactive As Some Private Sector Retailers’ Efforts
paragraphs: The retailers we contacted in the private sector are more proactive about  identifying working conditions than the military exchanges. They  periodically requested that suppliers provide a list of overseas factories  and subcontractors that they used to make the retailers’ private label  merchandise, administered questionnaires on working conditions, visited  factories, and researched labor issues in the countries where prospective  factories are located. The military exchanges largely rely on their suppliers  to identify and address working conditions in overseas factories that  manufacture the exchanges’ private label merchandise. The exchanges  generally did not maintain the names and locations of the relevant  overseas factories. The exchanges assumed that their suppliers and other  U.S. government agencies, such as U.S. Customs Service, ensured that  labor laws and regulations that address working conditions and minimum  wages were followed.
subsections: section_title: Leading Private Sector Retailers Are Proactive in Identifying Overseas Working Conditions
paragraphs: The 10 leading private sector retailers we contacted are more active in  identifying working conditions than the military exchanges for a variety of  reasons, ranging from a sense of social responsibility to pressure from  outside groups and a desire to protect the reputation of their companies’  product lines. These retailers periodically requested that overseas  suppliers provide a list of factories and subcontractors that they used to  make the retailers’ private label merchandise. Some retailers we contacted  terminated a business relationship with suppliers that used a factory  without disclosing it to the retailers. For example, JCPenney’s purchase  contracts stipulate that failure by a supplier or one of its contractors to  identify its factories and subcontractors may result in JCPenney’s taking  the following actions: seeking compensation for any resulting expense or  loss, suspending current business activity, canceling outstanding orders,  prohibiting the supplier’s subsequent use of the factory, or terminating the  relationship with the supplier. JCPenney officials told us that they have  terminated suppliers for using unauthorized subcontractors. Some  retailers that we interviewed, such as The Neiman Marcus Group, Inc.,  JCPenney, and Liz Claiborne, Inc., developed a company questionnaire,  which they had factory management complete. The questionnaire  addressed health and safety issues and whether U.S. or foreign  government agencies had investigated the factory. The retailers used the  questionnaire to provide factories with feedback on their compliance with  the retailers’ standards and for the retailer to provide the factory an  opportunity to make improvements in working conditions before an  inspection. The representatives of these retailers told us that they visited  factories to verify the accuracy of the factories’ answers to the  questionnaire before ordering merchandise.
Each of the 10 retailers we contacted told us they also used information on  human rights issues that was either developed internally or was available  from government agencies and nongovernmental organizations to assess  labor issues in the countries where the factories are located. This included  the Department of State’s annual Country Reports on Human Rights  Practices (a legislatively mandated report to Congress that covers worker  rights issues in 194 countries), which the retailers frequently cited as a  source for identifying labor issues in a particular country. Most retailers  also used information obtained from the United Nations; U.S. Department  of State; U.S. Customs Service; U.S. Department of Labor; and  nongovernmental organizations, such as Amnesty International. The  retailers we contacted used this information in their assessments of  suppliers to avoid business arrangements with factories in areas with a  higher risk of labor abuses. In addition, some of the retailers told us that  their decisions to buy merchandise made in a particular country  sometimes depended on whether they could improve factory conditions in  a country. For example, companies such as Levi Strauss & Co. used only  those Chinese factories that corrected problem conditions, an approach  supported by the officials we met at the Departments of State and Labor.
section_title: Exchanges Are Less Proactive in Identifying Factories’ Working Conditions
paragraphs: The military exchanges’ methods for identifying working conditions in  overseas factories that manufacture their private label merchandise are  not as proactive as the methods employed by companies in the private  sector. Only the Army and Air Force Exchange knew the identity of the  factories that manufactured its private label merchandise, and none of the  exchanges knew the nature of working conditions in these factories.  Instead, they assumed that their suppliers and other government agencies  ensured good working conditions. While the exchanges have sent letters to  some suppliers describing their expectations of compliance with labor  laws and regulations that address working conditions and minimum wages  in individual countries, they have not taken steps to verify that overseas  factories are in compliance or otherwise acted to determine the status of  employee working conditions; instead, they assumed that their suppliers  and other government agencies ensured good working conditions. For  example, the Navy Exchange and the Marine Corps Exchange do not  routinely maintain the name and location of the overseas factories that  manufactured their merchandise because they rely on brokers and  importers to acquire the merchandise from the overseas factories. The  AAFES Retail Business Agreement requires suppliers to promptly provide  subcontractors’ name and manufacturing sites upon request. But because  it had no program to address working conditions in overseas factories,  AAFES has not requested this information, except for the suppliers it used  for its private label apparel, and then only to check on the quality of the  merchandise being manufactured. AAFES’ records show that in fiscal year  2000, its private label apparel was manufactured in 70 factories in 18  countries and territories, as shown in table 3.
In some cases, the exchanges’ private label merchandise was  manufactured in countries that have been condemned internationally for  their human rights and worker rights violations. For example, at 9 of the  10 retailers we contacted, officials told us that they had ceased purchasing  from Myanmar (formerly Burma) in the 1990s because of reports of human  rights abuses documented by governmental bodies, nongovernmental  organizations, and the news media; at one retailer we contacted, officials  told us that they had ceased purchasing from Myanmar in 2000 for the  same reasons. In contrast, during 2001, each exchange purchased private  label apparel made in Myanmar.
For the most part, the exchanges assume compliance with laws and  regulations that address child or forced labor in the countries where their  factories are located instead of determining compliance. In 1996, for  example, following the much publicized El Monte, California, sweatshop  incident, the Navy Exchange notified all of its suppliers by letter that it  expected its merchandise to be manufactured without child or forced  labor and under safe conditions in the workplace, but it did not attempt to  determine whether these suppliers and their overseas factories were  willing and able to meet these expectations. The Navy Exchange and  Marine Corps Exchange relied solely on their suppliers to address working  conditions in the factories. Similarly, AAFES’ management officials told us  that they assumed that their suppliers were in compliance with applicable  laws and regulations by virtue of their having accepted an AAFES  purchase order. According to these management officials, when suppliers  accept a purchase order, they certify that they are complying with their  Retail Business Agreement. This agreement, distributed by letter to all  suppliers in 1997, states that by supplying merchandise to AAFES, the  supplier guarantees that it—along with its subcontractors—has complied  with all labor laws and regulations governing the manufacture, sale,  packing, shipment, and delivery of merchandise in the countries where the  factories are located. According to AAFES officials, an AAFES  contracting officer and a representative of the supplier are to sign the  agreement. We reviewed the contracting arrangements between AAFES  and nine of its suppliers of private label merchandise. Only four of the nine  suppliers had signed the AAFES Business Agreement.
AAFES management officials also told us that they rely on the reputation  of their suppliers for assurance that overseas factories are in compliance  with its business agreements. For example, these officials told us that they  use only the overseas suppliers that have existing business relationships  with other major U.S. retailers. The officials also stated that since many of  these private retailers have developed and are using their own program to  address working conditions in their overseas factories, the use of the same  suppliers provided some degree of confidence that the suppliers are  working within the laws of the host nation. However, some retailers we  contacted said their programs addressed factory conditions only for the  period that the factories were manufacturing the retailer’s merchandise  and that the factories did not have to follow their program when they were  manufacturing merchandise for another company. AAFES management  officials also told us that they rely on the U.S. Customs Service to catch  imported products that are manufactured under abusive working  conditions. However, the Customs officials we interviewed told us that  their agency encourages companies to be aware of the working conditions  in supplier factories to further reduce their risk of becoming engaged in an  import transaction involving merchandise produced with forced or  indentured child labor. According to the Customs’ officials, the military  exchanges—like retailers—are responsible for assuring that their  merchandise is not produced with child or forced labor.
section_title: Single Industry Standard Not Considered Practical, but Industry Practices and Other Assistance Could Be Useful to Military Exchanges
paragraphs: A single industry standard for adequate working conditions does not exist,  and the retailers we contacted did not believe that such a standard was  practical because each company must address different needs, depending  on the size of its operations, the various locations where its merchandise  is produced, and the labor laws that apply in different countries. However,  each of the retailers that we contacted had taken three key steps that  could serve as a framework for the exchanges in promoting compliance  with local labor laws and regulations in overseas factories. They involve  (1) developing codes of conduct for overseas suppliers; (2) implementing  their codes of conduct by disseminating expectations to their purchasing  staff, suppliers, and factory employees; and (3) monitoring to better  ensure compliance. The three steps taken by the retailers vary in scope  and rigor, and they are evolving. We did not independently evaluate the  effectiveness of these retailers’ efforts, but the retailers’ representatives  told us that although situations could occur in which their codes of  conduct are not followed, they believed that these steps provided an  important framework for ensuring due diligence and helped to better  assure fair and safe working conditions. The government agencies we  visited and the International Labor Organization also recognized these  three steps as key program elements and expressed a willingness to assist  the exchanges in shaping a program to assure that child or forced labor  was not used to produce their private label merchandise.
subsections: section_title: Three Industry Practices Could Provide a Framework for the Exchanges
paragraphs: Representatives of the 10 retailers we contacted believed that the three  steps they have taken—developing codes of conduct for overseas  suppliers; implementing their codes of conduct by disseminating  expectations to their purchasing staff, suppliers, and factory employees;  and monitoring to better ensure compliance—provide due diligence as  well as a mechanism to address and improve working conditions in  overseas factories. For example, officials at Levi Strauss & Co. told us that  after they refused to do business with a prospective supplier in India  because the supplier’s factory had wage violations and health and safety  conditions that did not meet Levi Strauss & Co.’s guidelines, the supplier  made improvements and requested a reassessment 4 months later.  According to Levi Strauss & Co., the reassessment showed that the  supplier had corrected wage violations and met health and safety  standards. In addition, employee morale had also improved, as indicated  by lower turnover, improved product quality, and higher efficiency at the  factory.
subsections: section_title: Developing a Code of Conduct
paragraphs: In 1991, Levi Strauss & Co. became the first multinational company to  establish a code of conduct to convey its policies on working conditions in  supplier factories, and subsequently such codes were widely adopted by  retailers. According to the Department of Labor, U.S. companies have  adopted 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. In  addition, allegations that a company’s operations exploit children or  violate other labor standards put sales—which depend heavily on brand  image and consumer goodwill—at risk and could nullify the hundreds of  millions of dollars a company spends on advertising. According to  Business for Social Responsibility, a nongovernmental organization that  provides assistance for companies developing and implementing corporate  codes of conduct, adopting and enforcing a code of conduct can be  beneficial for retailers because it can strengthen legal compliance in  foreign countries, enhance corporate reputation/brand image, reduce the  risk of negative publicity, increase quality and productivity, and improve  business relationships. “when notified by the U.S. Department of Labor or any state or foreign government, or after  determining upon its own inspection that a supplier or its subcontractor has committed a  serious violation of law relating to child or forced labor or unsafe working conditions,  Federated will immediately suspend all shipments of merchandise from that factory and  will discontinue further business with the supplier.”
An official from Federated Department Stores, Inc., said that the company  would demand that the supplier factory institute the monitoring programs  necessary to ensure compliance with its code of conduct prior to the  resumption of any business dealings with that supplier.
A variety of monitoring organizations, colleges, universities, and  nongovernmental organizations have codes of conduct, and codes of  conduct have now been widely adopted by the private sector. The  International Labor Organization’s Business and Social Initiatives  Database includes codes of conduct for about 600 companies. While the  military exchanges’ core values oppose the use of child or forced labor to  manufacture their merchandise, the military exchanges do not have codes  of conduct articulating their views. Examples of Internet Web sites with  codes of conduct are included in appendix III.
section_title: Implementing Codes of Conduct
paragraphs: Although retailers in the private sector implement their codes of conduct  in various ways, officials of the retailers we contacted told us that they  generally train their buying agents and quality assurance employees on  their codes of conduct to ensure that staff at all stages in the purchasing  process are aware of their company’s code. For example, an official at Levi  Strauss & Co. stated that his company continually educates its employees,  including merchandisers, contract managers, general managers in source  countries, and other personnel at every level of the organization during the  year. Officials of the retailers we contacted told us they also have  distributed copies of their codes of conduct to their domestic and  international suppliers and provided them with training on how to comply  with the code. In addition, some retailers required suppliers to post codes  of conduct and other sources of labor information in their factories in the  workers’ native language. For example, The Walt Disney Company has  translated its code of conduct into 50 different languages and requires  each of its suppliers to post the codes in factories in the appropriate local  language. Retailers such as Liz Claiborne, Inc., and Levi Strauss & Co. also  work with local human rights organizations to make sure that workers  understand and are familiar with their codes of conduct.
Some retailers dedicate staff solely to implementing a code of conduct,  while other retailers assign these duties to various departments—such as  compliance, quality assurance, legal affairs, purchasing agents, and  government affairs—as a collateral responsibility. Executives and officials  from the retailers we contacted stated that the successful implementation  of a code of conduct requires the involvement of departments throughout  the supply chain, both internally and externally (including supplier and  subcontractor factories). They also stated that the involvement of senior  executives is critical because they provide an institutional emphasis that  helps to ensure that the code of conduct is integrated throughout the  various internal departments of the company.
section_title: Monitoring for Compliance
paragraphs: To help ensure that suppliers’ factories are in compliance with their codes  of conduct, the retailers we contacted have used a variety of monitoring  efforts. Retailer officials told us that the extent of monitoring varies and  can involve internal monitoring, in which the company uses its own  employees to inspect the factories; external monitoring, in which the  company contracts with an outside firm or organization to inspect the  factories; or a combination of both. The various forms of monitoring  involve the visual inspection of factories for health and safety violations;  interviewing management to understand workplace policies; reviewing  wage, hour, age, and other records for completeness and accuracy; and  interviewing workers to verify workplace policies and practices. The 10  retail companies we contacted did not provide a precise cost for their  internal and external monitoring programs, but a representative of  Business for Social Responsibility estimated that monitoring costs ranged  from $250,000 to $15 million a year. Some retailers suggested that the  military exchanges could minimize costs by joining together to conduct  monitoring, particularly in situations where the exchanges are purchasing  merchandise manufactured at the same factories.
Companies that rely on internal monitoring use their own staff to monitor  the extent to which supplier factories adhere to company policies and  standards. According to an official with the National Retail Federation, the  world’s largest retail trade association, retailers generally prefer internal  monitoring because it provides them with first-hand knowledge of their  overseas facilities. At the same time, representatives of the  nongovernmental organizations we visited expressed their opinion that  inspections performed by internal staff may not be perceived as  sufficiently independent. According to information we obtained from the  retailers we contacted, nearly all of them had an internal monitoring  program to inspect all or some supplier factories; their internal monitoring  staff ranged from 5 to 100 auditors located in domestic and international  offices. Some retailers said they perform prescreening audits before  entering into a contractual agreement, followed by announced and  unannounced inspections at a later time. The frequency of audits  performed at supplier factories depends on various factors, such as the  rigor and size of the corporation’s monitoring plan, the location of supplier  factories, and complaints from workers or nongovernmental  organizations.
Some retailers—along with colleges, universities, and factories—are also  using external monitoring organizations that provide specially trained  auditors to verify compliance with workplace codes of conduct. We visited  four of these monitoring organizations—Fair Labor Association, Social  Accountability International, Worker Rights Consortium, and Worldwide  Responsible Apparel Production. More information on these monitoring  organizations appears in appendix II. Each organization has different  guidelines for its monitoring program, but typically, a program involves  (1) a code of conduct that all participating corporations must implement  and (2) the inspection of workplaces at supplier factories participating in  the program by audit firms accredited by the organization. External  monitoring organizations’ activities differ in scope. For example, under the  Fair Labor Association’s program, companies use external monitors  accredited by the Fair Labor Association for periodic inspections of  factories. In contrast, in the Worldwide Responsible Apparel Production’s  program, individual factories are certified as complying with their  program. Although differences in scope exist—and have led to debate on  the best approach for a company—corporations that are adopting external  monitors believe they are valuable for providing an independent  assessment of factory working conditions.
section_title: Advisory Services Are Available to Assist the Exchanges in Formulating a Program
paragraphs: Some retailers we contacted offered to share their experiences in  developing programs to address working conditions in overseas factories.  The Departments of Labor and State, the U.S. Customs Service, and the  International Labor Organization prepare reports that address working  conditions in overseas factories. These organizations expressed a  willingness to assist the military exchanges in shaping a program to assure  that child or forced labor does not produce private label exchange  merchandise. Furthermore, the International Labor Organization offered  to provide advisory services, technical assistance, and training programs  to help the military exchanges define and implement best labor practices  throughout their supply chain.
section_title: Conclusions
paragraphs: The military exchanges lag behind leading retailers in the practices they  employ to assure that working conditions are not abusive in overseas  factories that manufacture their private label merchandise. As a result, the  exchanges do not know if workers in these factories are treated humanely  and compensated fairly. The exchanges recently became more interested  in developing a program to obtain information on worker rights and  working conditions in overseas supplier plants, and the House Armed  Services Committee Report for the Fiscal Year 2002 National Defense  Authorization Act requires them to do so. However, developing a program  that is understood throughout the supply chain, lives up to expectations  over time, and is cost-effective will be a challenge. Leading retailers have  been addressing these challenges for as long as 10 years and have taken  three key steps to promote adequate working conditions and compliance  with labor laws and regulations in overseas factories—developing codes of  conduct, implementing the codes of conduct by the clear dissemination of  expectations, and monitoring to ensure that suppliers’ factories comply  with their codes of conduct. Drawing on information and guidance from  various U.S. government agencies and the International Labor  Organization can facilitate the military exchanges’ development of such a  program. Information available from these entities could be useful not  only in establishing an initial program but also in implementing it over  time, and the costs may be minimized by having the military exchanges  pursue these efforts jointly.
section_title: Recommendations for Executive Action
paragraphs: As the Secretary of Defense moves to implement the congressionally  directed program to assure that private label exchange merchandise is not  produced by child or forced labor, we recommend the Under Secretary of  Defense (Personnel and Readiness), in conjunction with the Assistant  Secretary of Defense (Force Management Policy), require the Army and  Air Force Exchange Service, Naval Exchange Service Command, and  Marine Corp Community Services to develop their program around the  framework outlined in this report, including creating a code of conduct that reflects the values and expectations that  the exchanges have of their suppliers; developing an implementation plan for the code of conduct that includes  steps to communicate the elements of the code to internal staff, business  partners, and factory workers and to train them on these elements; developing a monitoring effort to ensure that the codes of conduct are using government agencies, such as the Departments of State and Labor,  retailers, and the International Labor Organization as resources for  information and insights that would facilitate structuring their program; establishing ongoing communications with these organizations to help the  exchanges stay abreast of information that would facilitate their  implementation and monitoring efforts to assure that exchange  merchandise is not produced by child or forced labor; and pursuing these efforts jointly where there are opportunities to minimize  costs.
section_title: Agency Comments and Our Evaluation
paragraphs: In commenting on a draft of this report, the Assistant Secretary of Defense  (Force Management Policy) concurred with its conclusions and  recommendations.  The Assistant Secretary identified planned  implementing actions for each recommendation and, where action had not  already begun, established July 1, 2002, as the date for those actions to be  effective.  The Department’s written comments are presented in their  entirety in appendix IV.
We are sending copies of this report to the appropriate congressional committees; the Secretary of Defense; the Secretary of the Army; the Secretary of the Navy; the Secretary of the Air Force; the Commander, Army and Air Force Exchange Service; the Commander, Navy Exchange Service Command; the Commander, Marine Corps Community Services; the Director, Office of Management and Budget; and interested congressional committees and members.  We will also make copies available to others upon request.
Please contact me at (202) 512-8412 if you or your staff has any questions concerning this report. Major contributors to this report are listed in appendix V.
section_title: Appendix I: Scope and Methodology
paragraphs: To compare military exchanges with the private sector in terms of the  methods used to identify working conditions at the overseas factories, we  limited our work to the exchanges’ efforts related to private label suppliers  and performed work at the military exchanges and leading retail  companies. To determine the actions of the exchanges to identify working  conditions in the factories of their overseas suppliers, we reviewed the  policies and procedures governing the contract files, purchase orders, and  contractual agreements at the exchanges’ headquarters offices and  interviewed officials responsible for purchasing merchandise sold by the  exchanges. For example, we reviewed the contracting arrangements  between the Army and Air Force Exchange Service (AAFES) and nine of  its suppliers of private label merchandise to determine if AAFES had  requested information on working conditions in overseas factories and  whether the suppliers had signed the contractual documents. For  historical perspective, we reviewed the results of prior studies and audit  reports of the military exchanges. We met with officials and performed  work at the headquarters of AAFES in Dallas, Texas; the Navy Exchange  Service Command (Navy Exchange) in Virginia Beach, Virginia; and the  Marine Corps Community Services (Marine Corps Exchange) in Quantico,  Virginia.
To determine the actions of the private sector to identify working  conditions in the factories of their overseas suppliers, we analyzed 10  leading private sector companies’ efforts to identify working conditions in  overseas factories by interviewing the companies’ officials and the  documentation they provided. We chose seven of the companies from the  National Retail Federation’s list of the 2001 Top 100 Retailers (in terms of  sales) in the United States. The retailers and their ranking on the  Federation’s list follow: Federated Department Stores, Inc. (15); JCPenney  (8); Kohl’s (36); Kmart (5); The Neiman Marcus Group, Inc. (64); Sears,  Roebuck and Co. (4); and Wal-Mart (1). The remaining three companies—  The Walt Disney Company, Levi Strauss & Co., and Liz Claiborne, Inc.—  were chosen on the basis of recommendations from U.S. government  agencies, nongovernmental organizations, and industry associations as  being among the leaders in efforts to address working conditions in  overseas factories. These three companies generally refer to themselves as  “manufacturers” or “licensing” organizations, but they also operate retail  stores. We interviewed officials and reviewed documents from the  Departments of State and Labor, the Office of the United States Trade  Representative, and the International Labor Organization to gain a  perspective on government and industry efforts to address factory  working conditions. We also interviewed officials from industry  associations and labor and human rights groups.
To identify steps the private sector has taken to promote adequate  working conditions at factories that could serve as a framework for the  exchanges, we focused on the efforts of the 10 retailers. We documented  the programs and program elements (e.g., codes of conduct, plans for  implementing codes of conduct throughout the supply chain, and  monitoring efforts) used by the 10 retailers that we contacted. We did not  independently evaluate the private sector programs to determine the  effectiveness of their efforts or to independently verify specific allegations  of worker rights abuses. Rather, we relied primarily on discussions with  retailers’ officials and the documentation they provided. We met with  officials from government agencies and reviewed independent studies  such as State and Labor Department and International Labor Organization  reports, providing a perspective on government and industrywide efforts  to address working conditions in overseas factories. We documented the  procedures the exchanges used to purchase merchandise and interviewed  headquarters personnel responsible for buying and inspecting  merchandise made overseas. We also reviewed the exchanges’ policies,  statements of core values, and oversight programs.
To gain a perspective on the various approaches to address worker rights  issues, we interviewed nongovernmental organizations and industry  associations, including representatives from the National Labor  Committee, National Consumers League, International Labor Rights Fund,  Global Exchange, Investor Responsibility Research Center, Business for  Social Responsibility, National Retail Federation, and the American  Apparel and Footwear Association. In addition, we interviewed officials  from four monitoring organizations—the Fair Labor Association; Social  Accountability International; Worldwide Responsible Apparel Production;  and Worker Rights Consortium—which inspect factories for compliance  with codes of conduct governing labor practices and human rights.
To collect information on government enforcement actions and funding  for programs to address working conditions in overseas factories, we  interviewed officials from the Department of State’s Office of International  Labor Affairs, the Department of Labor’s Bureau of International Labor  Affairs, the U.S. Customs Service’s Fraud Investigations Office, and the  Office of the United States Trade Representative. For an international  perspective on worldwide efforts, we visited the International Labor  Organization’s offices in Washington, D.C., and Geneva, Switzerland.
We performed our review from April through November 2001 in  accordance with generally accepted government auditing standards.
section_title: Appendix II: Efforts of Government Agencies, Nongovernmental Organizations, and Industry Associations to Address Working Conditions in Overseas Factories
subsections: section_title: Government Agencies
subsections: section_title: U.S. Customs Service
paragraphs: The Customs Service’s Fraud Investigations Office and its 29 attaché  offices in 21 countries investigate cases concerning prison, forced, or  indentured labor. The Customs officials work with the Department of  State, Department of Commerce, and nongovernmental organizations to  collect leads for investigations. In some cases, corporations have told  Customs about suspicions they have about one of their suppliers and  recommended an investigation. In addition, private citizens can report  leads they may have concerning a factory. The Forced Child Labor Center  was established as a clearinghouse for investigative leads, a liaison for  Customs field offices, and a process to improve enforcement coordination  and information. Customs also provides a toll-free hotline in the United  States (1-800-BE-ALERT) to collect investigative leads on forced labor  abuses.
Outreach efforts from the Customs Service involve providing seminars  around the world for U.S. government agencies, foreign governments,  nongovernmental organizations, and corporations concerning forced and  indentured labor issues. In December 2000, Customs published a manual  entitled Forced Child Labor Advisory, which provides importers,  manufacturers, and corporations with information designed to reduce  their risk of becoming engaged in a transaction involving imported  merchandise produced with forced or indentured child labor. Customs  also publishes on its Internet Web site a complete list of outstanding  detention orders and findings concerning companies that are suspected of  producing merchandise from forced or indentured labor. Customs can  issue a detention order if available information reasonably, but not  necessarily conclusively, indicates that imported merchandise has been  produced with forced or indentured labor; the order may apply to an  individual shipment or to the entire output of a type of product from a  given firm or facility. If, after an investigation, Customs finds probable  cause that a class of merchandise is a product of forced or indentured  child labor, it can bar all imports of that product from that firm from  entering the United States.
On June 5, 1998, the Department of the Treasury’s Advisory Committee on  International Child Labor was established to provide the Treasury  Department and the U.S. Customs Service with recommendations to  strengthen the enforcement of laws against forced or indentured child  labor, in particular, through voluntary compliance and business outreach.  The Advisory Committee was established to support law enforcement  initiatives to stop illegal shipments of products made through forced or  indentured child labor and to punish violators. The Committee comprises  industry representatives and child labor experts from human rights and  labor organizations.
Customs Service officials told us they have met with leading retailers to  provide feedback on their internal monitoring programs to assure that  their merchandise is not produced with forced child labor. Customs  Service officials expressed a willingness to assist the exchanges in shaping  a program to assure that child or forced labor does not produce private  label exchange merchandise.
section_title: U.S. Department of Labor
paragraphs: The Department of Labor conducts targeted enforcement sweeps in major  garment centers in the United States, but it does not have the authority to  inspect foreign factories. In August, 1996, the Department of Labor called  upon representatives of the apparel industry, labor unions, and  nongovernmental organizations to join together as the Apparel Industry  Partnership (later becoming the Fair Labor Association) to develop a plan  that would assure consumers that apparel imports into the United States  are not produced under abusive labor conditions.
The Bureau of International Labor Affairs, Department of Labor, has  produced seven annual congressionally requested reports on child labor,  entitled By the Sweat and Toil of Children, concerning the use of forced  labor, codes of conduct, consumer labels, efforts to eliminate child labor,  and the economic considerations of child labor. Other relevant reports on  worker rights produced by the Bureau include the 2000 Report on Labor  Practices in Burma and Symposium on Codes of Conduct and  International Labor Standards.
Since 1995, the Department of Labor has also contributed $113 million to  international child labor activities, including the International Labor  Organization’s International Program for the Elimination of Child Labor. In  addition, the Department of Labor provided the International Labor  Organization with $40 million for both fiscal years 2000 and 2001 for  programs in various countries concerning forced labor, freedom of  association, collective bargaining, women’s rights, and industrial relations  in lesser-developed nations. The Department also provides any company  that would like to learn how to implement an effective monitoring  program with technical assistance, and Labor officials have expressed a  willingness to assist the exchanges in shaping a program to assure that  private label exchange merchandise is not produced by child or forced  labor.
section_title: U.S. Department of State
paragraphs: On January 16, 2001, the Department of State’s Anti-Sweatshop Initiative  awarded $3.9 million in grants to support efforts to eliminate abusive  working conditions and protect the health, safety, and rights of workers  overseas. The Anti-Sweatshop Initiative is designed to support innovative  strategies to combat sweatshop conditions in overseas factories that  produce goods for the U.S. market. Five nongovernmental and  international organizations, such as the Fair Labor Association,  International Labor Rights Fund, Social Accountability International,  American Center for International Solidarity, and the International Labor  Organization, received over $3 million. In addition, the U.S. Agency for  International Development will administer an additional $600,000 for  smaller grants in support of promising strategies to eliminate abusive labor  conditions worldwide.
The Department of State’s Bureau of Democracy, Human Rights, and  Labor publishes Country Reports on Human Rights Practices, a  legislatively mandated annual report to Congress concerning worker rights  issues, including child labor and freedom of association in 194 countries.  Retailers and manufacturers stated they have utilized these reports to stay  abreast of human and labor rights issues in a particular country and to  make factory selections. The Department of State has expressed a  willingness to assist the exchanges in shaping a program to assure that  child or forced labor does not produce private label exchange  merchandise.
section_title: Office of the U.S. Trade Representative
paragraphs: The Office of the U.S. Trade Representative leads an interagency working  group—the Trade Policy Staff Committee—which has the right to initiate  worker rights petition cases under the Generalized System of Preferences.  The Generalized System of Preferences Program establishes trade  preferences to provide duty-free access to the United States for designated  products from eligible developing countries worldwide to promote  development through trade rather than traditional aid programs. A  fundamental criterion for the Generalized System of Preferences is that  the beneficiary country has or is taking steps to afford workers’  internationally recognized worker rights, including the right to association;  the right to organize and bargain collectively; a prohibition against  compulsory labor; a minimum age for the employment of children; and  regulations governing minimum wages, hours of work, and occupational  safety and health. Under the Generalized System of Preferences, any  interested party may petition the committee to review the eligibility status  of any country designated for benefits. If a country is selected for review,  the committee then conducts its own investigation of labor conditions and  decides whether or not the country will continue to receive Generalized  System of Preferences benefits. Interested parties may also submit  testimony during the review process. In addition, U.S. Trade  Representatives can express their concern about worker rights issues in a  country to foreign government officials, which may place pressure on  supplier factories to resolve labor conditions. (The general authority for  duty-free treatment expired on September 30, 2001 .  Proposed legislation provides for an extension with retroactive application  similar to previous extensions of this authority. Authority for sub-Saharan  African countries continues through September 30, 2008 [19 U.S.C.  2466b]).
section_title: International Labor Organization
paragraphs: The International Labor Organization is a United Nations specialized  agency that seeks to promote social justice and internationally recognized  human and labor rights. It has information on codes of conduct, research  programs, and technical assistance to help companies address human  rights and labor issues. Currently, the International Labor Organization is  developing training materials to provide mid-level managers with practical  guidance on how to promote each of its four fundamental labor principles  both internally and throughout a company’s supply chain. The following  are the four fundamental principles: (1) freedom of association and the  effective recognition of the right to collective bargaining, (2) the  elimination of all forms of forced or compulsory labor, (3) the effective  abolition of child labor, and (4) the elimination of discrimination in  employment. These principles are contained in the International Labor  Organization’s Declaration on Fundamental Principles and Rights at Work  and were adopted by the International Labor Conference in 1998. To  promote the principles, the U.S. Department of Labor is funding various  projects pertaining to improving working conditions in the garment and  textile industry and is addressing issues of freedom of association,  collective bargaining, and forced labor in the following regions or  countries: Bangladesh, Brazil, Cambodia, the Caribbean, Central America,  Colombia, East Africa, East Timor, Kenya, India, Indonesia, Jordan,  Morocco, Nigeria, Nepal, Vietnam, southern Africa, and Ukraine. For fiscal  years 2000 and 2001, these projects received about $40 million in funding.
On January 16, 2001, the International Labor Organization was awarded  $496,974 by the Department of State Anti-Sweatshop Initiative to research  how multinational corporations ensure compliance with their labor  principles. Another research project seeks to demonstrate the link  between international labor standards and good business performance. A  major product of the research will be a publication for company managers  that looks at the relationship between International Labor Organization  conventions and company competitiveness and that then examines how  adhering to specific standards (i.e., health and safety, human resource  development, and workplace consultations) can improve corporate  performance. The International Labor Organization has also created the  Business and Social Initiatives Database, which includes extensive  information on corporate policies and reports, codes of conduct,  accreditation and certification criteria, and labeling programs on its Web  site. For example, the database contains an estimated 600 codes of  conduct from corporations, nongovernmental organizations, and  international organizations.
From fiscal year 1995 through fiscal year 2001, the Congress has  appropriated over $113 million for the Department of Labor for  international child labor activities including the International Labor  Organization’s International Program on the Elimination of Child Labor.  The program has estimated that the United States will pledge $60 million  for the 2002-3 period. The United States is the single largest contributor to  the International Program on the Elimination of Child Labor, which has  focused on the following four objectives:
Eliminating child labor in specific hazardous and/or abusive occupations.  These targeted projects aim to remove children from work, provide them  with educational opportunities, and generate alternative sources of  income for their families.
Bringing more countries that are committed to addressing their child labor  problem into the program.
Documenting the extent and nature of child labor.
Raising public awareness and understanding of international child labor  issues.
The program has built a network of key partners in 75 member countries  (including government agencies, nongovernmental organizations, media,  religious institutions, schools, and community leaders) in order to  facilitate policy reform and change social attitudes, so as to lead to the  sustainable prevention and abolition of child labor. During fiscal years  2000-2003, the United States is funding programs addressing child labor in  the following countries or regions: Bangladesh, Brazil, Cambodia,  Colombia, Costa Rica, the Dominican Republic, El Salvador, Ghana,  Guatemala, Haiti, Honduras, India, Jamaica, Malawi, Mongolia, Nepal,  Nicaragua, Nigeria, Pakistan, the Philippines, Romania, South Africa,  Tanzania, Thailand, Uganda, Ukraine, Vietnam, Yemen, and Zambia and  Africa, Asia, Central America, Inter-America, and South America.
section_title: Nongovernmental Organizations
subsections: section_title: Business for Social Responsibility
paragraphs: Business for Social Responsibility, headquartered in San Francisco,  California, is a membership organization for companies, including  retailers, seeking to sustain their commercial success in ways that  demonstrate respect for ethical values, people, communities, and the  environment. (Its sister organization, the Business for Social  Responsibility Education Fund, is a nonprofit charitable organization  serving the broader business community and the general public through  research and educational programs.) In 1995, this organization created the  Business and Human Rights Program to address the range of human rights  issues that its members face in using factories located in developing  countries. The Business and Human Rights Program provides a number of  services; for example, it offers (1) counsel and information to companies  developing corporate human rights policies, including codes of conduct  and factory selection guidelines for suppliers; (2) information services on  human rights issues directly affecting global business operations,  including country-specific and issue-specific materials; (3) a means of  monitoring compliance with corporate codes of conduct and local legal  requirements, including independent monitoring; (4) a mechanism for  groups of companies, including trade associations, to develop  collaborative solutions to human rights issues; and (5) the facilitation of  dialogue between the business community and other sectors, including the  government, media, and human rights organizations.
section_title: Fair Labor Association
paragraphs: The Fair Labor Association, a nonprofit organization located in  Washington, D.C., offers a program that incorporates both internal and  external monitoring. In general, the Association accredits independent  monitors, certifies that companies are in compliance with its code of  conduct, and serves as a source of information for the public. Companies  affiliated with the Association implement an internal monitoring program  consistent with the Fair Labor Association’s Principles of Monitoring,  covering at least one-half of all their applicable facilities during the first  year of their participation, and covering all of their facilities during the  second year. In addition, participating companies commit to using  independent external monitors accredited by the Fair Labor Association to  conduct periodic inspections of at least 30 percent of the company’s  applicable facilities during its initial 2- to 3-year participation period. On  January 16, 2001, the Fair Labor Association was awarded $750,000 by the  Department of State’s Anti-Sweatshop Initiative to enable the organization  to recruit, accredit, and maintain a diverse roster of external monitors  around the world. The Fair Labor Association’s participating companies  include the following: Adidas-Saloman A.G.; Nike, Inc.; Reebok  International Ltd.; Levi Strauss & Co.; Liz Claiborne, Inc.; Patagonia; GEAR  for Sports; Eddie Bauer; Josten’s Inc.; Joy Athletic; Charles River Apparel;  Phillips-Van Heusen Corporation; and Polo Ralph Lauren Corporation.
section_title: Global Exchange
paragraphs: Global Exchange, headquartered in San Francisco, California, is a  nonprofit research, education, and action center dedicated to increasing  global awareness among the U.S. public while building international  partnerships around the world. Global Exchange has filed and supported  class-action lawsuits against 26 retailers and manufacturers concerning  alleged sweatshop abuse in Saipan’s apparel factories. As of September  2001, 19 of those corporations had settled for $8.75 million and have  agreed to adopt a code of conduct and a monitoring program in Saipanese  factories that produce their merchandise.
section_title: International Labor Rights Fund
paragraphs: The International Labor Rights Fund is a nonprofit action and advocacy  organization located in Washington, D.C. It pursues legal and  administrative actions on behalf of working people, creates innovative  programs and enforcement mechanisms to protect workers’ rights, and  advocates for better protections for workers through its publications;  testimony before national and international hearings; and speeches to  academic, religious, and human rights groups. The Fund is currently  participating in various lawsuits against multinational corporations  involving labor rights in Burma, Colombia, Guatemala, and Indonesia.
In 1996, the International Labor Rights Fund and Business for Social  Responsibility were key facilitators in establishing a monitoring program  for a Liz Claiborne, Inc., supplier factory in Guatemala. The Guatemalan  nongovernmental monitoring organization, Coverco, was founded from  this process and has since published two public reports on the results of  its meetings with factory management and factory workers. Officials at Liz  Claiborne, Inc., stated that the monitoring initiative has been very effective  in detecting and correcting problems and helpful in offering ideas for best  practices and has provided enhanced credibility for the company’s  monitoring efforts.
In 2001, the International Labor Rights Fund was awarded an Anti- Sweatshop Initiative grant from the Department of State in the amount of  $152,880. The Fund plans to undertake a project to work with labor rights  organizations in Africa, Asia, and Latin America to build a global campaign  for national and international protections for female workers. The Fund  will conduct worker surveys and interviews in Africa and the Caribbean to  determine the extent of the problem. In addition, the Fund and its  nongovernmental organization partners will develop an educational video  to help alert women workers in these countries about the problem of  sexual harassment.
section_title: Investor Responsibility Research Center
paragraphs: The Investor Responsibility Research Center, located in Washington, D.C.,  is a research and consulting organization that performs independent  research on corporate governance and corporate responsibility issues. The  Center contributed to the University Initiative Final Report, which  collected information on working conditions in university-licensed apparel  factories in China, El Salvador, Mexico, Pakistan, South Korea, Thailand,  and the United States. The report addresses steps the universities can  implement to address poor labor conditions in licensee factories and  ongoing efforts by government and nongovernmental organizations to  improve working conditions in the apparel industry. The report is based  on factory visits and interviews with nongovernmental organizations, labor  union officials, licensees, factory owners and managers, and government  officials.
section_title: National Consumers League
paragraphs: The National Consumers League is a nonprofit organization located in  Washington, D.C. Its mission is to identify, protect, represent, and advance  the economic and social interests of consumers and workers. Created in  1899, the National Consumers League is the nation’s oldest consumer  organization. The League worked for the national minimum wage  provisions in the Fair Labor Standards Act (passed in 1938) and has helped  organize the Child Labor Coalition, which is committed to ending child  labor exploitation in the United States and abroad. The Child Labor  Coalition comprises more than 60 organizations representing educators,  health groups, religious and women’s groups, human rights groups,  consumer groups, labor unions, and child labor advocates. The Coalition  works to end child labor exploitation in the United States and abroad and  to protect the health, education, and safety of working minors.
National Labor Committee
 The National Labor Committee is a nonprofit human rights organization  located in New York City. Its mission is to educate and actively engage the  U.S. public on human and labor rights abuses by corporations. Through  education and activism, the committee aims to end labor and human rights  violations. The committee has led “Corporate Accountability Campaigns”  against major retailers and manufactures to improve factory conditions. In  El Salvador, the National Labor Committee has facilitated an independent  monitoring program between (1) The GAP, the retailer; (2) Jesuit  University in San Salvador, the human rights office of the Catholic  Archdiocese; and (3) the Center for Labor Studies, a nongovernmental  organization. The committee advocates that corporations should disclose  supplier factory locations and hire local religious or human rights  organizations to conduct inspections in factories.
section_title: Social Accountability International
paragraphs: Social Accountability International, founded in 1997, is located in New  York City, New York. It is a nonprofit monitoring organization dedicated to  the development, implementation, and oversight of voluntary social  accountability standards in factories around the world. In response to the  inconsistencies among workplace codes of conduct, Social Accountability  International developed a standard, named the Social Accountability 8000  standard, for workplace conditions and a system for independently  verifying compliance of factories. The Social Accountability 8000 standard  promotes human rights in the workplace and is based on internationally  accepted United Nations and International Labor Organization  conventions. Social Accountability 8000 requires individual facilities to be  certified by independent, accredited certification firms with regular  follow-up audits. As of November 2001, 82 Social Accountability 8000  certified factories were located in 21 countries throughout Asia, Europe,  North America, and South America. U.S. and international companies  adopting the Social Accountability 8000 standard are Avon, Cutter & Buck,  Eileen Fisher, and Toys R Us. In 2001, Social Accountability International  was awarded an Anti-Sweatshop Initiative grant from the Department of  State of $1 million for improving social auditing through research and  collaboration; capacity building; and consultation with trade unions,  nongovernmental organizations, and small and medium-sized enterprises;  and consumer education. These projects will take place in several  countries, including Brazil, China, Poland, and Thailand, and consumer  education will be focused on the United States.
Worker Rights Consortium
 Worker Rights Consortium, a nonprofit monitoring organization located in  Washington, D.C., provides a factory-based certification program for  university licensees. University students, administrators, and labor rights  activists created Worker Rights Consortium to assist in the enforcement of  manufacturing codes of conduct adopted by colleges and universities;  these codes are designed to ensure that factories producing goods bearing  college and university logos respect the basic rights of workers. The  Worker Rights Consortium investigates factory conditions and reports its  findings to universities and the public. Where violations are uncovered, the  Consortium works with colleges and universities, U.S.-based retail  corporations, and local worker organizations to correct the problem and  improve conditions. It is also working to develop a mechanism to ensure  that workers producing college logo goods can bring complaints about  code of conduct violations, safely and confidentially, to the attention of  local nongovernmental organizations and the Worker Rights Consortium.  As of November 2001, 92 colleges and universities had affiliated with the  Worker Rights Consortium, adopting and implementing a code of conduct  in contracts with licensees.
section_title: Worldwide Responsible Apparel Production
paragraphs: The Worldwide Responsible Apparel Production, a nonprofit monitoring  organization located in Washington, D.C., monitors and certifies  compliance with socially responsible standards for manufacturing and  ensures that sewn products are produced under lawful, humane, and  ethical conditions. The basis for creating the monitoring and certification  program came from apparel producers that requested that the American  Apparel & Footwear Association address inconsistent company standards  and repetitive monitoring. The program is a factory certification program  that requires a factory to perform a self-assessment followed by an  evaluation by a monitor from the Worldwide Responsible Apparel  Production Certification Program. On the basis of this evaluation, the  monitor will either recommend that the facility be certified or identify  areas where corrective action must be taken before such a  recommendation can be made. Following a satisfactory recommendation  from the monitor, the Worldwide Responsible Apparel Production  Certification Board will review the documentation of compliance and  decide upon certification. The Certification Program was pilot tested in  2000 at apparel manufacturing facilities in Central America, Mexico, and  the United States. As of November 2001, 500 factories in 47 countries had  registered to become certified.
section_title: Industry Associations
subsections: section_title: American Apparel & Footwear Association
paragraphs: The American Apparel & Footwear Association, a national trade  association located in Washington, D.C., represents roughly 800 U.S.  apparel, footwear, and supplier companies whose combined industries  account for more than $225 billion in annual U.S. retail sales. The  Association was instrumental in creating the Worldwide Responsible  Apparel Production monitoring program. The Association’s Web site states  that “members are committed to socially responsible business practices  and to assuring that sewn products are produced under lawful, humane,  and ethical conditions.” The American Apparel & Footwear Association  has also created a Social Responsibility Committee, in which various  manufacturers meet to discuss their programs to address worker rights  issues.
National Retail Federation
 As the world’s largest retail trade association, National Retail Federation,  located in Washington, D.C., conducts programs and services in research,  education, training, information technology, and government affairs to  protect and advance the interests of the retail industry. The Federation’s  membership includes the leading department, specialty, independent,  discount, and mass merchandise stores in the United States and 50 nations  around the world. It represents more than 100 state, national, and  international trade organizations, which have members in most lines of  retailing. The National Retail Federation also includes in its membership  key suppliers of goods and services to the retail industry. The Federation  has a Web site link entitled, “Stop Sweatshops,” which provides  information on the retail industry’s response to sweatshops, including  forms of monitoring and a brief history of U.S. sweatshops. The Federation  also has an International Trade Advisory Council, comprising retail and  sourcing representatives, which discusses various issues pertaining to  international labor laws; international trade; and customs matters, both in  the legislative and regulatory areas.
section_title: Appendix III: Examples of Web Sites With Codes of Conduct
paragraphs: The codes of conduct for the retailers we visited that have posted their  codes on the Internet are at the Internet Web sites shown in table 4.
section_title: Appendix V: GAO Contacts and Staff Acknowledgments
subsections: section_title: GAO Contacts
section_title: Acknowledgments
paragraphs: In addition to those named above, Nelsie Alcoser, Jimmy Palmer, and  Susan Woodward made key contributions to this report.