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Kathy Lee Gifford, then host of a popular ABC morning show, came under fire in May 1996 when investigators from the US Department of Labor visited a plant in Honduras that was making her clothing line. The investigators discovered 10 percent of the workforce was made up of girls 13 to 15 who were forced to working in humiliating and unsafe conditions for below market wages.

In August 1996, President Clinton brought together representatives from the apparel industry and labor and human rights groups to hammer out a humanitarian agreement, which was called the Apparel Industry Partnership. Congress then passed legislation that, among other things, holds US manufacturers and retailers liable for compliance with international labor laws. These laws forbid children under 15 to work, mandate minimum safety rules, and prohibit harassment and abuse. Today the US Customs Department is responsible for compliance with these rules, dubbed the "No Sweat Initiative."

Hanna Andersson Inc., a catalog retailer, is serious about complying with these international labor laws. But its leaders felt it was too costly to send its own representatives to the factories of all its vendors to ensure compliance. So it turned to a global trade management outsourcer, Sojitz Corporation of America, to perform the labor audits for it.

"Sojitz sends its representatives to the factories to check out the working conditionsof all our vendors. Now I am confident we can pass an audit and no children are making the goods we sell," says Karen Brandenburger, Sourcing Product and Manager for the Knits Division. As Gifford discovered, using child labor is bad for business.

Brandenburger says customs enforcement has become much stricter since 9/11. As government regulations increase, outsourcing becomes an even more important strategic tool for the retail industry.

Publish Date: November 2004

Copyright © 2004 - Everest Partners, L.P.

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