Global
Trade and Security: An Apparel Industry Response
by Steven A. Jesseph
When US apparel and footwear companies were accused of using "sweatshops" in Asia, the US and Latin America in the mid 1990's, the American Apparel and Footwear Association (the AAFA, then known as American Apparel Manufacturer's Association) met the accusations head on. A survey of US and offshore factories showed that many businesses were operating within the law and provided excellent working conditions. Unfortunately, there were also a significant number that weren't operated so well and had labor and environmental conditions that could be described as poor to very bad. The challenge was determining how to best bring the global apparel industry together under one set of operating standards to ensure products were made under legal socially responsible working conditions in the 80+ apparel producing countries around the world. A collaborative and global effort would be required.
Starting in late 1996, a task force of AAFA member companies and external consultants spent three years developing a code of conduct, factory monitoring and certification program that was launched as a separate organization in January 2000 and called WRAP® - the Worldwide Responsible Apparel Production program, now Worldwide Responsible Accredited Production. Today, WRAP is the world's largest independent, nonprofit social compliance certification program dedicated to ensuring legal, ethical and humane working conditions. WRAP enjoys the support of major brands, retailers and trade associations in over 40 countries around the world. The 12-point WRAP code is focused on generally accepted workplace standards, local laws and ILO conventions, and also includes provisions for the environment, security and customs compliance.
The task force that developed WRAP first sought to address the labor component of compliance, but also focused on the potential environmental impact of vertically integrated textile and apparel operations. The recent news reports of a South China textile factory turning a river red with effluent from its dye house is just the type of situation the task force and the industry wanted to avoid. Polluting community drinking water supplies with waste dyes and harming ecosystems that fish and fowl rely upon for survival simply isn't behaving responsibly.
The task force also included security procedures to ensure that drugs and other "non-manifested cargo" weren't being smuggled alongside apparel and footwear in shipping containers, and sought to ensure the smooth transit of goods through US Customs. When one US apparel company opened a trailer containing what they thought was their product which had been produced outside the US and found that 40,000 pounds of marijuana had been substituted for underwear, the event became a significant lesson for the rest of the industry and importers in general. Transporting a smuggler's drugs in their containers was not a good thing. The potential monetary penalties alone would have made a material difference on that company's income statement in their annual report. And, the resulting negative media coverage and embarrassment with their customers was damaging to the company's brand and their reputation.
At the same time, other companies found that some enterprising individuals viewed shipping containers as make-shift conveyances to illicitly move people into the US. The distance from a number of locations in Central America and the Caribbean isn't far. With a little work, a hidden compartment can be constructed in the front or bottom of a 40 foot container and used to conceal a half dozen or more people seeking a free trip to the US. Again, not something the apparel and footwear industry wanted to inadvertently support.
In his new book Doing Business Anywhere 1, Tom Travis summarizes today's security challenge very well: "While the issues affecting cargo security prior to 9/11 had been aggressively addressed by the government and the private sector, the 2001 terrorist attacks have taken the issue of cargo security to a whole new level. The question became, how you keep your business and merchandise secure in an environment where a weapon of mass destruction secreted in a container holding your merchandise, packed by your factory, and transported by your chosen carrier is ultimately your responsibility? As a global trader, you are now tasked with securing your cargo against loss, thwarting would-be drug traffickers, and ensuring that your business practices do not open the door for international terrorism." Like it or not, any person or business importing finished products or raw materials into the US is part of this country's security control network.
Clearly, the task force that established WRAP could not have foreseen the events of September 11, 2001. As it happened, the security safeguards WRAP sought to incorporate as part of its factory certification program turned out to be aligned with the C-TPAT Guidelines and the Container Security Initiative established by the US Government. Many US brands and retailers now require their offshore suppliers to meet the C-TPAT guidelines. Factories that participate in the WRAP certification process can now demonstrate their voluntary compliance with these requirements.
The WRAP task force viewed security and customs compliance as "the right thing to do" and logically presumed there would be benefits to the factory through reduced theft, tighter inventory controls, etc. No empirical studies had been conducted up to that point to prove the assertion. Up to that point, security was viewed by many as simply a necessity and a cost of doing business. The findings of a 2006 study, "Innovators in Supply Chain Security: Better Security Drives Business Value" 2, conducted by Stanford University for The Manufacturing Institute - the research and education arm of the National Association of Manufacturers, and funded by IBM - clearly demonstrate that there are direct business benefits to implementing security measures within a company's supply chain. Some of those benefits include a reduction in Customs inspections by 48%, improved on-time shipping to customers by 30%, reduced theft in inventory management by 38%, reduced excess inventory by 14% and more.
While one can make an argument that securing one's facilities is good business and the "right thing to do", and some can make a business case for security that implementing good management practices has a spill-over business benefit, one could also ask the question: what is the government's responsibility in this area? Don't businesses pay heavy taxes and fees now that should support proper inspection services? Don't we have a Customs and Border Patrol section of the government charged with this responsibility? Why should business be burdened with assuming a governmental regulatory function, especially when many of their products are made in offshore factories where the importing company has little direct influence or control over the security of the supply chain? The answer to these questions is probably somewhere in the middle. As was said earlier, like it or not, the rules have changed. We all have to pitch in.
The global apparel and footwear industries were the first to be attacked for workplace violations. Significant improvements in working conditions and environmental performance in factories around the world has been made but more work needs to be done.
Notes:
1 Doing Business Anywhere: The Essential Guide to Going Global, Tom Travis,
John Wiley and Sons, 2007, p 110-111.
2 "Innovators in Supply Chain Security: Better Security Drives Business
Value", Barchi Peleg-Gillai, Gauri Bhat and Lesley Sept, The Manufacturing
Institute, July 2006.
Steven A Jesseph is the Vice Chairman, President and CEO of Worldwide Responsible Accreditation Production in Arlington Virginia. To contact the author and for more information about WRAP certification please visit WRAP's website, www.wrapapparel.org