May 14, 2013

European, U.S. retailers split on Bangladesh reform plan

Gap looks for changes to how disputes resolved in courts
By Ruma Paul and Serajul Quadir

DHAKA (Reuters) — Major United States retailers, including Gap, declined to endorse an accord on Bangladesh building and fire safety backed by Europe's two biggest fashion chains, a trans-Atlantic divide that may dilute garment industry reform efforts.

Three weeks after the collapse of a building housing garment factories, which killed more than 1,100 people, Western brands that rely on Bangladesh to produce clothing cheaply disagreed over how best to ensure worker safety.

Gap said it was ready to sign on "today" to an agreement already endorsed by European companies, including Italian clothing retailer Benetton, Britain's Marks & Spencer, Sweden's H&M Hennes & Mauritz and Spain's Inditex, but first wanted a change in the way disputes are resolved in the courts.

"With this single change, this global, historic agreement can move forward with a group of all retailers, not just those based in Europe," Eva Sage-Gavin, an executive in Gap's global human resources and corporate affairs department, said in a statement.

A series of deadly incidents at factories, including a fire in November that killed 112 people, has focused global attention on safety standards in Bangladesh's booming garment industry, the world's biggest exporter of clothing after China.

Wal-Mart Stores, the world's biggest retailer, called on Bangladesh to shut one factory and examine another after its own inspections found safety problems.

Major brands and retailers set a May 15 deadline to join the agreement after talks in Germany last month. As of Tuesday morning, the only U.S. company to announce it had signed on was PVH, which owns brands such as Calvin Klein.

Europe accounts for about 60 per cent of Bangladesh's clothing exports, so even without participation from the big U.S. retailers, the agreement may bring some change in a country that has seen at least three deadly garment factory disasters in the span of six months.

Mohammad Atiqul Islam, president of the Bangladesh Garment Manufacturers and Exporters Association, said the deal was a bit of good news in the "worst time for us."

"We believe this decision will motivate other big buyers across the West and the USA to join their hands with us," he told Reuters.

Li & Fung, which supplies dozens of major retailers, including Walmart, said it was "continuing to look at" the European pact, but declined to give details. Bangladesh is second only to China in Li & Fung's global supply chain.

"We don't think the answer is to move away from Bangladesh," Bruce Rockowitz, Li & Fung's group president and chief executive, told reporters after a shareholder meeting in Hong Kong on Tuesday.

"The answer is actually to invest more and try to make safety better and work with the government on doing a better job on monitoring buildings."

Walmart flags safety concerns

Walmart did not say whether it planned to sign the accord. But on Monday it released an unusually blunt and detailed public statement, asking the government to halt production at Stitch Tone Apparels in Chittagong, Bangladesh, and to inspect Nassa Group's Liz Apparels factory complex in Dhaka.

Walmart said it found "structural concerns" at a factory adjacent to Stitch Tone, Dresswell, which was not part of the retailer's own supply chain. It said the Dresswell factory "appeared unstable and could cause a hazard" for workers at Stitch Tone, which was making clothes for Walmart.

Walmart said it removed its business from Stitch Tone and advised the owner not to continue production.

The inspections also found visible cracks in the wall at Liz Apparels. Walmart said it notified factory owners, the garment association and the government about the safety concern at Liz Apparels and Stitch Tone.

Nazrul Islam Majumder, chairman of the Liz Apparels factory, said there was a "very light crack on the surface of cement plaster, not on the deep of the brick" and it could be repaired with a bit of whitewash.

He said before Walmart checked out the factory, the owner had conducted an inspection with a qualified firm, which found the building to be safe.

A garment association official said Dresswell was closed after cracks were found in the four-storey building where it is based. But the official, who declined to be named because he was not authorized to speak to the media, said his group was not notified about safety concerns at Liz Apparels.

"The government of Bangladesh did the responsible thing last week by closing factories believed to be dangerous," Rajan Kamalanathan, vice-president of ethical sourcing for Walmart, said in a statement. "We call on them to show the same leadership in the Stitch Tone Apparels and Liz Apparels cases, and take any actions necessary to ensure safe conditions."

Retailers routinely inspect suppliers, but several companies said after the Rana Plaza collapsed in April that they were not able to check for structural soundness.

Walmart said it hired Bureau Veritas to inspect for structural, fire and electrical safety, including checking building designs and permits as part of an expanded inspection process it launched last month.

Rana Plaza was extended to add three more floors, in violation of city building codes, according to the chief engineer of Dhaka's development authority. The day before the building collapsed, cracks were seen in the walls.