2 Down; 489,086,876,394 To Go

Phew! Wal-Mart “issued a warning” to two Chinese factories. Glad that ugly business is resolved.

Wal-Mart Cautions Two Chinese Suppliers [Wall Street Journal]

Wal-Mart Stores Inc. said it issued warnings to two Chinese suppliers following reports of labor violations at the factories, which also make official Olympic merchandise.

The development comes after the publication of an influential report last month alleging labor violations at some official Olympic suppliers, including underpaying and overworking employees and, in one case, using child labor.

The report by Playfair, an international alliance of trade unions and nongovernmental organizations, sparked an investigation by the Beijing Olympic Organizing Committee and other retailers as pressure rises on China to improve its human-rights and labor records ahead of the 2008 Olympic Games in Beijing.

China is particularly sensitive to sweatshop allegations, given its status as a major apparel manufacturer producing, by some estimates, as much as half of the world’s clothes. Concern has deepened after the discovery last month of dozens of young people who had been kidnapped and used as slave labor at brick kilns and coal mines.

The Beijing Olympic committee says it will release its own findings on the four companies named in the report in coming days. The companies include the two Wal-Mart suppliers—Hong Kong-listed Mainland Headwear Holdings Ltd. and privately owned Yue Wing Cheong Light Products (Shenzhen), which makes bags and satchels—as well as Le Kit Stationery Co. and Eagle Leather Products.

Approximately 60 Chinese firms are official licensees making souvenirs of the 2008 Games.

Wal-Mart initiated an audit of Yue Wing Cheong, based in the southern city of Shenzhen, following the report last month by the Playfair alliance. Wal-Mart spokesman Jonathan Dong said yesterday that an audit found evidence that Yue Wing Cheong was overworking its workers, though he said it found no “hard evidence” of underpayment. A person who answered the phone at Yue Wing Cheong declined to comment, saying the company’s spokesperson wasn’t available.

Both Yue Wing Cheong and hat maker Mainland Headwear were issued “orange” warnings, which in Wal-Mart’s internal monitoring system denotes stepped-up checks within a period of 120 days.

The Wal-Mart audit of Mainland Headwear was conducted even before the Playfair report. The manufacturer has been issued three orange warnings since 2005, Wal-Mart said.

The retailer initiated another audit after the Playfair report, but hasn’t yet released its findings, said Mainland Headwear spokeswoman Linda Oei. In an email, she said the factory was required to undergo “some corrective actions” after receiving the Wal-Mart warning, “but there were no serious violations, and business could continue.”

Under Wal-Mart’s compliance code, suppliers that receive four orange warnings within two years will have their contracts canceled, though several manufacturers in China say it isn’t uncommon to receive orange warnings from the retailer.

Mainland Headwear’s chief executive, Peter Ho, said that “comparing our factory with a low-margin sweatshop is outrageous.” He said Mainland Headwear pays piece-rate workers an average of $142 a month, 57% above the minimum wage in their district in Shenzhen.

Posted by Alex Goldschmidt on Wednesday, July 25, 2007