Importing products that were made in Chinese factories is considered forced labor and is forbidden in several countries. It is also a very high risk in terms of PR/reputation for the importer and the retailer.
It is hard to detect and even harder to prove. But it sure exists. Here is an example from when I was working in a trading company. I was searching online for the contact information of a Chinese supplier my company had recently purchased from (since I did not have any namecard). I found a report from the US Senate blaming that precise company for procurement in Chinese prisons!
I remember, for a brief moment I thought “if I make copies of the letter of credit, which was opened by the retailer and transferred to that black-listed supplier, this story could make a lot of noise.”
Is it an isolated case? I don’t think so. Several purchasers of textile have told me how prison labor was proposed to them as an option to get lower prices. In one case, the difference was as much as 40% (on complex denim products requiring a high amount of labor).
Of course, all suppliers are not that transparent. But offering prison labor is not a bad strategy. There is an understanding that the buyer cannot ask for a factory audit or product inspections. Low risk and easy follow up…
This is one more reason why importers should spend more time getting to know their suppliers and following production!
We had a strange experience with this some years ago. I never found out the *truth*; as it turned out, the deal collapsed for other reasons before it was necessary to resolve.
We were sourcing an auto part product in China for eventual sale to one of the Detroit automakers. (Their standard purchase contracts all prohibit any use of forced labor.) Our sourcing guy (North American with considerable China experience) had located a factory. While planning a joint factory survey with the automaker’s QA team, our general manager asked the sourcing guy, “now, our customer isn’t going to find any child labor or anything like that, are they”? The reply was, “well, there aren’t any children working there…. but you should know that the factory is built in an old prison.” With further questioning, the sourcing guy claimed that no, it wasn’t a prison any longer… but yes, it still had big outside walls, and some armed guards… Fortunately for us, the deal fell apart for economic reasons before we had to find another factory which could at least pass a “smell test” for working conditions.
Brad: thanks for recounting this experience. That factory should not even try to do export business, they start the game with a handicap!