A Conversation on

Compliance

6/19/13

LDP and FOB Direct Import Programs

LDP (Landed Duty Paid):

•Production may take place outside of the USA

•US supplier is the importer of record, responsible for

bringing the goods into the country and clearing

Customs

-Versus-

FOB direct import programs:

•MMG is the importer of record

Macy’s developed our Code of

Conduct as a means of defining the

minimum standards we expect

from our factories.

By enforcing Macy’s Code of

Conduct, we attempt to ensure

that all private label merchandise

is produced in workplaces that are

free of abusive, exploitative or

unsafe working conditions.

Golden Rule of MMG’s Social

Compliance program: MMG has a pre-production approval model in place

meaning all factories must be pre-approved by

MMG PRIOR to the start of any production.

Supplier and Manufacturer numbers will NOT be

assigned until minimum compliance standards are

met.

Orders cannot be created until the factory is

approved – merchant area does not decide.

Immediate escalation to MMG’s senior

management when at least one High Risk issue is

found at an approved factory. Both the supplier

and factory may be deleted.

High Risk issues consist of:

1. Child or forced labor, freedom of movement, slavery

or human trafficking

2. Physical abuse

3. Attempted bribery or kickback

4. Homeworkers

5. Fraudulent record keeping

6. Unauthorized subcontracting

Strict High Risk Policy:

If a factory is unable to meet full compliance

to MMG’s Code of Conduct after 3 audits, MMG

may cease doing business with the factory, or

will not approve the factory for production if it

is a new one.

3-Strike Policy:

- Comprehensive Audit Tool which is enhanced as

needed based on industry evolution

- Audits conducted by a third party company

- Audits are unannounced with a 14 day window

- Audits are conducted at least annually

- Online Corrective Action Plan – in addition to

corrective actions and completion dates, suppliers

required to provide root cause analysis for each

violation

- Constant physical presence in factories for

technical and quality control evaluations

Other program strengths:

-Training for all factories in Bangladesh by

WRAP

-Development of a fire safety and building

structure focused audit

-Enhancements to audit tool to include more

questions regarding fire safety and building

structure

Bangladesh – What is MMG doing?

Phase 1 Training

The course of this phase covers the role and

responsibilities of the fire safety personnel,

specific risks, the fire Safety legislation,

firefighting equipment (including the exhibition of

the equipment tool) and best practices.

WRAP Training

Phase 2 Training To help the factory to organize the fire warden team.

Goal is to train the team to become the trainer, in

order to carry out the same training for their own

department(s). Phase 2 training is conducted 30 days

after the phase 1 training.

Phase 3 Training This is a training for everyone at the factory on

emergency evacuation, inclusive of a fire drill. The

target is 90 seconds to get everyone out of the site.

Phase 3 training is conducted 45 days after phase 2

training.

WRAP Training

The Industry has Identified these risk factors

- Location of factories in densely-populated and congested urban areas

- Multiple factories in same building - Obstacles limiting building access for fire and

emergency personal and equipment - Illegally added floors - Height of factory - Weight of machinery and equipment - Visible structural cracks - Lack of proper construction or zoning permits - Lack of external fire escape(s) - Barred windows with no inside release

mechanism

The Industry has Identified these risk factors

-Single exit -Improperly installed electrical wiring -Location and storage of hazardous or flammable materials -Blocked exits -Doors that do not open in the outward direction -Lack of emergency lighting over exits -Illegal rooftop structures -Illegal subcontracting

Questions???