2018 IPS Guidebook (English)

IPSCOMPLIANCEGUIDEBOOK2018TheinformationcontainedintheguidebookshouldnotbecopiedorreproducedwithoutthewrittenconsentofIndependentProductionServices.Thedetailswithintheguidebookshouldonlybesharedwithassociates,suppliersandfactoriesofLBrands.©2010LBrands,Inc.DearPartner:AsLBrandshasgrown,ourvalueshaveremainedintegraltoevery-thingwedo.Youarearespectedpartofourteam,andwelooktoyoutolivethesevaluesaswell.Ourculturedemandsdoingtherightthingeverytime,andthat’spartofoursharedaccountability.Ourvaluesarereflectedinspecificcompanypoliciesandguidelines.ThisincludesourIndependentProductionServices(IPS)ComplianceGuidebook.TheIPSteamprovidesthefollowinginformationasameanstohelpallofusbetterunderstandandfullycomplywithapplicablelegal,regulatoryandbusinessstandardsforourindustryaroundtheglobe--includinglaborstandards,brandprotection,tradecompliance,supplychainsecurity,monitoringprogramsandothermatters.Together,wetouchaglobalcommunity...onethatdependsonustodowhat’sright.Wetrulyappreciateyourpartnershipinensuringthatresponsibilityisalwaystopofmind.Sincerely,LesWexnerChairmanandChiefExecutiveOfficerCEO’SMESSAGEThispageintentionallyleftblank.IPSCOMPLIANCEGUIDEBOOK20181INTRODUCTION................21.1WhoisIPS?.....................21.2WhatistheIPSComplianceGuidebook?....................21.3WheretoLearnMore............3IPSCOMPLIANCEAUDITPROGRAM......................42.1Overview.......................42.2IPSAuditObjectives.............42.3IPSAuditProcess...............42.4AuditResults...................52.5NewFactories..................62.6WheretoLearnMore............6LABORSTANDARDSANDWORKPLACECONDITIONS...73.1Overview.......................73.2ProgramStandards..............73.3WheretoLearnMore.............13TRADECOMPLIANCE.........144.1Overview.......................144.2ProgramStandards..............144.3AuthorizedSubcontracting.......164.4WheretoLearnMore............16SUPPLYCHAINSECURITY...175.1Overview.......................175.2ProgramStandards..............175.3ImporterSecurityFiling(ISF)Requirements..................245.4LeanManufacturingandSupplyChainSecurity.................255.5WheretoLearnMore...........25BRANDPROTECTION........266.1Overview......................266.2ProgramStandards.............266.3WheretoLearnMore...........29REMEDIATION...............307.1Overview......................307.2CorrectiveAction..............307.3AdditionalRemediationTools.....317.4WheretoLearnMore............31POLICIES.......................328.1SupplierCodeofConduct.......328.224-HourNotification............328.3NoForcedLabor...............338.4Anti-Bribery/Anti-Corruption....338.5ConflictMinerals...............338.6UzbekandTurkmenCotton......348.7ActionforNon-Compliance......35SUPPLIERRESPONSIBILITIES..........36RIZEPOINT....................3710.1Overview....................3710.2RizePointFunctions...........3710.3WheretoLearnMore..........39CONTACTLIST................39DEFINITIONS/TERMS.......40APPENDIXA:LBRANDSCODEOFCONDUCT..........44APPENDIXB:ANTI-CORRUPTIONGUIDELINES..................45TABLEOFCONTENTS2IPSCOMPLIANCEGUIDEBOOK2018INTRODUCTION11.1WHOISIPS?IndependentProductionServices(IPS)isafunctionwithinLBrandsthatworkswithsupplierstoensuregoodsaresourcedfromfactoriesthatmeetorexceedLBrandscompliancestandards.Wehavesupportedglobalcomplianceforovertwodecades,enablingimprovementinworkingconditions,supplychainsecurity,tradecomplianceandbrandprotectionthroughmonitoring,remediation,capacitybuildingandtraining.IPSiscommittedtodoingbusinessresponsiblyandethically.OneofourcorevaluesatLBrandsis“ItMattersHowWePlaytheGame.”Doingwhatisrightmeansfollowingourbeliefsandtheruleswhennooneiswatching.Winningmeansnothingunlesshowwegetthereisfair,collaborative,rootedinourvaluesandcontributestothegreatergood.Weinsistthatoursupplierscomplybothwiththelocallawsthatgoverntheirbusinessesandourcompany’scompliancestandardsandpolicies.Ifwediscoverthatasupplierorfactoryisnotincompliance,wewillpartnerwiththeminanattempttobringthemintocompliance.Wearecommittedtocontinuousimprovement,andwillnotpartnerwithsuppliersandfactoriesthatareunwillingorunabletoworkwithustoachievecompliance.1.2WHATISTHEIPSCOMPLIANCEGUIDEBOOK?LBrandssuppliersmustsignaMasterSourcingAgreement(MSA)beforeLBrandscanissuepurchaseordersandthesuppliercanbeginproducingourproducts.TheMSAstatesthatsuppliersmustcomplywithLBrandspoliciesandallapplicablelawsandregulations.TheIPSComplianceGuidebookisacollectionofpoliciesoursuppliersareexpectedandlegallyobligatedtocomplywith.WhileIPSrecognizesthattherearedifferentlegalandculturalenvironmentsinwhichoursuppliersoperatethrough-outtheworld,theprinciplesandguide-linesinthisGuidebooksettheminimumrequirementsthatallsuppliersmustmeetinordertodobusinesswithLBrands.TheIPSComplianceGuidebookdoesnotreplacethelocallawsofeachcountrywheresuppliersandfactoriesarelocated.Ifourcompliancestandardsdifferfromlocallaws,weexpectoursupplierstofollowthestricterstandard.Eachsupplierandfactoryshouldbefamiliarwithandcomplywithalllawsandregulationsrelevanttotheirbusiness.IPSexpectssuppliersandfactoriestorefertothisGuidebookwhentheyhavequestionsaboutLBrands’standards,theIPScomplianceauditprocessorwanttobetterunderstandhowtopartnerandcommunicatewithIPS.ITMATTERSHOWWEPLAYTHEGAMEATLBRANDS.WETHINKTHATDOINGWHATISRIGHTMEANSFOLLOWINGOURBELIEFSANDTHERULESEVENWHENNOONEISLOOKING.IPSCOMPLIANCEGUIDEBOOK20183IfyouhaveanyquestionsthatarenotansweredbyreviewingtheIPSComplianceGuidebookandreferringtolocallaws,pleasecontactIPSforguidance.1.3WHERETOLEARNMOREAsLBrandscontinuestofosterstrategicrelationshipswithsuppliers,wemaintainourcommitmenttosuppliereducation.TolearnmoreaboutIPSandourcomplianceprogramsandstandards,pleasevisitIPS’websiteathttp://ips.steton.comorcontactIPSdirectlybyreferringtotheContactssectionwithinthisGuidebook.IPShostsannualawarenessandtrainingsessionsoncompliancestandardsinmultiplecountriesaroundtheworldforsuppliersandassociateswhohavedirectresponsibilityforsupplychainmanagement.Wealsouseone-on-onetrainingalongwithcomplianceauditsandcorrectiveactiontocontinuouslyeducatefactoriesandreinforceLBrands’SupplierCodeofConductandcompliancestandards.IPSKEYACTIVITIES:•Workwithsuppliersandfacto-riestoensurethatourgoodsaresourcedfromfactoriesthatmeetorexceedLBrandscompliancestandards•Providetrainingandeducation•ConductICMaudits•Managecorrectiveactionplans(CAP)andremediation•Conductriskassessments•Manageprogramdevelopmentandenforcement•ManageadministrationofsupplierandfactoryinformationandauditreportsinIPS’softwaresystem4IPSCOMPLIANCEGUIDEBOOK20182IPSCOMPLIANCEAUDITPROGRAM2.1OVERVIEWThemainwayIPSsupportsglobalcomplianceisthroughthecomplianceauditprocess.Suppliersareexpectedtocomplywithourstandardsandobserveallrelevantlaws,regulationsandconven-tionsinallcountrieswheretheyandtheirfactoriesoperate.IPSorourdesignatedthirdpartyauditorisresponsibletoverifythatthesupplieranditsfactoriesmeetcompliancestandardsinthefourareaslistedbelow:•LaborStandardsandWorkplaceConditions•SupplyChainSecurity•TradeCompliance•BrandProtectionEachsupplierisrequiredtosignLBrands’MSAwhichstatesthatthesupplier’sfactoriesandsubcontractorsinvolvedinproducinggoodsforLBrandsmustcooperatefullyinanyauditorotherreview.Factoriesmustbepreparedtoallowauditorsintothefacilityatanytimeandgivethemfullaccesstothefactoryfacilityandallrequireddocumentstoconductanaudit.IPSorourthirdpartyauditorhastherightatanytimeto:1.Conductauditsatthefactorywhereproductmanufacturingtakesplace.2.ConductcapacitymonitoringoranyothercompliancereviewatanyfacilitydoinganytypeofproductionforLBrandsproducts.3.Inspectanyandalldocumentsorotherrecordsrequiredtobemain-tainedorprovided.PleasenotethatLBrands’normalprac-ticeistobearthecostofauditsandnotpassitontooursuppliers;however,ifasupplierdropsafactoryafteranauditisconfirmed,theymaybechargedtheauditexpenseduetolatenotice.2.2IPSAUDITOBJECTIVESIPSdoesnotuseauditstopassorfailafactory.Rather,weuseauditstoassesswhetherpotentialnewfactoriesarecapableofcomplyingwithourstandardsandtoensurethatexistingfactoriescontinuetocomplywithourstandardsandworktocontinuouslyimprovetheircomplianceperformance.Wealsouseauditstovalidatethatoursuppliersandtheirfactoriesaretransparent.Weexpectthatonlycompleteandaccuratedocumentationwillbepresentedduringanauditorotherreview.ThegoalsofICMandthirdpartyauditsareto:•Assesspotentialnewfactories•Identifynon-compliancewithLBrands’standardsandrelevantlaws,regulationsandconventions•Identifybestpractices•Observeimprovementstoissuesidentifiedduringthefactory’spreviousaudit•Assessthefactory’scompliancelevelineachauditarea•Detectunauthorizedsubcontracting2.3IPSAUDITPROCESSAuditsmaybeconductedbyIPSoroneofourthirdpartyauditpartners,ElevateGlobalLimitedandULVerificationServices,Inc.ICMauditsareconductedbyIPSandtypicallyconsistofallfourareaslistedinsection2.1.IPSmayalsosendathirdpartyauditortoconductanaudit.ThirdpartyauditsusuallycoverlaborstandardsandworkplaceconditionsingreaterdetailthantheICMaudit.IPSCOMPLIANCEGUIDEBOOK20185Allauditsmaybeannounced,semi-unannouncedorunannounced.Aspecificdatewillbescheduledinadvanceofanannouncedaudit.IPSwillprovideatwo-weekwindowforsemi-unannouncedaudits.Ifanauditisunannounced,IPSorourthirdpartyauditorwillarrivewithidentificationtoshowtheyarefromIPSoroneofourthirdpartyauditcompa-nies.Inaddition,theauditorwillbringasignedletternotifyingthefactoryoftheunannouncedauditandthetelephonenumberofIPSManagementshouldthefactorywanttocontactIPStoconfirmtheauditarrangements.ICMauditsareconductedbyapairofauditorsandtakeonedaytocomplete.Thirdpartyauditsarealsoconductedbyapairofauditors;however,theymaytakeoneormoredaystocompletedependingontheareastobeauditedandthesizeofthefacility.Auditsconsistofthefollowingprocedures:1.Anopeningmeetingtoexplaintheareastheauditwillcover2.Afactorytour3.Reviewofanydocuments,photosorotherrecordsneededtoverifycompliancerequirements4.Workerinterviews*5.Aclosingmeetingtoreviewanyauditfindings*ThirdPartyLaborStandardsauditsandsomeICMauditsincludeworkerinter-viewsintheworkers’nativelanguage.IPSexpectsthatthesupplierortheirfacto-riesorsubcontractorswillnotinterferewith,discourageorpunishworkersforcommunicatingwithIPSorourappointedthirdpartyauditor.Wealsoexpectthatworkersareabletointerviewfreely,withoutotheremployeesorfactorymanagementparticipatingorlisteningin.2.4AUDITRESULTSAftertheauditisconductedandapprovedbyIPSmanagement,thesupplierwillreceiveanautomaticAuditResultNotificationtoalertthemthatauditreportsareavailableinRizePoint.Supplierswillbegivenaccesstotheauditreportforeachareareviewed.Auditreportsincludeasummaryshowingthescoreforeachsectionandanoverallscore.Thetotalscoredoesnotindicatea“Pass”or“Fail”result.Instead,thescorerepresentsthecompliancelevelofthefactoryineacharea.Dependingonthescoreachieved,IPSmaywaivethefactory’sauditforthefollowingyear.Inorderforanaudittobewaived,scoresmustreflectalowrisklevel,andthesuppliermustnothaveahistoryofviolations.AuditwaiversareatthediscretionofIPSleadershipandaresubjecttoapprovalbyourbrandsanddivisions.HOWWILLIKNOWWHENMYFACTORY’SAUDITISAVAILABLE?SupplierswillbenotifiedviaanautomatedemailfromRizePointwhenauditshavebeenapproved.AuditnotificationwillbesentfromAuditResults_IPS@steton.com.Ifanautomaticnotificationisnotavailable,IPSwillemailthesuppliertonotifythemthattheauditisavailableandtoconfirmifcorrectiveactionsarerequired.Suppliersareresponsibletosendauditreportstotheirfactoriesforreviewandcorrectiveaction.IPSREQUIRESAPRE-PRODUCTIONAUDITFORALLPOTENTIALNEWFACTORIESBEFOREPRODUCTIONCANBEGIN.6IPSCOMPLIANCEGUIDEBOOK20182.5NEWFACTORIESAlaborstandardsandworkplaceconditionsauditmustbeconductedinallpotentialnewfactoriesbeforeproductionmaybegin.Aftertheauditisconducted,IPSwillreviewtheauditresult,determineifthefactoryisapprovedforproductionandnotifyourbrandpartnersofthedecision.SuppliersshouldenterpotentialnewfactoriesintoRizePointatleast30dayspriortoplannedproductionsothepre-productionauditcanbeconducted.IfthefactoryhasalaborstandardsauditforthenewfactorythatwasconductedwithintheprevioussixmonthsbyareputableauditfirmandcanshareitwithIPS,wemayaccepttheauditinsteadofconductingapre-productionaudit.2.6WHERETOLEARNMORETolearnmoreaboutICMauditcompliancerequirements,pleaserefertosections3-6inthisGuidebook.WealsoencourageyoutosignintoRizePointandreviewadditionalinformationavail-ablebyclickingontheGuidanceicon.IPSCOMPLIANCEGUIDEBOOK20187LABORSTANDARDSANDWORKPLACECONDITIONS33.1OVERVIEWAspartofourcorporatecultureandvalues,LBrandsstronglybelievesthequalityofourmerchandisebeginswiththetreatmentofthepeoplewhocreateourproducts.WearecommittedtofollowingaCodeofConductthatspecifiesbasicminimumpolicies,proceduresandworkingconditionswhileleveragingindustrybestpractices.Wealignourselvesonlywithsuppliersthatsharethiscommitment.3.2PROGRAMSTANDARDSThissectionliststhecomplianceexpec-tationsfortheLaborStandardsprogram.Factoriesmustmeeteachofthestan-dardslistedtoreceivethemaximumscoreinanaudit.Ifafactorymeetssomeornoneofthecriteria,theywillreceiveapartialscoreorazeroforthequestion.ThecomplianceexpectationssetforthinthissectionarederivedfromtheLBrandsSupplierCodeofConduct.TheCodeofConductrepresentsourpolicyofworkingwithsuppliersandfactorieswhoshareourcommitmenttoethicalandresponsiblebusinesspractices.AcopyoftheCodeofConductisincludedinAppendixAforreference.SECTIONA:COMPLIANCEWITHTHELAWSuppliersmustbeincompliancewithalllaws,rulesandregulations.A.1CodeofConductposter•AcurrentLBrandsCodeofConductpostermustbeprominentlypostedinallworkers’nativelanguage(s)andvisibletoallfactoryworkers.•LBrandsCodeofConductpostersmustberequestedfromIPSbycompletingaposterrequestformorthroughthefactoryset-upformfornewfactoriesinRizePoint.A.2Communicationtoworkers•Thefactorycommunicatesthefollowinginformationtoallworkersintheirnativelanguage(s):a.Updatedlaborlaw,factoryregulationsandrelevantupdatesb.LBrandsCodeofConductc.Wagecalculation•Communicationtoworkersmustbedocumented,andrecordsaremain-tainedasevidencethatcommunica-tionhastakenplaceoneachtopic.SECTIONB:MINIMUMWAGESANDBENEFITSPaymenttoworkersmustbeatleasttheminimumwageprescribedbylocallawortheprevailinglocalindustrywage,whicheverishigher,andprovisionstoworkersofbenefitsthatconformtothebetterofapplicablelocallaworprevail-inglocalindustrystandards;andpaymenttoworkersofovertimecompensationincompliancewithallapplicablelaws.B.1Basicpay•Allworkersarepaidlegalminimumwagesorhigher.•Ifanemployeeispaidbypieceratewageinsteadofhourlyrate,theemployeemustreceiveawageequaltoorabovethelegalminimumwage.•Traineesreceivealllegallymandatedwagesandbenefits.•Allbasepayrecordsarecomplete,accurateandavailableuponrequest.B.2Overtimepay•Overtimepayfollowslocallaw.•Overtimewagesarepaidforalltimelegallydefinedtobeoverregularworkinghours.•Allovertimepaymentrecordsarecomplete,accurateandavailableuponrequest.B.3Paydate•Paydatefollowslocallaw.•Paymentrecordsclearlyindicatethedateworkersarepaid.8IPSCOMPLIANCEGUIDEBOOK2018B.4Deposit•Nodepositisheld.•Workersarenotrequiredtopaydepositsasaprovisionoftheiremployment.B.5Deductionsorfines•Alldeductionsarelegallyallowedwithworkers’writtenagreement.•Donotimposefinesonworkers.•Donotrequireworkerstopayfortoolsorotheritemsrequiredfortheirjob.B.6Benefits•Allworkersareprovidedbenefitsinaccordancewithlocallaw,includingbutnotlimitedtoSocialInsurance,entitledleaveandholidays.SECTIONC:MAXIMUMWORKINGHOURSOvertimeshallbelimitedtoalevelconsistentwithhumaneandproductiveworkingconditions.Workersshallnotberequired,onaregularbasis,toworkinexcessof60hours(orlowerifprescribedbylocallawsorindustrystandards)perweek;workersshallbeprovidedwithatleastonedayoffinseven.C.1Overtimehours•Overtimehoursfollowlocallaw.C.2Consecutivedaysworked•Workersareprovidedatleastonedayoffinseven.C.3Timecard/record•Timecard/recordshouldbecompleteandaccurate,reflectingthefactory’sactualworkinghours.•Allhoursworkedaretrackedtoensurecorrectpaymentofthelegalminimumwageandovertime.SECTIOND:NOFORCEDLABORPrison,indentured,bonded,involuntary,slavelabororlaborobtainedthroughhumantraffickingshallnotbeused.D.1Freedomofmovement•Workershavefreedomofmovementatthefactoryandarenotphysicallyconfinedtotheworkplace.•Workershavefreedomofmovementafterworkhoursandarenotconfinedtothedormitory.D.2Freedomofovertime•Workersarefreetorefuseovertimewithoutthethreatofpenalties.•Mandatoryovertimeisnotallowed.D.3Prisonlabor•Donotallowprisonlabor.•Donotsubcontractworktoprisonfacilities.D.4Freedomofemployment•Workersenterintoemploymentvoluntarilyandfreely,withoutthreat.D.5Terminationofemployment•Workersarefreetolegallyterminatetheircontractswithoutpenalty;thisissupportedwithcompleteandaccuraterecords.D.6Employmentagents•Registeredemploymentagentcontractswiththefactoryandworkersindividually,includingshort-termemployments.•Screeningofemploymentagentisconductedtoensuretheagentoragencyislegal,evidencedbyabusinesslicense,companyregistrationorotherrelevantdocumentation.•Completeofficialdocumentsofemploymentagentandofficialcontractwithagentaremaintained.U.S.LAWSONFORCEDLABORTheU.S.governmentpassedalawin2016calledtheTradeFacilitationandEnforcementAct.Asaresult,U.S.companiesareprohibitedfromimportinggoodsmadewithconvict,forcedorindenturedlabor.In2017,theU.S.governmentpassedanadditionallawcalledtheCounteringAmerica’sAdversariesThroughSanctionsAct.ThislawrecognizesthatNorthKoreahasforcedmanyofitscitizenstomigratetoChinaorothercountriestoworkincertainfactories;theU.S.governmentviewsthisasforcedlabor.ThelawprohibitstheimportationofgoodsmadewhollyorinpartbyNorthKoreannationalsorcitizensworkingascon-vict,forcedorindenturedlaborers.Itiscriticalthatoursuppliersdonotuseanykindofforcedlaborintheproductionofourgoodsoruserawmaterialsorcomponentsmadebyorobtainedwithforcedlabor.ThesuppliermustbeabletodemonstratethatLBrandsproductswerenotmadeusingforcedlaborbyprovidingdocumentationincludingbutnotlimitedtoafactoryprofile,adescriptionofproductionprocessesperformed,supportforrawmaterialspurchases,dailyproductionrecords,attendanceandpayrollrecords,workercontractsanddocumentstosupportthefactory’shiringprocessandpolicies.IPSCOMPLIANCEGUIDEBOOK20189•Theworkers’recruiting,contract,payrollandtransitioningprocessesaremonitored.•Donotallowemploymentagentstocollectmonetarydepositsorunreasonablefeesfromworkers.D.7Controloverpersonaldocuments•Workershavecontrolofandaccesstotheirpersonaldocuments(i.e.birthcertificates,passports,workpermits,residencecardsandidentitycards,etc.).D.8Debtbondageandrecruitmentfees•Donotuseirregular,delayed,deferredornon-paymentofwagesasameanstobindworkerstoemployment.•Donotforceworkerstoworkinordertorepayanincurredorinheriteddebt.•Donotchargerecruitmentfeestoworkers.Note:Ifthefactorytobeauditedemploysforeignmigrantworkers(excludingman-agementandofficestaff),thesuppliermustnotifyIPS.Ourpolicyrequiresaspecializedauditinthesecases.SECTIONE:NOCHILDLABORAllworkersshallbeatleastthelocalminimumlegalworkingageortheminimumagespecifiedbytheILOstandard,whicheverishigher.E.1Underageworker•Allworkersmustmeetorexceedtheminimumworkingagepriortotheirdateofhire.•Donotallowpersonsbelowtheminimumlegalworkingagetobeinproductionareasforanyreasonatanytime.E.2Screeningprocedure•Aprocesstoverifytheageofworkersatthetimeofrecruitmentisfullyimplementedanddocumented.E.3Dateofhire•Allworkers’date-of-hirerecordsareavailable.E.4Dateofbirth•Birthrecordsareavailableforallworkers;acopyofeachworker’sI.D.certificateismaintained.SECTIONF:HEALTH&SAFETYTheworkenvironmentshallbesafeandhealthy.F.1Evacuationplan•Evacuationplansareavailableinallworkers’nativelanguage(s),legible,largeenoughandhavecleardirectiontoanexit.F.2Fireextinguisher/hydrant•Fireextinguishers/hydrantsareavail-able,visible,unblocked,incorrectpositionandproperlymaintained.•Training