Major apparel brands delay & cancel orders in response to pandemic, risking livelihoods of millions of garment workers in their supply chains

Major apparel brands and retailers are cancelling or postponing orders as the COVID-19 pandemic forces store closures in Europe and the United States, risking the livelihoods of millions of garment workers in their supply chains. As it is standard practice for brands not to pay for products until after they are shipped, when an order is put on hold or cancelled, payments are also held or cancelled. Non-payment for orders that have not yet left factories risks leaving suppliers unable to pay for their workers’ salaries and, because they buy their materials outright, for what they owe their own suppliers. This has forced many suppliers to lay off or suspend workers in garment factories, without any social protection, or paid leave, pushing an already precarious group of workers to greater economic vulnerabilities. 

Exporters are appealing to their buyers not to cancel orders due to lockdowns enforced by governments in response to the pandemic. H&M, Inditex, Marks & Spencer, Kiabi, PVH and Target have confirmed they will receive and pay for placed orders from their suppliers in Bangladesh.

Labour groups and unions are calling on apparel brands and governments to urgently mitigate impacts on the 60 million garment workers bearing the brunt of the COVID-19 crisis. Their full set of demands can be found here.

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6 April 2020

Bangladesh: Thousands of garment workers ordered home as factories stay closed due to order cancellations

Author: Naimul Karim, Reuters

"Thousands of Bangladeshi garment workers ordered home as factories stay closed", 5 April 2020

Thousands of Bangladeshi garment workers were ordered home... voicing concerns about loss of income after arriving at work to find factories remained shut after the cancellation of Western orders due to the coronavirus pandemic.

Although official numbers were not available, labor leaders said the majority of the workers they had spoken to had either been temporarily laid off or sent on leave. A smaller section of workers complained of being sacked...

The workers went to factories in Dhaka hoping to get paid for March and resume work after a 10-day break enforced by the government to tackle the spread of the coronavirus...

Akter said thousands of workers had put their lives at risk due to “mismanagement” in a bid to get back to work, ignoring advice over social distancing and with police outside the factories telling them to return home. “They didn’t have to come back. They could have been told on the phone about the factory closures,”...

Garment worker unions are calling on the government, buyers, or factory owners to pay workers who will struggle to feed themselves and their families with no income...

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6 April 2020

Primark commits to pay wages of garment workers producing orders it has cancelled in supply chain

Author: Isabella Fish, Drapers

“Primark to pay factory wages”, 03 April 2020

Primark’s entire store estate has been closed since 22 March … [resulting] in the loss of sales of £650m every month. The retailer said it had asked suppliers to stop production … [a]ll of this stock has been paid for under its normal … terms.

Extended payment terms have also been offered to suppliers to enable Primark to take and pay for further stock ready for shipment.

Under this new commitment, Primark has pledged to pay the wages of workers who were producing Primark orders that have now been cancelled…

In a company statement, Primark said … “Accordingly, Primark … will fund payment of the wages …  This action will cover orders from … Bangladesh, Cambodia, India, Myanmar, Pakistan, Sri Lanka and Vietnam...” 

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6 April 2020

Sri Lanka: up to 30% of garment workers set to lose jobs as brands cancel orders amidst COVID-19 outbreak

Author: Sunimalee Dias, The Sunday Times

“Apparel industry to lay off 30% workforce”, 05 April 2020

Sri Lanka’s apparel industry is likely to lay off at least 30 per cent of its workers … even as they receive global orders to manufacture face masks and surgical gowns.

[Sri Lanka Apparel Exporters Association Chairman Rehan Lakhany] … noted that some factories had decided to pay some salaries … [at] 70 per cent of the workers’ dues as they face mounting issues with costs soaring to millions of dollars in cancellations and retail stores in the European Union and the US shutting down.

Mr. Lakhany explained that in spite of discussions with the Presidential Task Force and the Labour Minister they as factories would be unable to obtain a loan from the government and pay wages as there is no output and no production going on at the factories.

Mr. Lakhany pointed out that the local apparel industry is too big to manufacture protective medical equipment in all its factories.

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3 April 2020

Bangladesh: Primark, Matalan and the Edinburgh Woollen Mill among apparel retailers cancelling orders in response to COVID-19

“Primark and Matalan among retailers allegedly cancelling £2.4 bn orders in ‘catastrophic’ move for Bangladesh”, 02 April 2020

More than a million Bangladeshi garment workers have been sent home without pay or have lost their jobs after western clothing brands cancelled or suspended £2.4bn of existing orders...

Primark, Matalan and the Edinburgh Woollen Mill are among retailers that have collectively cancelled £1.4bn and suspended an additional £1bn of orders … [including] nearly £1.3bn of orders that were already in production or had been completed.

The [Bangladeshi and Garment Exporters Association] said the impact of the cancellations has already been “catastrophic” for Bangladesh. More than one-quarter of the country’s 4 million garment workers have already lost their jobs or have been furloughed without pay…

In a statement, Primark said that, while it recognised and was “deeply saddened” by the effect this would have further down its supply chain, it had had “no option” but to cancel orders that had been placed with their Bangladeshi suppliers.

Edinburgh Woollen Mill also confirmed it has cancelled all existing orders saying, “Our relationships with suppliers are absolutely fundamental to our business, and this is not what we would ever normally wish to do but the current circumstances are such that this is a necessity.”

Matalan would not confirm whether they had cancelled orders. By email, they said the company was “looking at multiple ways of repurposing or postponing, rather than cancelling wherever possible.”

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3 April 2020

New Look suspends payments to suppliers for existing stock 'indefinitely'

Author: BBC

"Coronavirus: New Look delays supplier payments 'indefinitely'", 3 April 2020

New Look says it is suspending payments to suppliers for existing stock "indefinitely", telling them in a letter that the stock can be collected by its owners. The retailer is also cancelling orders for its Spring and Summer clothing lines and won't pay costs towards them.

New Look told the BBC it did not take the decision lightly. "This is a matter of survival," it told suppliers. The firm said it was still trading online, but its distribution centre was full and it could receive no more goods.

“We are acutely aware that our suppliers are facing their own challenges at this time...” [New Look Chief executive] Mr Oddy wrote in his letter. “Government support schemes continue to be announced throughout the world, and we encourage you to pursue any options that are available to you.”...

[A] supplier... said small firms could not afford to trade in those circumstances and accused New Look of “passing all the risk on to the supply chain”. The firm said it, and others like it, had its designs manufactured in China and could not afford to take on all the liability by itself... “The new reality in China is that factories now insist on deposits for all orders placed on behalf of grocers and large retailers, as they cannot afford orders to be cancelled with no compensation to cover raw materials and production.”...

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2 April 2020

Bangladesh: ACT signatory brands express commitment to maintain responsible business practices

Author: IndustriALL Global Union

“ACT brands commit to responsible business practices in Bangladesh”, 31 March 2020

In the majority of garment factories in Bangladesh, workers are yet to receive their due payments for March. Union leaders in the IBC stress that workers are vulnerable, as many factories are closing over fears of the virus outbreak, and in some cases laying off workers.

…907 million pieces of apparel worth US$2.87 billion have been cancelled or suspended by brands and buyers that source from Bangladesh. This has a direct impact on the 2.09 million workers in the country’s textile industry.

The majority of the stores of the ACT brands, inlcuding H&M, Inditex, PVH, C&A, Primark, Next, Lidl, Tesco, Tchibo and others, are closed in Europe and North America, leading to liquidity crisis.

However, most agree in principle to pay for completed orders, and are discussing various incentive and stimulus packages for suppliers to ensure workers are paid.

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2 April 2020

Asia: Apparel brands cancel orders in midst of COVID-19 crisis, leaving garment workers in financial precarity

Author: Human Rights Watch

“Brands Abandon Asia Workers in Pandemic”, 01 April 2020

Apparel brands’ business practices in response to COVID-19 are exacerbating the economic plight of millions of garment workers in Asia … brands and retailers have cancelled orders without assuming financial responsibility even when workers had finished making their products.

These brand actions that increase worker job losses through dismissals and temporary layoffs are contrary to brands’ human rights responsibilities … Many supplier factories in Asia are strapped for cash and unable to pay workers’ wages and other compensation because of the brands’ actions.

“These are extraordinarily challenging times, yet clothing brands facing tough business decisions to ride out the COVID-19 crisis should not forsake the factory workers who make their branded products,” said Aruna Kashyap... of Human Rights Watch…

… Nearly 200 institutional investors have urged companies to maintain supplier relationships as much as possible, and make timely and prompt payments to suppliers.

Some global brands are repurposing their supply chains to produce personal protective equipment, including gloves and masks, for medical purposes…

… Producing personal protective equipment, however, will not generate sufficient alternative employment for all workers.

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1 April 2020

Bangladesh: Inditex, Marks & Spencer, Kiabi, PVH and Target confirm they will receive placed orders

Author: Moinul Haque, NewAge

"5 more global brands assure not cancelling export orders", 31 March 2020

... ‘... Spanish clothing company Inditex, British multinational retailer Marks and Spencer, French retail company Kiabi and US retail company PVH and Target have come forward and have informed us of their decision to take the ready goods along with the goods in production,’ Rubana told New Age...

‘We welcome their decisions to support us and hope that the payment terms will remain unaffected in order to ensure liquidity flow for the factories,’ she said....

Target also reiterated that they would work as partners to come out of the crisis and they had no intention of cancellations of any order...

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30 March 2020

Bangladesh: Survey of garment factories reveals a million workers fired or temporarily suspended without pay or severance, as retailers cancel orders & refuse to pay for goods produced amid pandemic

Author: Center for Global Workers’ Rights & Worker Rights Consortium


...  As clothing outlets have been shut by lockdowns... brands and retailers have moved quickly to cancel or postpone production orders... As a result, millions of factory workers have been sent home, often without legally-mandated pay or severance... This Research Brief draws from responses from an online survey of Bangladesh employers...

Since the coronavirus pandemic took hold, more than half of Bangladesh suppliers have had the bulk of their... production canceled... despite the fact that buyers have a contractual obligations to pay for these orders. But many are making dubious use of general force majeure clauses to justify their violations of the terms of the contract...

When orders were cancelled, 72.1% of buyers refused to pay for raw materials... already purchased by the supplier, and 91.3% of buyers refused to pay for the cutmake-trim cost... As a result of order cancellations and lack of payment, 58% of factories surveyed report having to shutdown most or all of their operations...

More than one million garment workers in Bangladesh already have been fired or furloughed (temporarily suspended from work) as a result of order cancellations and the failure of buyers to pay for these cancellations. Suppliers... reported that 98.1% of buyers refused to contribute to the cost of paying the partial wages to furloughed workers that the law requires...

[Bestseller, C&A, Inditex, JCPenney, Kiabi, Kohls, LPP, Marks & Spencer, Mothercare, Primark, Target, Tesco, VF and Walmart are named as the buyers with the highest value of cancelled and postponed orders in the Appendix chart. H&M and PVH are major buyers of Bangladesh garments. They are not included in the chart because they have agreed to pay suppliers for in-production orders.]

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30 March 2020

H&M assures garment suppliers it will pay for orders per agreed payment terms, while other retailers cancel orders & delay payments during pandemic

Author: Refayet Ullah Mirdha, The Daily Star

"H&M comes to its garment suppliers' rescue", 30 March 2020

... H&M yesterday assured its garment suppliers of taking shipment of goods that have already been manufactured, much to the relief of some Bangladeshi exporters.... at a time when apparel suppliers across the world, including those from Bangladesh, are being slammed by work order cancellations and delayed shipments.

"We will stand by our commitments to our garment manufacturing suppliers by taking delivery of the already produced garments as well as goods in production," said H&M in a media message...

H&M sources garment and textile items worth nearly $4 billion from more than 230 Bangladeshi factories annually...

"We will, of course, pay for these goods and we will do it under agreed payment terms. In addition, we will not negotiate prices on already placed orders," H&M said. At this point, it is necessary to temporarily pause new orders as well as evaluate potential changes on recently placed orders. "We will start placing orders again as soon as the situation allows,"...

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