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CodeofConduct-SetUpAuditCodeofConduct-Shoes5/10:AUDITslt00AUDITslt00slt5slt5AuditorAUDITTYPEandAUDITTIMEThisnormalsemi-unannouncedfollow-up1auditwasconductedbyLevelWorksstaff.CheneyPeng(Auditor)wasassignedtoverifytheoverallcompliancestatusofthefactoryagainstSearsHoldingsGlobalComplianceProgramandtheapplicablelaws.Itwasstartedat8:30amandendedat3:304:00pmonJanuary10th,2012(Tuesday).ThepreviousauditwasconductedbySTRauditorBrattinLionJuly5th,2011withthefindingsof“hHealth&sSafety”,“cCompliancewithlLaw”,“nNoticeandrRecord”and“wWageandhHours”.CangzhouYilideShoesCoLtd(沧州益利得鞋业有限公司)wasestablishedin2004.ThefactorywaslocatedatNo331,JingfuSouthRoad,QingCounty,CangzhouCityHebeiProvince,China中国河北省沧州市青县京福南路331号).Thefactorynamewasmatchedwiththegovernmentbusinesslicense.Theyspecializedinmanufactureofoutdoorshoes.Mainproductionprocessesincludedcutting,sewing,assembly,lasting,inspectionandpackingetc.Itconsistedof1blockof3-storeyofficebuilding,2blocksof2-storeyproductionbuildingsand2flatwarehouses,nodormitoryandnobuilding.Nokitchenorcanteenwasavailableforworkers’use.Atotalof190employeeswerecurrentlyworkingatthefactory,Refertoleftincluded170productionworkersand20officestaffMr.ZhangXianguo(GeneralManager,tel:(86email:shoes9199@126.comorChina9199@163.com),Mr.ShiJVZhong(Productionmanager,Tel:(86email:notprovided)andMr.ZongJun(Vicegeneralmanger,Tel:(86email:notprovided)participatedintheopeningmeeting.Astheauditor’sroutineworkingprocedure,SearsHoldingsGlobalComplianceProgramandWRIPprojectwereexplainedindetailstothem.Atthesametime,theexpectationandflexibilityonwagesandworkinghoursofSearsHoldingswerecommunicatedtothemaswell.Theauditoralsoemphasizedtheimportanceofprovidingtruerecords,andthenon-disclosureletteroninconsistencywasalsoprovidedtothefactory.OnesetofSearsHoldingsHandbook,GuidebookandWRIPdocumentswereprovidedtothefactoryfortheirfurtherreferenceandauditorshowedLevelWorksCodeofEthics(COE)toaskfactorytopmanagementtosignandstampwithfactoryofficialseal.FactoryrepresentativeconfirmedunderstandingofSearsComplianceexpectationandwillshowtruesetofrecord.FACTORYSTATUSINCOMPLIANCEThefactorywasskillfulinsocialcomplianceaudits.Accordingtothefactorymanagement,thefactorywouldgothroughabout1~2socialauditsbycustomereachyear.ThemostrecentcomplianceauditwasconductedbySTRonbehalfofSearsHoldingsonJuly5th,2011FactorymanagementestimatednoproductionwasdevotedtoSearsHoldingsinboth2011aswellasinand2012.MajorcustomersincludedBK(40%)etc.Accordingtofactorymanagement,therewasnoobviouspeakornon-peakmonthinthefactory.Accordingtofactorymanagementinterviewduringopeningmeeting,theemployeesworkedfor6daysaweek,Monday-Saturday,inoneshift.Normalworkinghourswerefrom8:00amto5:00pmwith1houroflunchtimefrom12:00noonto1:00pm.Wagesforallemployeeswerecalculatedonapiece-ratedbasis.Thefactoryprovidedthetimeattendancerecordsandpayrollrecords50minutesaftertheopeningmeeting,auditortookapreviewandnoticedtheprovidedtimeattendancerecordsindicatedastandardworkinghourasabove.Allworkerscouldearnabovetheminimumwageandovertimepremium6).AUDITDuringtheplanttour,itwasnotedthatonlyfewproductionrecordswereavailableforauditorreviewonsite,andmostoftheproductionrecordswerewell-preparedintheoffice.Theauditorcollectedsomeofrecordswhichincludeproductionrecordsincutting,sewing,assembly,lasting,inspectionandpacking,QCinspectionsectionsandwarehouse,leaveapplicationrecords,securityin/outrecords,internaltransferrecordsforreview.Throughathoroughreviewofthefactoryrecordsandtheprovidedtimeattendancerecords,someinconsistencieswerenoted.Thedetailswereasfollows:A)Basedontheinspectionrecordsincuttingdepartment,aworkernamed(LiuYanping,aworkerincuttingdepartmenthadworkedonOctober1st,3rd,9th,16th,23rd,30th,2011(PublicHolidaysandSundays).However,theprovidedattendancerecordsshowedtherelevantworkerrestedonthesedays.Noyear”wasmarkedforthedatesshownontherecords,however,throughinterviewofrelevantworker,auditorsauditorcouldconfirmthattheserecordsbelongedto2011B)Basedonthematerialissuingrecordsinwarehouse,twoworkersnamed(YaoXuehong,aworkerinassemblydepartment)”and“阎建国(YanJianguo,aworkerinwarehouse)”hadworkedonJuly31st,2011(Sunday).However,theprovidedattendancerecordsoftherelevantworkersshowedtheydidnotworkonthatday.C)Basedonmaterialinspectionrecordsinwarehouse,aworkernamed“王淑英(WangShuying,aworkerinwarehousedepartment)”hadworkedonDecember4th,2011(Sunday).However,herattendancerecordsshowedshedidnotworkonthatday.Aftertheseinconsistencieshadbeenidentified,theauditorheldaninformalmeetingwithMr.缩进:首行缩进:1缩进:首行缩进:1Xianguo/GeneralManagerandothermanagementforfurtherdiscussion,tryingtopersuadethemtoprovidetheirtruerecords.Firstly,therequirementsofcompleteandaccurateattendancerecordswereexpressedtothem.Then,theflexibilityofworkinghoursandwagesandWRIPprojectofSearsHoldingswerefurtherexplainedtothemagain.However,theystillinsistedthattheyhadprovidedalloftheirtruedocumentsfortheauditor,anditwastheonlyrecordavailableforotherclientsaswell.Therefore,theauditorfinallyendedtheauditwithwagesandworkinghourscouldnotbeverified.Eightworkers(5womenand3men)wereselectedfromdifferentdepartments(diecutting,sewing,assembly,lasting,inspectionandpackingdepartments)forprivateinterview.Allofthe8workerswereinterviewedindividuallyinthefactoryworkshops.IngeneraltheyseemeduncomfortabletalkingwithLevelWorksstaff,andprovidedveryconsistentanswerstothequestions,whichmaybeasignofcoachingbymanagement.AllofthemclaimedthattheyhadneverworkedonSundaysbefore.Theirovertimewageswerepaidat1.5X,2X&3Xasperlocallawrequirements,andtheywereallveryhappytoworkinthefactoryaccordingtotheirsaying.Someoftheworkerswereinterviewedtoconfirmtheaccuracyoftheinconsistentrecords.Allofthemclaimedthattherelevantproductionrecordswererecordedontheworkdays,andallofthedatesshowedontherecordsweretheexactworkdaysofthem.OTHERThroughotherdocumentationreview,therewasonefindingnoted,whichwasinsufficientparticipationinsocialinsurance.Asperfactorytour,twohealthandsafetyfindingswerealsonoted,whichwerewasnosafetyguardsforsewingmachinesandchemicalsnolabeledforchemicals.WAGESANDWORKINGHOURSINFORMATIONBASEDONPROVIDEDA.Sixmonths(fromJune2011toNovember2011)ofpayrollrecordswereprovidedforauditorreview.Basedontheserecords,workers’wageswerepaidoncepermonthincash(Paydate:20thofeachmonth).WorkerscouldearnamonthlywageofRMB1,430.00~RMB1,800.00,orinhourlyrateofRMB7.07~RMB9.00,whichwereabovethelocallegalminimumwagestandardofRMB4.83perhourbeforeJuly2011/RMB5.98perhoursinceJuly1st,2011.ThelocallegalminimumwagestandardhadbeenupgradedfromRMB840permonth(orequivalenttoRMB4.83perhour)toRMB1040permonth(orequivalenttoRMB5.985.89perhour)sinceJuly1st,2011.Theovertimewageswerepaidat1.5X,2Xand3Xoflocalminimumwageasperthelegalrequirements.B.Sevenmonths(fromJune2011toDecember2011)ofbarcodeormanualattendancerecordswereprovidedforauditorreviewaswell(Remark:ThefactoryusedmanualattendancerecordsinJune2011,butusedthebarcodeattendancerecordssinceJuly1st,2011).Accordingtotheserecords,therewasnoovertimeworkingatnightforallworkers,andallworkersonlyworkedovertimefor8hoursonSaturdays.Totalaverageweeklyworkinghoursrangedfrom40to48.37hours.Allworkerswereentitledto1restdayeachweekSunday.Mr.ZhangXianguo(GeneralManager,tel:(86email:shoes9199@126.comorChina9199@163.com),Mr.ShiJVZhong(Productionmanager,Tel:(86email:notprovided)andMr.ZongJun(Vicegeneralmanger,Tel:(86email:notprovided)attendedtheclosingmeeting.TheyagreedonthefindingsandsignedthePreliminaryAuditReportSummaryonsite.ThefactorymanagementMr.ZhangXianguo(GeneralManager,tel:(86email:shoes9199@126.comorChina9199@163.com),Mr.ShiJVZhong(Productionmanager,Tel:(86email:notprovided)andMr.ZongJun(Vicegeneralmanger,Tel:(86email:notprovided)werecooperativeduringtheentireauditprocessandsubmittedtherequireddocumentintimeasrequested.12)NoKmart/SearsproductionwasfoundontheauditDuringfactorytourandfactorymanagementinterview,nosub-contractorwasfoundduringthe(Auditor’scommentwaspreparedbyCheneyPengonJanuary10th,2012,1streviewedbyMarjanMaonJanuary16th,2012.,2011andfinalreviewedbyRaymondHuang,LWLShenzhenOfficeon,2011.)AuditorNeeds5AuditorCheneyAuditornNumberof150to00HourlyRegularWage(aslow7.07CouldnotbeHourlyRegularWage7.61CouldnotbeHourlyRegularWage(ashigh9.00CouldnotbeWeeklyHours(aslow40CouldnotbeWeeklyHours46.88CouldnotbeWeeklyHours(ashigh48.37CouldnotbeAccessToFactoryRepMr.ZhangXianguoFactoryRepFactoryRepAgreedto00slt00slt00ChildLabor00Enteranother00HEALTH&slt00HEALTH&slt00Health&SafetyPreviousFinding:ItwasnotedthattherewasnofirstaidboxprovidedthroughthewholeproductionCorrected:Asperfactorytour,sufficientfirstaidboxeswereplacedinall00Enteranother00Health&SafetyPreviousFinding:wasnotedthat80%ofsafetyexitswerenotinstalledwithexitsigns.Corrected:Asperfactorytour,allsafetyexitswereinstalledwithexitsigns.00Enteranother00Health&Safety00PreviousFinding:Itwasnotedthatapproximately80%ofsafetyexitswerenotinstalledwithemergencyexitslights.Corrected:Asperfactorytour,allsafetyexitswereinstalledwithemergencyexitsEnteranother00Health&SafetyPreviousFinding:Itwasnotedthatthefactoryhadnotinstalledafirealarmsysteminthefactory.Corrected:Asperfactorytour,afirealarmsystemhadbeeninstalledinthefactory.00Enteranother00Health&SafetyPreviousFinding:Itwasnotedthatallfireextinguisherswerenotmountedataproperheightorputinthedesignatedboxes.Corrected:Asperfactorytour,allfireextinguisherswereputinthedesignated00Enteranother00Health&SafetyPreviousFinding:Itwasnotedthatthechemicalswerestoredintheworkplacedirectly,andtherewerenoseparatedstorageareaforthechemicals.Corrected:Asperfactorytour,chemicalswerestoredintheseparatechemicals00Enteranother00Health&SafetyPreviousFinding:Itwasnotedthatthefactorydidnotproviderubberglovesandpropermasksfortheworkersusinglatex.Corrected:Asperfactorytour,allworkerscontactinglatexworerubberglovesandpropermaskstheywere00Enteranother00Health&SafetyPreviousFinding:Itwasnotedthattoiletsintheworkshopswerenotequippedwithdoors.Corrected:Asperfactorytour,alltoiletsintheworkshopswereequippedwithdoors.00Enteranother00Health&SafetyPreviousFinding:ItwasnotedthatallsewingmachineswerenotinstalledwithupperandlowerpulleyNotCorrected:Asperfactorytour,itItwasnotedthatallsewingmachineswerestillnotinstalledwithupperandlowerpulleyguards.TheSearsHoldingsGlobalComplianceProgramrequirestoinstallcompleteupperandlowerpulleyguardsforallsewingNeeds00Enteranother00Health&SafetyNewFinding:InaccordancewiththeRegulationForChemicalUsageSafetyinWorkPlaceclause27,staffandworkersareentitledtoreceive:(1)Dateandinformationindescriptionofthespecificcharacteristics,hazardousingredients,andsafetyprecautionmarksofthechemicalstobeusedintheworkingpremises,andinstructionsuponsafetytechniques,etc.(2)Informationconcerningtheprobabilityofoccurrenceofharmagainstsafetyandhealthofstaffandworkerscausedbydangerouschemicalsintheworkingprocess.(3)Traininguponsafetytechniques,includingtrainingwithregardtopreventionandcontrol,anddanger-avoidingmethods,handlingofemergencycases,oremergencymeasures.(4)LaborprotectionarticlesinconformitytoStatestipulations.Itwasnotedthatallofthechemicalswerefoundwithouttheproperlabelinallworkshops. PLANNEDCOMPLETIONDATE(mm/dd/yyyy):Needs00Enteranother00slt00slt00CompliancewithLawPreviousFinding:Itwasnotedthatnovalidlaborcontractswereprovidedforreview.ThefacilitymanagementexplainedthatthefacilitywasrecombinedaroundApril2011.TherelevantrecordswereCorrected:Asperdocumentsreviewandworkersinterviews,allworkershadsignedlaborcontractswiththefactoryrespectively,andonecopyofthecontractwasprovidedtoeachworker.00Enteranother00CompliancewithLawPreviousFinding:Itwasnotedthattheaddressonthebusinesslicensewasnotinlinewiththeactualproductionaddress.TheaddressonthebusinesslicensewasNo344JingfuSouthRoad,QingCountyCangzhouHebeiChina,andtheproductionaddresswasNo331JingfuSouthRoad,QingCountyCangzhouHebei,China.Thefacilitymanagementexplainedthattheywereapplyingforupdate.Corrected:Asperdocumentreview,theupdatedbusinesslicensewasinlinewiththeactualaddress(No331JingfuSouthRoad,QingCountyCangzhouHebei,00Enteranother00slt00slt0000Enteranother00slt00slt0000Enteranother00slt00slt00Needs00NewFinding:InaccordancewithTheSearsHoldingsGlobalComplianceProgram,eachfactorymustmaintainandprovidecurrentandaccuratetimecard,payrollandemployeerecordstoSearsHoldingsauditorrepresentativesothatwemayverifycompliancewiththeProgram.Duetoinconsistencieswerenotedduringtheaudit,appropriatepaymentofwagesandworkinghourscouldnotbeverifiedatthistime.TheSearsHoldingsGlobalComplianceProgramrequiresthefactorytoprovidecompleteandaccuratetimecard,payrollandemployeerecordstoourauditrepresentativessothatworkinghours,minimumwage,overtimewageandbenefitsrequirementscanbeverified.Ifyouwouldliketolearntheexactreasonforthenotedinconsistency,youmaycontactMr.JosephWong(email:Joseph.Wong@),ComplianceManagerinSearsHoldingsGlobalSourcingHongKongoffice.Enteranother00slt00slt0000Enteranother00FREEDOMOFslt00FREEDOMOFslt00FreedomofAssociation00Enteranother00slt00slt00HarassmentorAbuse00Enteranother00NOTICEANDslt00NOTICEANDslt00NoticeandRecordPreviousFinding:ItwasnotedthatOnly45employees’agedocumentsaremaintainedatthefacility.Corrected:Asperdocumentationreview,allemployees'agedocumentsweremaintainedatthefacility.00Enteranother00NoticeandRecordPreviousFinding:Itwasnotedthatthefactoryhadonlyusedsymbol""tick""torecordworkers'attendancewithoutspecificdetailedin-timeandout-timeclockorworkerssignatureasacknowledgementofworkinghours.Therefore,workers’actualworkedhourscouldnotbeaccuratelyverifiedinthisCorrected:Asperdocumentationreviewandworkersinterviews,thefactoryhadusedbarcodeattendancerecordsforallemployeessinceJuly1st,2011.00Enteranother00NoticeandRecordPreviousFinding:Itwasnotedthatnofireandevacuationdrillrecordswereprovidedforreview.ThefacilitymanagementexplainedthatthefacilitywasrecombinedaroundApril2011.Therelevantrecordsweremissing.evacuationdrillrecordsprovidedforauditorreviewduringinthis00Enteranother00NoticeandRecordPreviousFinding:ItwasnotedthatthefactorydidnotprovidetheworkersacopyofCorrected:Asperdocumentationreviewandworkersinterviews,allworkerswereprovidedacopyof00Enteranother00NoticeandRecordPreviousFinding:Itwasnotedthatonechildwasfoundintheproductionareaofthefactoryonthedateofthisaudit.Corrected:Asperfactorytouranddocumentationreviewmanagementinterview,nochildwasfoundtheproductionareaofthefactory,andthesecurityguardofthefactorygatewouldpreventchildgoingintothefactory.00Enteranother00NoticeandRecordPreviousFinding:ItwasnotedthatbrokenneedlerecordsbeforeApril2011werenotmaintainedattheCorrected:Asperdocumentationreview,allsufficentbrokenneedlerecordssinceJune1st,2011videdfor00Enteranother00NoticeandRecordPreviousFinding:Itwasnotedthatnofireserviceinspectioncertificatewasprovidedbythefactoryforauditorreview.Corrected:Asperdocumentationreview,avalidfireserviceinspectioncertificatewasprovidedbyfactoryforauditorreviewduringthis00Enteranother00NoticeandRecordPreviousFinding:ItwasnotedthattherewerenoqualifiedworkersforoperatingcargoCorrected:Asperdocumentationreview,avalidqualificationcertificateforcargoelevatoroperatingwasprovidedforauditorreviewduringthisaudit.00Enteranother00NoticeandRecordPreviousFinding:ItwasnotedthatthefactorydidnothaveaninspectioncertificateforelevatorsattheCorrected:Asperdocumentationreview,validinspectioncertificatesforelevatorsatthefacilityprovideforauditorreviewduringthis00Enteranother00WAGE&slt00WAGE&slt00Wage&BenefitsPreviousFinding:ThroughreviewofpayrollrecordsfromMarch2011toMay2011,andaccordingtoSearsHoldingsminimumwageverificationmethod(totalmonthlypayablegrosswagedividedbytotalactualworkinghoursinthesamemonthofeachworker),itwasnotedthattheminimumwageswasinsufficientlypaidto9outof15sampledemployeesinMarch2011and10outof15sampledinApril2011.NotCorrected:Duetoinconsistencieswerenotedduringtheaudit,appropriatewagebenefitscouldnotbeverifiedatthistime.TheSearsHoldingsGlobalComplianceProgramrequiresfactorytoshowthetruthbookofrecordtotheauditorsothatwecanunderstandtheactualworkinghourtodeterminethewagelevelismettheminimumwageandovertimepremium.Needs00Enteranother00