Global Sourcing: The Philippines

Page 1

The

Philippines

Taylor A. Allen FASM 420 Global Sourcing Spring 2013 Country Report

Executive Summary:

Pure Jade - Where Eco Meets Style

Pure Jade is an eco-friendly apparel company with a focus on woven tops. Pure

Jade targets young, professional women who about to or have recently entered the work field. We focus on quality, value, the environment, and transparency with consumers and within the company. It is vital for Pure Jade to source with countries that can uphold the standards of the company while still producing trendy and well-made clothing.

We have chosen to out source in order to save costs for the company and the

consumer and so our products can be produced in a quick and efficient manner by a country that has the expertise. We will be sourcing to the Philippines first because the continent of Asia is the largest manufacturer in the world and is filled with emerging economies. Another reason we have chosen the Philippines is because of the great opportunity they provide for the production of woven tops. The last major reason Pure Jade is sourcing to the Philippines is due to our research on past U.S. companies who have chosen to source to the Philippines. They’ve proven to have many factories that follow the company’s sourcing guidelines in a cooperative manner.

Table of Contents:

Introduction Country Overview Trade Agreements & Laws Business Etiquette Sourcing Guidelines Manufacturing & Production Costing Import Classification Logistics & Importation Country Exporting Requirements Conclusion Appendix

Introduction:

The gorgeous group of 7,106 islands located in Southeast Asia in the Pacific

Ocean is officially called the Republic of the Philippines. These islands are known as “The Smile of Asia” because the people are so friendly and hospitable. This is just one of the reasons these islands are popular among tourists. It’s also a popular vacation destination because of the variety of places there are to see. Not only does the country have modern metropolis areas, like the capital, Manila, but also there are ancient tribal territories, and vacant islands with clear water and smooth white coral sand.

Country Overview: Socio-Economic-Political Climate:

After World War II, the Philippines became one of the wealthiest nations in

Asia. Growth began to slow due to economic mismanagement and political volatility. Because of the great downturn of the Philippines’ economy over the years, the government put a range of reforms into action in order to spur growth and bring foreign investment. The economy slowly began to expand, but the Asian financial crisis in 1997 ended growth.

Unlike the rest of the world, the Philippines was not as affected by the recent

recession of 2007-2009. While the country’s economic growth was a slow 3.8 percent in 2008 and continued to downturn to 1.1 percent in 2009, the gross domestic product (GDP) jumped to 7.6 percent in 2010. This high occurred because of the contributions from people spending money for the upcoming election, their optimism for a peaceful transition into a new government, and also an accommodating monetary policy. Growth slowed back down again in 2011 to 3.7 percent.

The overseas workers have been successful with a steady annual growth rate

of 8 percent, but they have also compromised around 10 percent of their GDP. Over the past decade, the annual GDP average growth rate has been 4.6 percent. This is a better GDP then the country has had in the past, but it is estimated that the country will need a much higher and solid GDP growth: at least 7-8 percent per year. It is very important for the Philippines to raise their GDP because their population growth is one

of the highest in Asia at 2.04 percent. This will be a major factor in overcoming poverty alleviation.

Unfortunately, the Filipino poverty level is over a fourth of the population. Pov-

erty increased from 24.9 percent to 26.5 percent in just six years, leading up to 2009. There are nearly 29 million people living in poverty and only 5,000 very wealthy people.

The previous president of the Philippines, President Macapagal-Arroyo, helped

the economy to grow an average of 4.5 percent during her term. While we see great economic growth during her term, poverty actually worsened. The current president, President Aquino, has caused growth to accelerate but has not done a lot to bring down the unemployment rate or to improve the quality of jobs. The unemployment rate is currently around 20 percent. Nearly half of those with jobs are only working to boost budgets for things like education, health, cash transfers to the needy, and other social spending programs. The government is relying on private sectors to fund major infrastructure projects through their Public-Private Partnership program. Some of their struggles are reforming their judicial system, building infrastructure, and improving regulatory predictability.

About half of the Philippines’ population live in rural areas and almost 80 per-

cent of the poorest people reside in these rural areas. There are not very many choices for jobs for poor rural people other than agriculture. The poor can choose to farm or fish.

Farmland takes up over 40 percent of the country’s land area. The Philippines is

filled with agriculture potential but they actually have very limited productivity gains.

Some of the problems with the agriculture in the Philippines are the lack of financing, inadequate infrastructure, and government policies. Agriculture makes up about onethird of the work force, but only actually brings in less than a fifth of GDP.

Since the Philippines is made up of over 7,000 islands, there is a huge fishing op-

portunity. Yet, they also face similar issues that agriculture faces. They use distructive fishing methods, there is a major lack of funds, and also a lack of government support. Although the country has struggled with poverty over the years, their economy has “weathered global economic and financial downturns better than its regional peers due to minimal exposure to troubled international securities, lower dependence on exports, relatively resilient domestic consumption, large remittances from four- to five-million overseas Filipino workers, and a rapidly expanding business process outsourcing industry� (cia.gov). The national debt is still fairly high, but it has decreased immensely from 78 percent of GDP in 2004 to currently being below 56 percent.

The Philippines’ government is modeled after the United States system of rep-

resentative democracy. Like the official title states, the Philippines are a republic. The 1987 constitution promoted a presidential system of government that included a bicameral legislature and an independent judiciary. The 15th president is currently President Benigno Aquino.

The government receives many threats from terrorist groups. The threats they

receive are often groups threating the United States as well. The U.S. has offered rewards to Filipinos with information that could lead to the deaths of these terrorist groups.

The Philippines proclaimed their independence from Spain on June 12, 1898.

Ironically, they also proclaimed independence from the U.S. on July 4, 1946. Their legal system includes a mix of civil, common, Islamic, and customary law. They have diplomatic representation in the states through Ambassador Cuisia and the states are diplomatically represented in the Philippines through Ambassador Thomas.

2012 Stats Regarding Gross Domestic Product (GDP): GDP (Official Exchange Rate): $250.3 billion GDP Growth Rate: 6.6% -Country comparison to the world: 32 GDP - Per Capita: $4,300 GDP by Sectors: Agriculture = 11.9% Industry = 31.1% Services = 57%

2012 Stats Regarding Labor and Household Income: Labor Force: 40.36 million Labor Force by Occupation: Agriculture = 32% Industry = 15% Services = 53% Unemployment Rate: 7% -Country comparison to the world: 77 Poverty: 26.5% Household Income: Lowest 10% = 2.6% Highest 10% = 33.6% Family Distribution of Income: 44.8 -Country comparison to the world: 42

Poverty Incidence Among Families (%)

Poverty Incidence <10 10-20 20-30 30-40 40-50

www.nscb.gov.ph

2012 Stats Regarding Philippine Finances: Investment: 19.6% of GDP Budget: Revenues: $35.96 billion Expenitures: $41.53 billion Taxes and Revenues: 14.4% of GDP -Country comparison to the rest of the world: 193 Public Debt: 51% of GDP -Country comparison to the rest of the world: 62 External Debt: $61.72 billion Inflation Rate: 3.2% -Country comparison to the rest of the world: 84 Stock: Narrow Money- $36.81 billion Broad Money- $132.5 billion Domestic Credit- $129.9 billion Direct Foreign Investment- $37.53 billion Exchange Rate: Philippine Pesos per U.S. Dollar- 42.23

Statistics provided by www.cia.gov.

President Benigno Aquino III took office in 2010. One of his main goals as Pres-

ident is to provide an economic growth that will benefit everyone. After two and a half years with Aquino as President, the Philippines boast of the second-fastest growth rate in Asia, next to China, a low budget deficit, and improved revenue collection that have not only earned the country credit rating upgrades, but also more jobs.

Yet, according to a survey by Social Weather Stations, more Filipinos feel they

remain poor. The chart below shows where the Philippine economy stood at the start of Aquino’s presidency and where the economy stood this last year.

Pehaps President Aquino has come up with a plan to reduce poverty, consider-

ing the economy grew 7.1 percent in the third quarter of 2012.

Chart provided by www.rappler.com

Labor & Labor Laws:

Like previously stated, agriculture and fishing provide many jobs but primarily

among the poor. These jobs do not pay well because of the low productivity, low economies of scale, and inadequate infrastructure support that agriculture suffers from in the Philippines. While farmland compromises over 40 percent of the nation’s land, 80 percent of the poorest people in the country hold these jobs.

Industrial production is another large segment of jobs that Filipinos hold. These

jobs primarily cover the processing and assembly of: food, beverages, tobacco, rubber and plastic products, textiles and textile products, clothing and footwear, leather products, pharmaceuticals, paints, wood and wood products, paper and paper products, printing and publishing, furniture and fixtures, small appliances, and electronics. The Philippines also has heavier industries which produce: cement, glass and glass products, industrial chemicals, fertilizers, iron and steel, fabricated metal products, mineral products, machinery and equipment, transport equipment, and refined petroleum products. According to globaledge.com, there are “newer industries, particularly production of semiconductors and other intermediate goods for incorporation into

consumer electronics are important components of Philippine exports and are located in special export processing zones.�

These industrial jobs are located in urban areas. The capital, Manila, is filled

with many of these factories. These urban areas are not well connected to the rural economy. Like agriculture and fishing, the Filipino industrial sector has struggled to gain growth because of inadequate infrastructure, but also because of the poor transportation and communication.

Another industry that provides a surplus of jobs is mining, considering the Phil-

ippines is one of the highest mineralized countries in the world. The mineral wealth is estimated to be $840 billion because of their large deposits of copper, gold, and chromate and also clay, limestone, marble, silica, and phosphate.

In the 70s and 80s the Philippine mining industry was listed in the world’s top 10

producers of gold and copper. Since then the industry has had a major decline due to low metal prices, high production costs, and lack of investment in infrastructure.

The 1995 Mining Act allowed 100 percent foreign-owned companies to invest in the minerals, oil, and gas. Many local government units have not supported this decision, and have therefore banned mining in their territories.

It would be easy to infer that from these three categories that laborers make

up the largest occupational group, which is true. One out of every three employed is a laborer. The following chart lists all of the major occupational groups; everything from managers, technicians, sales workers, farmers, and laborers. It shows that laborers makes up 32.3 percent of the employed people which rose 3.4 percent in 10 years from 2001.

The Labor Code of the Philippines is the law which governs employment prac-

tices and labor relations. While President Ferdinand Marcos enacted it back in 1974, there continues to be revisions to it. The code accompanies the Philippine Labor and Employment Plan for 2011-2016. Since the labor code is 106 pages long, only a summary of the major points have been included.

Employment Promotion: The Secretary of Labor has the power to establish new

employment offices, relocate workers to other areas, and require anyone to submit necessary employment information.

Direct-Hiring Ban: Employers must hire Filipino workers for overseas through

the Board of Secretary of Labor.

Office of Emigrant Affairs: Must promote the well being of emigrants and main-

tain their close link to their homeland.

Citizenship Requirement: Only Filipino citizens can participate in the recruit-

ment of workers.

Reports: When public interest requires, the Secretary of Labor must submit a

report on all employment data.

Children: Must be at least 15 years old. They must be given an opportunity for

elementary education.

Handicapped Workers: Must not be paid under 75 percent of legal minimum

wage.

Normal Work Hours: Must not exceed eight hours per day.

Meal Periods: Employees must get at least an hour for meal times.

Overtime Work: Must earn an additional 25 percent to their wage for holidays

and overtime hours.

Rest Periods: Employees have the right to a weekly rest day.

Minimum Wage: Is to be prescribed by Regional Tripartite Wages.

Pay Periods: Wages must be paid at least twice a month, directly. Withholding of

wages is prohibited.

Women: Are permitted to work between 10pm and 6am unless it is an urgent mat-

ter, which could lead to a serious loss to the employer or if the woman holds a managerial or technical position. They must also have seats, separate bathrooms, a nursery for children, and maternity leave benefits.

Discrimination: Is prohibited in the work field.

Emergencies: Employer must pay for medical and dental services during emer-

gencies. Hospitals are not provided if not accessible.

First Aid: Sufficient number of employees must be trained in first aid.

Safety and Health Standards: Must be appropriately set by Secretary of Labor

and Employment.

Termination: Employers may terminate for misconduct, neglect of duties, fraud,

or commission of a crime. Employees may terminate by giving written notice one month in advance.

While the labor laws of the Philippines may ban many things, such as discrim-

ination, overtime work without extra pay, and child labor, that doesn’t mean that employers are always following them.

For instance, take child labor. Dante and Alvic are 14 and 13 year-old boys living

in the Philippines. They work in the sugar cane fields pulling weeds. They are paid only $3.50 for a seven-hour work day, which is under the minimum wage law. Both boys work for survival; their families don’t have enough to eat. Alvic dropped out of school in the first grade to help his family earn an income.

Many companies with child labor blame the parents for begging them to allow

their sons and daughters to work, but if the companies paid the employees fair wages in the first place, than perhaps these families would not feel it necessary to have their children work. ABC News estimates that over 5 million children ages 5-17 work in the Philippines, even though it is illegal for children under 15 to be working.

Pure Jade is strictly against child labor, but unfortunately it occurs in many

countries. This is a primary reason why Pure Jade will have an on-site employee from the states to monitor the working conditions of their factories.

State of the Textile and Apparel Industry:

The textile and garment industry are a vital part of the Philippines’ economy.

It was established in the 50s under the principle of import substitution industrialization. This promoted producing goods instead of importing them from foreign countries. Throughout the 60s and 70s the industry continued to rapidly expand.

Today, the Philippine textile industry employs around 320,000 employees with an

additional 700,000 home-working employees and sub-contractors. At one point they were one of the largest sources of imported garments for major markets in North America and Western Europe because quotas sometimes held exports back from competitors. However, the arrival of a new world trade regime in the early 2000s caused serious

damage to the country’s global competitiveness. Therefore, China, India, and other Asian nations have begun capturing large shares of this market.

The apparel industry consists of two sectors: the primary processing sector,

which includes spinning twisting, weaving, knitting, dyeing and finishing; and the secondary processing sector comprises the manufacturing of apparel and textile end products (textileworldasia.com).

The Garments and Textile Industry Development Office (GTIDO) reported

that textile and apparel exports increased annually between 2009 and 2011. According to GTIDO, exports in 2011 totaled US$2.14 billion — of which apparel exports accounted for $1.92 billion; textiles, US$162 million; and used apparel, US$53 million — and accounted for 4.4 percent of total Philippine exports. During the January through October 2012 period, the United States ranked first among export markets for Philippine textiles and apparel, accounting for a 59-percent share, followed by the European Union, 13 percent; and Japan, 9 percent. Apparel exports increased annually from 2008 to 2011, and on average, accounted for approximately 91.1 percent of total textile and apparel exports, GTIDO notes. The DTI recently announced that apparel exports alone reached US$2 billion in 2012.

The Save Our Industries Act of 2009 and 2011 was introduced by congress in the

U.S. in order to expand textile and apparel trade between the States and the Philippines. The act eliminates certain duties on apparel products made in the Philippines using U.S. fabric. According to the Confederation of Garment Exporters of the Philippines, the bill is “the best hope for the Philippine garments industry as we work towards its revitalization, targeting US$3 billion in apparel exports and 600,000 jobs�. The bill has caused the Philippine textile industry to focus their efforts on exporting to the United States even though it has not yet reached a vote by U.S. congress.

The graph below shows the manufacturing logistics for the 20 years from 1990

to 2009 pertaining to the textile and apparel indusrty. The graph shows what was produced and what was exported. Philippines Manufacturing Logistics

In addition to focusing textile efforts to the United States, the Philippines have

been considering negotiating with the European Union for Generalized System of Preferences Plus (GSP+). This would provide reduced tariffs of products exported from the Philippines to the EU. If they qualify for GSP+ status this year, they can begin exporting products with minimum tariffs beginning January 2014.

One of the reasons the Philippines has such a large textile and garment indus-

try is because of how many native, natural fibers they have: particularly their plentiful abaca, pina, silk and ramie.

The abaca fiber, aka manila hemp, actually comes from a banana. The Philip-

pines accounts for 85 percent of the world’s supply of abaca. They export both the pulp and fiber. According to the Philippine Fiber Industry Development Authority (FIDA), they produced 73,274 metric tons of abaca fiber in 2011. They also exported $140.3 million worth of fiber and $104.4 million worth of pulp. This textile is prized for its “mechanical strength, buoyancy, resistance to saltwater damage, and long fiber length” (textileworldasia.com). It is often used to make special papers, rope, twine, fishing nets, fishing lines, sacking, and even automobile parts, yet it can be manufactured into strong, lightweight fabrics to make apparel, curtains, and furnishings. Asia Textile Mills Inc. in Manila has actually developed a way to mass-produce abaca into yarn from raw fibers and then weave it into high-end textile products. They can even use this method to create jeans. Just recently in 2012, the company has exported the first abaca jeans to Japan. Because of the jeans’ success, they are now being marketed in the United States.

Pina is another popular textile produced in the Philippines. Instead of bananas,

it is made from pineapple leaves. The fiber is strong, has high moisture absorption, and is also soft and lightweight. Since it is finer than bamboo or ramie, it is often combined with silk or polyester fabrics. Pina is being used in apparel more frequently, particularly with formalwear and home furnishings.

Abaca and pina are both sustainable and biodegradable. Environmental-

ly-friendly fabrics are becoming more and more in demand which has caused the use of these fibers to increase. Maybe this will give the Philippines an advantage in the market and strengthen their textile and apparel industry.

The country has been working towards the promotion of local production and

using textiles primarily made from abaca, pina, and other indigenous fibers. In 2004 a law entitled Tropical Fabrics Law mandated the use of Philippines tropical fabrics in government employee uniforms. A tropical fabric is considered any natural fiber produced, spun, woven, or knitted and finished in the Philippines.

While 2012 saw a 22 percent decrease in abaca exports produced in the Philippines,

there is still high hope for the apparel industry. According to Cecilia Gloria Soriano, who is the administrator of the Fibre Industry Development Authority, exports for abaca almost sky-rocketed during 2011, but then as people started holding back their expenses in the wake of global economic slump, there was a dip in demand and exports dropped in 2012.

The abaca industry is expecting an eight percent rise in exports this year,

thanks to more and more people preferring green products. The fact that the Philippines is already a major producer of green fibers, like abaca and pina, is a core reason

why Pure Jade thinks this country is an excellent choice for sourcing.

The Filipino government has also come out and stated that they are now col-

laborating with the Department of Trade and Industry (DTI) and the Philippine Coconut Authority (PCA) in order to promote, develope, and sustain the growth of the Philippine coco coir industry. By 2016 they intend to have the country’s coco coir industry in the world’s top three exporters.

Coir is a natural fiber that comes from the hust of coconut. It’s used to produce

products like doormats, brushes, matresses, sacking, and upholstery. The government wants to raise the coir fiber industry in order to provide $50 million in exports, $1.7 billion in domestic sales, $2 billion in investments, 200,000 farmers, and 10,000 jobs created.

The government plans to achieve their goals by expanding domestic sup-

ply-base for coco coir, strengthening access to market information, and stengthening market linkage among actors within the value chain. If the country succeeds in boosting their coir fiber industry like planned, it could have a very positive not only on their textile and garment industry, but also the country’s economy. Coir Fiber

Abaca Fiber

There have been several challenges in the Philippine textile industry including

increasing electricity rates and also employee wages. Apparel manufacturing uses a high amount of power; therefore it is vulnerable to these raising electricity charges. The country also has the highest minimum wage of all Asian third-world countries in 2012, according to the Employers Confederation of the Philippines.

Regardless of the struggles that the textile and apparel industry faces, the Phil-

ippine economy grew by 7.1 percent in the third quarter of 2012. This means it is the second fastest growing economy in Asia, just after China. This is very encouraging for the Philippine textile industry. The Philippine Export Development Plan of 2011-2013 has stated that the textile and apparel industry is a key sector that could help to drive the country’s export growth.

Textile & Apparel Associations:

Some of the major textile and apparel associations for the Philippines are The

ASEAN (Association of Southeast Asian Nations) Federation of Textile Industries or AFTEX, The Source ASEAN Full Service Alliance or SAFSA, and The ASEAN Common Competencies Program or ACCP. These associations are not only for the Philippines, but also Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Singapore, Thailand, and Vietnam.

AFTEX (ASEAN Federation of Textile Industries) is basically a grouping of tex-

tile and apparel associations for the ASEAN member countries. It was founded in 1977 for the country members to meet and discuss different policies and to implement ASEAN-wide projects that all share three common objectives: advocating a similar position on trade policies, promoting intra-ASEAN trade, and promoting ASEAN textiles and apparel. The structure of this group is modeled after the ASEAN Chamber of Commerce and Industry. There are multiple standing committees and one main council. Each member country is a head of a standing committee. The main council has one chief delegate, three nominated members, and three alternate members from each member country.

SAFSA (Source ASEAN Full Service Alliance) is the ASEAN textile and apparel

industry’s “solution to enhancing its competitiveness through regional integration” (sourceasean.com). Their main goal is to forge virtual vertical factory partnerships with independent ASEAN textile mills and factories. Because of SAFSA, the ASEAN mills and factories are offered a better opportunity to meet and form alliances with global

brand-name apparel buyers. According to ASEAN, SAFSA has been hailed as a model for the integration of their priority sectors by the ASEAN Economic Ministers.

SAFSA was inaugurated in June 2010 in Singapore. SAFSA believes that garment

factories must offer global fashion brand importers and retailers a better value. They also believe that a source market that offers a full package of services is the best option today for international apparel brands.

A major challenge they have faced in implementing their beliefs was gaining the

acceptance of buyers as a legitimate alternative to competitor source countries and regions. Regardless, they have been able to follow through with their mission, which is to “bring together quality-assured Southeast Asian garment factories and textiles mills to offer global fashion brands a one-stop solution to their sourcing needs�. They have numerous textile mills and garment factories that have willingly partnered with them.

ACCP (ASEAN Common Competencies Program) is a scheme associated with

AFTEX, which has certified workers in the following textile positions: sewing machine operator, sewing machine mechanic, sewing machine supervisor, and pattern maker. Their goal is to promote productivity and empower workers. This is a milestone in the ASEAN textile and garment sector because it is the first time a region has adopted common competencies for the textile industry. ACCP is not only certifying workers for these positions, but they are making sure that workers are meeting the performance expectations. They’ve vowed that the factories, which offer this program to their workers, will know what to expect of them. The workers must have portable skills that empower them to seek out great opportunities throughout the ASEAN region. This is a major way that ASEAN is pursuing economic integration.

Trade Agreements & Laws: Trade Agreements Specific to the Philippines:

The Philippines does not yet have any specific trade agreements, like most of

Asia does not. However, like previously mentioned, they are a part of the Association of Southeast Asian Nations. This is an economic organization that was formed in 1967 between the countries of the Philippines, Indonesia, Malaysia, Singapore, Thailand, Brunei, Burma, Cambodia, Laos, and Vietnam.

The ASEAN Declaration has stated that their aims and purposes are:

1. To accelerate the economic growth, social progress and cultural development in the region through joint endeavors in the spirit of equality and partnership in order to strengthen the foundation for a prosperous and peaceful community of Southeast Asian Nations;

2. To promote regional peace and stability through abiding respect for justice and the rule of law in the relationship among countries of the region and adherence to the principles of the United Nations Charter;

3. To promote active collaboration and mutual assistance on matters of common interest in the economic, social, cultural, technical, scientific and administrative fields;

4. To provide assistance to each other in the form of training and research facilities in

the educational, professional, technical and administrative spheres;

5. To collaborate more effectively for the greater utilization of their agriculture and industries, the expansion of their trade, including the study of the problems of international commodity trade, the improvement of their transportation and communications facilities and the raising of the living standards of their peoples;

6. To promote Southeast Asian studies; and

7. To maintain close and beneficial cooperation with existing international and regional organizations with similar aims and purposes, and explore all avenues for even closer cooperation among themselves.

While ASEAN doesn’t currently have any trade agreements, it doesn’t mean

they are working toward any. In fact, in 1992 ASEAN signed a trade bloc agreement called AFTA (ASEAN Free Trade Area). AFTA’s primary goals are to increase the ASEAN competitive edge as a production base in the world market by eliminating tariffs and non-tariff barriers and attracting more foreign direct investment to ASEAN.

They plan to achieve their goals through the Common Effective Preferential Tar-

iff (CEPT) Scheme. CEPT has helped them to follow through with their commitments because over 99 percent of the products in the CEPT Inclusion List of ASEAN have been brought down to the 0-5 percent tariff range. The average tariff for ASEAN under the CEPT Scheme is now down to 1.51 percent from 12.76 percent when the tariff cutting began in 1993.

In 2007, AFTA announced that they were striving to complete free trade agree-

ments with China, Japan, South Korea, India, Australia, and New Zealand by 2013 and to be established by 2015. Considering Japan is the ASEAN region’s largest export market, it would be very beneficial for them to form a trade agreement. Unfortunately the countries can’t seem to come to an agreement and that seems to be holding up the progression of these trade agreements.

The Philippines does not yet have any trade agreements with the United States,

but they are working towards some kind of agreement. The United States is the ASEAN region’s second largest export market, so a trade agreement might really benefit them. On the other side, the total U.S. exports to the ASEAN region in 2008 were $747 billion. A trade agreement would obviously benefit both sides.

In 2002, President Bush announced they would be working towards negotiations

with ASEAN under the Enterprise for ASEAN Initiative (EAI). Since then, the Save Our Industries Act was introduced to the U.S. congress both in 2009 and in 2011. The act would eliminate certain duties on apparel products made in the Philippines by using U.S. fabric. According to the Confederation of Garment Exporters of the Philippines, the bill is “the best hope for the Philippine garments industry as we work towards its revitalization, targeting $3 billion in apparel exports and 600,000 jobs�. The bill has caused the Philippine textile industry to focus their efforts on exporting to the United States even though it has not yet reached a vote by U.S. congress either time it was introduced. It is uncertain right now if the bill will be introduced again in the near future.

2012 Trade Stats: Market Value of Publicly Traded Shares: $266.3 Billion -Country comparison to the world: 35 Exports: $50.96 Billion Exports - Commodities: Semiconductors and electronic products, transport equipment, garments, cop- per products, petroleum products, coconut oils, fruits. Exports - Partners: Japan: 19% United States: 14.2% China: 11.8% Hong Kong: 9.4% Singapore: 9.2% South Korea: 5.5% Imports: $65 Bilion Imports - Commodities: Electronic products, mineral fuels, machinery and transport equipment, iron and steel, textile fabrics, grains, chemicals, plastic. Imports - Partners: United States: 11.5% China: 10.8% Japan: 10.4% Taiwan: 7.8% South Korea: 7.3% Singapore: 7.1% Thailand: 5.6% Indonesia: 4.4% Malaysia: 3.9% Statistics provided by www.cia.gov.

United States Trade Laws Affecting Imports:

The International Trade Administration (ITA) is the organization that consults with

U.S. trade industry. The ITA goals are to promote U.S. trade and investment, strengthen the U.S. trade industry competitiveness, and to ensure fair trade. ITA ensures that U.S. industry’s commercial interests are represented in trade negotiations, bilateral and multilateral discussions, and the U.S. rulemaking process (trade.gov). ITA strives to maintain policies that stimulate innovation and investment, enhance economic growth, and support U.S. manufacturing and services industries.

ITA recognizes the need for exporting green technologies, with consumers want-

ing to benefit the environment more and more. ITA has been working with U.S. manufacturers to improved energy efficiency of their operations. They also believe that businesses should have a long-term goal of being sustainable by increasing longterm shareholder and social value. Their definition of sustainable manufacturing is the creation of manufactured products that use processes that minimize negative environmental impacts, conserve energy and natural resources, are safe for employees, communities, and consumers and are economically sound.

While the Philippines produce many natural fibers in environmentally- friendly

ways, other products they produce are not manufactured in an eco-friendly manner. Since the U.S. has a goal of moving forward to be more sustainable, the Philippines will need to also have that goal for their products they wish to export to the states.

Another department associated with the U.S. trade industry is the Office of

Standards Liaison (OSL). OSL engages private sector stakeholders, as well as pertinent U.S. government agencies and foreign regulators. They also work with members of ITA’s Commercial Service, Market Access and Compliance, Manufacturing and Services, and Import Administration staff on trade matters involving:

-market access of chemicals, manufactured goods and services, and

information technology

-protection of intellectual property rights

-compliance with trade agreements

-resolution of technical barriers to trade

-standardization and conformity assessment frameworks of

developing markets

Clearly the United States maintains strict trade regulations. They do everything

possible to import the best products for the best prices and to ensure the safety of the American people. With the U.S. working to increase trade competitiveness, the Philippines will have to work harder to keep the U.S. as their second largest exporter.

Another difficult feat for the Philippines is that the U.S. already has trade agree-

ments in force with 20 countries: Australia, Bahrain, Canada, Chile, Colombia, Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, Israel, Jordan, Korea, Mexico, Morocco, Nicaragua, Oman, Panama, Peru, and Singapore. The Philippines must compete to trade for the U.S. with countries that already have free trade with the states. This could negatively affect their future trading with the United States, particularly if U.S. congress doesn’t pass the Save Our Industries Act in the near future.

Business Etiquette: Type of Culture:

The Hofstede Centre is a company that does cultural research for countries.

They have scored the Philippines on five different categories pertaining to culture of their society. This 5-Dimension Model shows the outcome:

Graph provided by www.hofstedecentre.com

The first category is Power Distance. The Philippines scored a 94, which means

they are a hierarchical society. The people of the Philippines accept that there is a hierarchical order and that everyone has a place; no further justification is needed.

The second category is Individualism. Since the Philippines have a low score of

32, they are considered to be a collectivistic society. People in the Philippines are very family oriented. They have a long-term commitment to their groups (extended families and relationships) and if they cause offence this could lead to shame and loss of face. Employers take into consideration the other employees when hiring and promoting. The Filipinos have a self-image defined in terms of “we” rather than “I”.

The third category is Masculinity / Femininity. The Philippines scored a 64,

deeming them a masculine society. This means that they are driven by competition, achievement, and success. Their lifestyle follows the saying “live in order to work”. They emphasize equality, competition, and performance. When there is a conflict, it is often resolved by fighting it out.

The fourth category is called Uncertainty Avoidance. The Philippines scored a

44 on this dimension meaning that they have a low preference for avoiding uncertainty. This shows that the Filipinos have a more relaxed attitude and straying from the norm is a little more tolerated. They often believe that there should be no more rules than are necessary. Schedules are often flexible; punctuality does not come naturally in this society.

The fifth and final category is Long Term Orientation. The Philippines scored a

low 19 on this dimension, meaning they are a short-term orientation culture. This shows that they have immense respect for traditions and are impatient. They like to achieve quick results and have a strong concern for the truth.

Negotiation Styles & Strategies:

When conducting business in the Philippines, it is necessary to make an ap-

pointment. It’s appropriate to schedule appointments about a month in advance, at least. It is proper etiquette to confirm a few days prior to the appointment. Although the Philippines have a fairly relaxed culture, in the business world punctuality is expected. For the most part Filipinos will also be on time. Traffic is very common in the Philippines, so allow extra time for travel. You should send an agenda and any other informational materials needed prior to the meeting so colleagues may prepare properly for the discussion.

At a business meeting, avoid making exaggerated claims. Remember that de-

cisions are made at the top of a company, so be prepared for the fact that a decision may not be made at the meeting. You might not ever meet the decision maker; if you do it could take several meetings.

The term “lose face” does not properly translate from Filipino to English. We may

describe it as “ashamed” or “embarrassed”, but those words do not do the term justice in describing the dishonor given to a Filipino when they lose face. Losing face has “driven people to leave a job, to move to another city, to drop out of school, to get into a big fight, to stab someone, to exact subtle revenge and to [even] commit suicide” (liveinthephilippines.com). Therefore always accept any offer of food or drink, because if you turn down a colleague’s hospitality they will lose face. If you raise your voice or lose your temper when conducting business, you lose face.

Filipinos like to avoid confrontation if possible. Therefore, be aware that it can

be difficult to say no. If they say yes, it may actually only mean maybe. Try to have agreements put into writing to avoid confusion and to keep everyone on the same page at each step of negotiating.

When scheduling a business meeting for the first time, it is best to meet in the

morning or afternoon. Companies in the Philippines have a lunch break from noon1pm. Business negotiations often move at a leisurely pace, so be allow for extra time. Meetings usually begin with small talk and end with more of the same; it would be rude to jump up and leave right away.

Relationship Building:

The Philippines are warm and hospitable people. They make friends very easily

and smile often. They like to build relationships with people rather than businesses. If this is your first time meeting and they have a good relationship already with your company, you will still have to build your own relationship with them. Filipinos thrive on interpersonal relationships, so it is a good idea to be introduced by a third party.

When doing business in the Philippines, it is crucial to network and build friend-

ships with associates that you can call upon for assistance in the future. Business relationships mean personal relationships. Colleagues will consider you friends and ask you to do them favors. They will expect you to ask them for favors as well.

In the Philippines, it is not considered nosey to ask personal questions such as

your marital status, your family history, or how your children are doing in school. This is polite and they are beginning to build a relationship with you. Before and after a meeting they like to enjoy social chatter, whether about your personal lives or American pop culture, which they are usually very familiar with.

It is a good idea to spend time with colleagues during meal times or breaks. Get-

ting to know business partners during more informal settings helps to build solid relationships. However, stay away from “nightlife� activities during deployment. When a foreigner treats a colleague and spends money in nightclubs, it can be associated with supporting the local sex trade.

Social & Cultural Elements: Appropriate Dress:

When conducting business in the Philippines, clothing should be conservative.

Filipinos will often wear button down shirts without a tie, but to show respect and professionalism, men should wear a dress shirt and tie for a business meeting, at least initially. A full suit may sometimes be appropriate, but can also seem intimidating to Filipinos. When wearing a suit jacket, do not remove it unless the most important Filipino does first.

Women’s clothing may be brightly colored, but the quality should be good and

the garments well tailored. A conservative suit, a skirt and blouse, or dresses are all appropriate for business meetings. Appearance matters to Filipinos. Visitors should dress well, especially if it is the first meeting because you will be judged on appearance.

Introductions & Greetings:

When meeting for the first time, introductions are formal. They follow a set pro-

tocol of greeting the most important person first or the eldest. A firm handshake and a smile is the standard Filipino greeting, while close female friends may hug and kiss when they meet. You should always use someone’s professional, academic, or honorific title followed by his or her family name, unless invited to use their first name or nickname. Filipinos often go by quirky nicknames. They also frequently say “sir” and “ma’am” to show respect, not just to superiors but also to older people. Colleagues will probably call you “Sir” or “Ma’am” and then your first name, but you are not expected to do the same.

Filipinos talk about their families often and will ask about yours, considering

family is such a large part of their lifestyle. If a Filipino has told you about their family, which they will, you should follow up with questions about their family the next time you meet.

Presenting Business Cards:

Exchanging business cards is an important part of establishing working rela-

tionships in the Philippines. You should present and receive business cards with two hands so that it is readable to the recipient. You should always offer your business card first, but don’t be surprised if you don’t receive one in return. Many senior level executives only hand out business cards to colleagues of similar rank and status. Be sure to include your title and position to emphasize any influence and authority you have. It’s polite to examine the card briefly in front of them before putting it into your business card case.

Gestures & Personal Space:

Hand shaking is common in the Philippines for both men and women. Touch-

ing, however, is not coming for Filipinos, especially men touching women. They tend to need more personal space than other cultures. Observe the comfort level and sense of space between others.

Filipinos use lots of non-verbal communication, such as raising eyebrows or

slightly lifting their head with a smile to greet friends. It is very rude to walk through people having a conversation. If it’s necessary to get by, then extend both arms down with hands clasped and pointing downward. Eye contact is important in the Philippines, especially in the professional world because it shows self-confidence. However, if someone does not make eye contact with you they are not necessarily rude, but possibly shy.

Like in the United States, raising the middle finger is considered rude as well as

pointing an index finger at someone. Filipinos often use their lips to point. Subtle gestures are preferable to elaborate, showy ones. A raised voice, the wrong tone, implying incompetence, or excessive staring can do quite the damage. If a Filipino sees you as arrogant or pushy, they automatically shut you out. Some other rude gestures are not returning phone calls, missing deadlines, not following instructions, and failure to follow through in general. You do not want to get on a Filipino’s bad side because there is usually no coming back.

Colors & Their Meanings:

Red: happiness, marriage, prosperity Pink: marriage Yellow: against evil, for the dead, geomantic blessings Green: eternity, family, harmony, health, peace, posterity Blue: self-cultivation, wealth Purple: wealth White: children, helpful people, marriage, mourning, peace, purity, travel Gold: strength, wealth Gray: helpful people, travel Black: career, evil influences, knowledge, mourning, penance, self-cultivation

Gift Giving:

Small and inexpensive gifts are always appreciated in the Filipino culture. You

should find out what your recipient’s likes are, but be careful not to give a gift that is too personal. Be sure to attach a card with a message and wrap the gift elegantly; presentation is important. If you are invited to a Filipino home, bring sweets or flowers for the hosts. It’s proper to send a fruit basket afterwards as a thank you, but do not send one before or during the event. This could be perceived that you do not think the host will provide enough hospitality. It is also appropriate to just send a thank you note afterwards. After giving a gift to a Filipino do not expect them to open it in front of you. They will usually wait until later. If you are given a gift you should also wait until later before opening it.

Time:

At one point, Filipinos were known for their tardiness and it was customary to

be fairly late to meetings. This is changing, and timeliness is becoming of great importance for business in the Philippines. It is better to be early than it is to be late to a business meeting. Yet, when going to a social event it is common to be around 15 or 20 minutes late. This is considered fashionably late. The more important guests will arrive even later than that.

Business Entertaining:

For business entertaining, it is customary for you to treat the Filipino to a hearty

meal, entertainment, or even a round of golf. A nice lunch or dinner can make an excellent first impression. Lunchtime is at noon and dinner is around 7 or 8pm. You should research and find a fancy restaurant to take your business partner or client. It would be beneficial for you to find one near your hotel to avoid heavy traffic.

If you receive an invitation to dine out or for another event, you should consider

it an honor and accept it. Dining with your hosts will help build a strong relationship and trust. This will definitely help with your business encounters in the future. Only refuse if you have a legitimate reason and explain that.

Joke Telling:

Filipinos have a sense of humor and can always find something to laugh about.

They like to come up with silly anecdotes about socio-economic-political situations and other adversaries in life. If they are telling jokes pertaining to socio-cultural conflicts or issues, it is acceptable for them to but it is not appropriate for a foreigner to partake. Just listen and do not take sides. It is also not appropriate for foreigners to comment on political or religious situations.

Dining:

When dining out there are several key things to remember. When sitting at the

dinner table, good posture is expected. Another thing to keep in mind, especially if you have your spouse with you, is that public display of affection is considered rude, particularly among young people. Dress to impress. You will be judged on your appearance. While a fork and spoon are the typical utensils, they are used differently since rice is often served. You hold the fork in your left hand and use it to guide the food into your spoon.

The Philippines are not considered an alcohol drinking country, but if others

are ordering wine then a beverage or two is acceptable. Don’t forget about tipping at a restaurant, especially if you are the one paying the bill. Ten percent of the check is standard for tipping, but showing generosity shows a strong presence with your business contacts.

If you have been invited to dinner at a Filipino’s house, then it is best to arrive

about 15 minutes late to give the host a few extra minutes to prepare. Be sure to compliment the hosts on the house. Wait to be asked several times before you move into the dining room or before helping yourself to food. You should also wait to be told where to sit, since there is often a seating plan. Meals are generally served buffet style, and the hosts generally over do it on the food. Therefore, you can usually take as much as you desire.

Like in most cultures, avoid discussing religion or politics. Also refrain from an

arguing or raising your voice. Accept any hospitality that is offered to you. After dining in a Filipino’s home, always send a thank you note after to show you have class.

Sourcing Guidelines:

Pure Jade - Sourcing Guidelines I. Compliance with Laws

A. Pure Jade operates a legal and ethical business. Sup- pliers are expected to maintain and follow all local, na- tional, and international laws. B. Relevant laws, including those relating to labor, worker health, safety, and the environment, must be upheld.

II. Environment A. Suppliers must comply with all relevant environmental laws and regulations. B. All Pure Jade products must be made from organic or recycled materials, in order to maintain an eco-friendly company and to promote a clean environment. C. Suppliers must keep a record of what materials are used in each product to ensure its environmentally friendly credibility. III. Child Labor

A. Child labor is prohibited. Suppliers may only employ workers of 15 years of age or older. If the minimum legal age of the country is higher, the higher age applies. B. The factory must allow time off for minors to attend school or night classes. C. Children may not work more than 20 hours a week. Once they reach the country’s legal adulthood, they may begin working full time.

IV. Involuntary Labor A. Forced labor of any kind is prohibited, including, but not limited to, prison labor, debt bondage, or government force. V. Discrimination

A. Workers must be employed based of their ability to complete the job. Personal characteristics and beliefs may not be taken into consideration. B. Suppliers must disregard race, gender, religion, dis- ability, sexual status, political affiliation, and marital sta- tus when employing workers. C. Suppliers are required to treat all workers fair, equal, courteous, and must refrain from singling out employees.

VI. Work Hours

A. Workers may not work more than 60 hours a week, in cluding over time. B. Suppliers must give employees at least one day off for every six-day period.

VII. Wages and Benefits A. Workers must be paid at least the country’s minimum wage. Wages must be fair according to the work. B. Overtime work must be compensated at the legal pre- mium rate. Overtime pay must be higher than regular working hours. C. Suppliers must provide workers with paid annual leave and holidays, according to the local law and industry standard. D. Suppliers must provide workers with an understand able wage statement after each pay period. E. Wages must be paid consistently and on time for each pay period.

VIII.

Health and Safety

A. All laws and regulations regarding working conditions must be followed in order to create and safe and healthy working environment. 1. The factory must be well ventilated with anything from windows, fans, air conditioning, and heaters. 2. Work surface lighting must be proficient in pro- duction areas. 3. There must be a sufficient amount of well-marked exits and emergency exits. They must be unlocked and accessible during working hours. 4. Aisles, exits, and stairwells must be kept clear at all times. 5. Fire extinguishers must be sufficiently placed, maintained, and charged. Fire alarms must also be placed on each floor. 6. Emergency lights must align exits and stairways. 7. Evacuation drills must be conducted at least annually. 8. Machinery must be equipped with operational safety devices and must be inspected on a regular basis. 9. Protective material, i.e. masks, gloves, goggles, boots, must be provided for workers. 10. Drinking water must be provided and accessible for employees during all working hours. 11. First aid kits must be stocked on every floor. 12. Bathrooms must be clean, sanitary, well stocked, and accessible during all working hours. 13. Minors may not work dangerous equipment of any kind. 14. Employees must be properly trained on safe use of machinery and equipment.

IX. Freedom of Association

A. Suppliers must respect that workers are free to join associations of their own choosing. Factories may not interfere with workers who wish to lawfully associate or organize.

X. Humane Treatment A. Factories must treat all workers with dignity and respect. B. Physical, psychological, corporal, or sexual punish- ments are absolutely prohibited. C. Abuse in any form, including sexual harassment, screaming, or any other verbal abuse is prohibited. XI. Transparency & Accountability

A. Suppliers must provide any documentation relating to the factory, sourcing, or company whenever requested by Pure Jade. B. Suppliers must keep an open and honest relationship with workers, supervisors, and all other departments of the Pure Jade company. C. All sourcing documentation must be available for pub- lic access in order to build customer trust, as well as to ensure company accountability.

XII. Monitoring and Compliance A. In order to uphold company standards, there will be a Pure Jade on-site representative within all production facilities. B. A strict hiring process will be put in place in order to ensure that all Pure Jade employees exemplify company values and responsibilities so they will continue to help enforce them. C. Suppliers must allow Pure Jade representatives full access to all facilities. They should be prepared for fre- quent inspections. Pure Jade reserves the right to terminate its business relationship with any Supplier who does not comply with the provisions and guidelines set forth herein.

Manufacturing & Production: Potential Manufacturers:

1. Eastko Apparel Inc.

Contact:

Phone: 2171-2094-4826

Email: hr@eastko.co.kr

Address: Rnb Compound Sitio Bural Barangay San Juan Taytay Rizal,

Philippines M I D Phseaspptay

About:

Eastko Apparel Inc. has made 1,596 imports to the United States from the Phil-

ippines in the last five years. The company primarily manufactures apparel, dress, wearing, and wearing apparel. They produce all different types of apparel, natural and synthetic fibers. They have a large selection of woven tops, women’s clothing, cotton, woven cotton, and organic materials.

2. Gratchi Fashion Internationale

Contact:

Phone: +63-918-910-9633

Email: info@gratchi.com

Website: www.gratchi.com/company-profile

Address: Tagaytay / Barangay Cabangaan, Silang, Cavite, Philippines

About:

Gratchi Fashion Internationale produces everything from basic apparel, ac-

cessories, home accessories, and pet accessories. They use some synthetic fibers for production, but they also use a large variety of natural plant fibers. This manufacturer often considers nature and the environment in regards to production.

3. CS Garment, Inc.

Contact:

Phone: +63 46 437-0417 to 20

Email: info@csgarment.com

Website: www.csgarment.com

Address: Cavite Economic Zone 4106 Rosario, Cavite, Philippines

About:

CS Garment, Inc. has been around for over two decades. They specialize in

manufacturing high-end professional and quality shirts. They primarily cater to the luxury European market, but they also produce some for the United States. They hold high standards for quality and delivery. The company only hires employees that have

passed screenings, interviews, and trial testing. They are set on having employees with the highest skills in shirt production, quality control, pattern making, and technical matter. They have implemented a Dual Training System Program, which helps develop skills and competencies that youth need. When youth graduate the program, they have the opportunity for local and international employment. The company works hard to make sure their employees are prepared for responsibilities so that if the opportunity arises they are ready to take on a better position and work their way up. They treat their employees fairly and with respect.

4. RK Manufacturing Corporation

Contact:

Phone: +63 (2) 521 1364

Email: info@rkmfg.ph

Address: 210 Fresno Street, Pasay City, Manila, Philippines

About:

RK Manufacturing Corporation is a clothing manufacturer based in the Philip-

pines. They specialize in all types of garments: women’s, men’s, and children’s apparel. They use all different types of fabrics and materials, so eco-friendly fibers are a possibility. While they are based in the Philippines, they also have branches in Hong Kong, Bangladesh, India, and China.

5. Suzette Manufacturing and Trading Corporation

Contact:

Phone: (+632) 7415588

Email: smtc@pldtdsl.net

Address: 99 Maria Clara Street, Banawe, Quezon City, Philippines 1100

Website: www.smtc.com.ph

About:

Suzette Manufacturing and Trading Corporation produces women’s, men’s and

children’s clothing in knit and woven fabrication. The company has been around since the 70s and primarily exports to clients in the United States, Canada, and Europe. Their mission is to focus on excellence and quality management to strengthen their foothold in the globally competitive apparel industry. They are committed to: productivity, enhancement, expansion, modernization, and quality standards that satisfy both clients and business partners. Suzette Manufacturing is constantly improving employee capability and team spirit. They hire 400 employees, 300 of them being sewers, and they can accommodate 240,000 sets per month.

6. Diseno de Moda

Contact:

Phone: 632-9454631

Email: liezlesb@yahoo.com

Address: 0447 Quirino Avenue Don Galo, Paranaque, Philippines

About:

Diseno de Moda is a manufacturer in the Philippines that focuses on produc-

ing women’s clothing and accessories. They are conveniently located near the Manila port, so they pride themselves on quick deliveries. 7. GumshirtS

Contact:

Phone: +639271496

Email: info@gumshirts.com

Website: www.gumshirts.com

Address: Talamban, Cebu City, Philippines

About:

GumshirtS produce high quality shirts for women, men, and children. Their goal

is to produce unique garments that will help to build confidence for the wearer. They produced both knitted and woven cotton.

8. Twelve-Two Garments

Contact:

Phone: 632-912-8778

Email: orders@twelve-two.net

Address: 42 16th Avenue, Dioquino Street, Cubao, Quezon City, Metro Manila,

Philippines

About:

Twelve-Two is a Filipino family owned company. They manufacture shirts for lo-

cal clients and clients abroad. Their shirts are for men, women, and children and they produce all types of shirts, including: collared shirts, v-necks, round neck, long sleeve, short sleeve, polos, tank tops, jackets, hoodies, undershirts, and also shorts and pants. The use woven and knitted fibers and all different types of materials in their fabrics, so eco-friendly and organic fibers are a possibility.

9. To One Fashion Clothing

Contact:

Phone: 00 63 972 4605109

Email: dco082005@yahoo.com

Address: JAQ Bldg, Magallens Cor. Bilbao Street, Brgy III, Roxas City,

Philippines

Website: www.toone21.com

About:

To One Fashion Clothing is a manufacturer located both in China and in the

Philippines. They produce many types of garments including intimates, pants, swimsuits, t-shirts, polos, sleepwear, blouses, and casual shirts. They employ well-skilled and experienced designers, pattern makers, and other technicians. They have over 300 factory employees. Their main goals are fine workmanship, high quality materials, and maintaining credibility. They primarily export to the United States, Japan, Russia, Germany, the United Kingdom, and South America. The company’s motto is “people-oriented, customer foremost”.

10. T&H Shopfitters Corp.

Contact:

Phone: 047-252-8360

Email: rgcostales@gmail.com

Address: 140 Banasijan Street, Balabay Castillejos, Zambales, Metro Manila,

2208 Philippines

Website: www.gqshop.net

About:

T&H Shopfitters manufacture accessories and some apparel, but they also

manufacture store fixtures like hangers, display racks, shoes racks, shelving systems, and more. They have been in business for 20 years and they have clients all over the world. Their top exporters are the United States, Europe, Japan, Taiwan, Australia, and the Middle East.

Evaluation:

Each of these manufacturers have been selected because of the potential they

show. Either their products align with Pure Jade’s products and standards, high quality woven tops for stylish, young professionals just entering the work field, or they appear to have high working condition standards in their factories, or they show potential for being able to produce organic and eco-friendly fibers and care about the environment, like Pure Jade does. Out of these ten manufacturers, Eastko Apparel Incorporated, CS Garment Incorporated, and Suzette Manufacturing and Trading Corporation seem like they would be the best manufacturers for Pure Jade. After contacting each company, Pure Jade will decide which factory seems like the best fit to produce the Pure Jade apparel.

Costing:

Costs & Materials:

The organic cotton used for this sleeveless woven blouse is from Indo Phil Cot-

ton Mills Inc. located in the Philippines, which is priced at $4.59 per yard. The thread is from A&E and is priced at $.25 for a roll of 225 yards. The care labels, woven labels, hangtags, hangers, cartons, tape, and labels all come from Vasam Corporation in the Philippines. This is a manufacturer that produces eco-friendly paper, hangers, tags, boxes, tape, and other items. The care label is priced at $.0023 per unit, the woven label is priced at $.03 per unit, the hangtag is priced at $.04 per unit, and the wooden hangers are priced at $.15 per unit. The cartons cost $.51 per unit, with ten tops fitting in each carton, the tape is priced at $.15 per 20 ft. roll, and the labels cost $.06 per unit.

The labor in the Philippines is priced at $.11 per minute, so between each step,

from pattern making to sewing, it takes about 35 minutes per garment. For transporting the product, the container is priced at $2,100, the broker will cost about $250, and the insurance will cost about $1,800, depending on which manufacturer we use. The duty, which is the ad valorem tariff, is 16.6% for woven tops bringing the cost of duty to just under two dollars.

Wholesale & Retail Price:

Since the total cost for one woven top comes out to $12.04 the wholesale price

with be $30.10, giving the wholesale a 60 percent mark-up or a $18.06 margin. From there, there will be another 60 percent mark-up, which brings the retail price to $75.25 with a $45.15 margin. By rounding the retail price up to $79, it gives a little leeway to the price in case any extra fees apply or complications arise.

Summary:

Cost: $12.04

Wholesale Margin: $18.06

Wholesale: $30.10

Retail Margin: $45.15

Retail: $79

Import Classification:

A Harmonized Tariff Schedule is the main resource for classifying goods and de-

termining their tariffs. The ten-digit HTS number for women’s woven tops is 6206.10.00.10. The corresponding tariff percentage that calculates the amount in dollars that the tariff costs is 16.6 percent. This HTS code is found in the harmonized tariff schedule book, which is used by importers, in chapter 62, “Articles of Apparel and Clothing Accessories, Not Knitted or Crocheted�.

Logistics & Importation: Freight Companies:

Maersk Line is a freight company that has been in business for over one hun-

dred years. They ship products all over the world and are comprised of over 600 vessels. The company is based out of Denmark, but they have six offices in the Philippines alone. They are dedicated to delivering the highest level of customer-focused and reliable ocean transportation services. Their vision is built from a strong heritage of uprightness, constant care, and innovation.

Since Maersk is a globally recognized company, has been around for over a

century, and has a strong vision and reputation, they seem like a great fit for delivering the Pure Jade products.

Contact: Address:

Rm 205 ICTSI Administration Building,

Manila International Container Terminal, North Harbor

Manila, Philippines 1013

Phone:

+63 2 2447011

Email:

PHIOPSGEN@maersk.com

Evergreen Marine Corporation was established in 1968 in Taiwan. They are

ranked among the world’s leading international shipping companies withover 240 service locations. They deliver all over the world, throughout China and all over the Americas, Europe, the Mediterranean, Africa, and Australia.

The company works to stay up to date with technology. Their electronic sailing

schedules allow customers to search for services by port or region and provide them with up-to-date information on departures and arrival. The company prides themselves on being clean, green, and keeping in harmony with the environment and their customers; a similar motto to Pure Jade’s. They seem very user friendly, efficient, experienced, green, and they frequently deliver from Asia to the states. These are the primary reasons EMC seems like a great choice for shipping Pure Jade product.

Contact: Address:

9 FL., 166, Sec. 2, Minsheng E. Road, Taipei, Taiwan 104

Phone: 886-02-25057766 Email:

biz@evergreen-shipping.com.tw

CMA CGM is the world’s third largest container shipping group. They are based

out of Marseille, France but have over 650 offices worldwide. The company has been operating since the 70s and now has 17,000 employees in over 150 countries. CMA CGM works relentlessly to improve their business is a way that is beneficial to the enviroment. Protecting the marine environment, fighting climate change, offering eco-solutions and services and developing an environmental aware culture are some of their major objectives.

This freight company sounds perfect for Pure Jade. They have very similar stan-

dards, they are located all over the world, and they care about protecting the environment.

Contact: Address:

5th Floor Two E-com Tower A, Bayshore Ave.

Mall of Asia Complex, Pasay City, Philippines

Phone:

+63 2 869 3119

Email:

wimbmaster@cma-cgm.com

Shipping Routes, Timeline, & Maps:

Since the location of the Philippines is nearly a straight shot through the Pacific

Ocean to California, which is where the Pure Jade headquarters are located, it would make sense to the product shipped directly from the Philippines to California. From there, the product will be deliverd in a truck and distributed accordingly.

The product will start in the Manila North Port, Philippines, cross the Northern

end of the Pacific Ocean, and continue on to end in the Port of San Francisco, California, USA.

Maps provided by Google Maps

Philippines Port:

Manila North Harbour Port Inc. Road 10 Manila Harbour Center Vitas St, Bgy 128, Zone 010 Tondo, Manila, Philippines

United States Port:

Port of San Francisco Pier 1 The Embarcadero San Francisco, CA 94111, USA

While it would make sense to have the product from the Philippines delivered

directly to California in a timely manner, this is not likely to happen. Most shipping companies will make numerous stops at other ports around Asia before reaching the Untied States.

Shipmentlink.com gives a more accurate timeline, estimating that between travel

time and all other port stops, it will take from 24-35 days for the product to be delivered to the U.S. These maps show the potential shipping route from Manila to other Asian ports and then on to San Francisco (Oakland) and other U.S. ports:

Country Exporting Requirements:

The Philippines customs clearance requires the following documents in order to

go through customs clearance:

-Import Entry Declaration Form

-Commercial Invoice including: date and place of issue, name and address of

importer, detailed description of goods, unit value name, and address of supplier

-Bill of Lading (or Airway Bill for air shipments)

-Certificate of Origin

-Packing List

-Applicable special certificates required due to the nature of goods; only if re-

quested by importer, bank, or letter of credit clause

-Commercial Invoice of Returned Philippine Goods and Supplemental Declara-

tion on Valuation

-Letter of Credit Transaction including: Proforma Invoice and Import Entry Dec-

laration for Advance Customs Import Duty (ACID)

Conclusion:

There are an abundance of risks to Pure Jade outsourcing their products to the

Philippines. For instance, the economy is a big risk. It has been constantly fluctuating over the past several years, as well as the unemployment rate, and the poverty level. The government in the Philippines is also lacking in supporting the textile industry, agriculture, mining, and other areas of labor that is causing these fields to slack on how much they could be producing and how much money they could be making. Another risk is that the Philippines do not have any trade agreements so there are tariff charges. Although child labor is illegal, the country still seems to have a problem with young chrildren dropping out of school to work excessive hours for low wages. If this is going on, it can be assumed that other laws are not being followed.

On the contrary, there are major benefits to outsourcing to the Philippines. For

one thing, they already produce many natural and organic fibers, which is what Pure Jade is looking for. The Philippines is also inexpensive, costing only $.11 a minute to produce a garment, While they do not have a trade agreement with the United States, they do have a good relationship with the states which helps with trading. The Philippines also has the second largest emerging economy in Asia, which could be very beneficial to production.

There are pros and cons to doing business in the Philippines, but overall this

seems like a positive choice to outsource for Pure Jade. Filipinos are friendly, kind, and honest people. The country offers a good price and eco-friendly materials. What more could an apparel brand ask for?

Appendix: Country Traits:

Filipinos are very friendly, social, and family oriented people. They like to build

lasting relationships. Yet, they do like to keep a little personal space and don’t get too close to others unless they are good friends. They work hard, but tend to multi-task and like to have a good time.

Population: 105,720,644

-Comparison to the world: 12

-Growth rate: 1.873%

Age Structure: 0-14 years: 34% (male 18,339,398 / female 17,607,472)

15-24 years: 19.1% (male 10,259,385 / female 9,896,090)

25-54 years: 36.8% (male 19,550,257 / female 19,369,177)

55-64 years: 5.7% (male 2,772,003 / female 3,239,659)

65 years and over: 4.4% (male 2,023,118 / female 2,664,085)

Median age: 23.1 years (male 22.6 / female 23.6)

Ethnic Groups:

Tagalog: 28.1%

Cebuano: 13.1%

Ilocano: 9%

Bisaya/Binisaya: 7.6%

Hiligaynon Ilonggo: 7.5%

Bikol: 6%

Waray: 3.4%

Other: 25.3%

Religion:

Catholic: 82.9% (Roman Catholic 80.9% / Aglipayan 2%)

Muslim: 5%

Evangelical: 2.8%

Iglesia ni Kristo: 2.3%

Other Christian: 4.5%

Other: 1.8%

Unspecified: 0.6%

None: 0.1%

Languages:

Filipino (official; based on Tagalog)

English (official)

Major Dialects:

-Tagalog -Cebuano -Ilocano

-Hiligaynon / Ilonggo

-Bicol -Waray -Pampango -Pangasinan

Government:

Type: Republic

Legal System: Mixed legal system of civil, common, Islamic, and customary law

Capital: Manila

Chief of State: President Benigno Aquino; Vice President Jejomar Binay

Head of Government: President Benigno Aquino

Cabinet: Appointed by the president

Elections: President and vice president are elected on separate tickets by pop-

ular vote for a single six-year term

U.S. Representation: Ambassador Harry K. Thomas Jr.

Culture: Arts:

Art is very important to the Filipino culture, so much that the government pro-

vides funds to run art institutions like the National Museum in Manila. Early art reflects the Spanish culture of the Philippines and religious themes. Crafts have been a long time form of art in the Philippines, like pottery, weaving, and shell crafts. The national culture is also reflected through batik cotton prints of Muslim areas to woodcarvings of the mountainous areas. More contemporary artists use all different techniques and mediums to reflect social and political life in the Philippines.

Dance is also considered a major form of art in the Philippines. Their dance in-

fluence comes from both Filipino and Spanish cultures. At meetings and conferences folk dances influenced by the Spanish are often performed. They also use dance as a way to tell stories. One major recreational dance in this country is ballroom dancing, particularly the waltz and the cha-cha.

Music is another popular art form. Music is taught in most families in the home

and it is also taught in schools. They often have live music performers at fiestas. Popular instruments from traditional Filipino culture are folk instruments like the nose flute and guitars. Most current popular music in the Philippines tends to be American.

Contemporary Filipino Art: Janos Delacruz, Iggy Rodriguez

Traditional Filipino Art: Carlos V. Francisco

Traditional Filipino pottery and basket weaving:

Monuments:

Intramuros is the oldest district in the Philippines and is located in the core of

the country’s capital, Manila. The Spaniards put up walls in this part of the city during the 16th century for protection from foreign invaders. This walled part of the city was declared a national monument in 1951.

Another historic landmark in the Philippines is the Fountain of Justice in Bacolod

City. This is the location where the surrender of Spanish authorities to the Filipino forces took place. This was during the Negros Revolution in 1898. The monument consists of a fountain and park and is now a place for recreational activity and gathering.

The last major Philippine monument is the Rizal Monument. This is a memorial

mausoleum that was dedicated for Jose Rizal in the early 1900s. Rizal was a patriot, writer, poet, and martyr for the Philippines. He was also a nationalist and reformist for the country during the Spanish colonial era and was wrongfully executed. There is now a national holiday in honor of him called Rizal Day.

Dining & Cuisine:

The Philippine cuisine is interesting because it is influenced from the country’s

Spanish, Asian, and American heritage. Rice is served with most meals and it can be served with a simple meal of fried fish to more elaborate dishes like: lechon (whole roasted pig), longganisa (Philippine sausage), puchero (beef in bananas and tomatoes), or sinigang (seafood in sour broth). Filipino cuisine is distinguished by sweet, sour, and salty flavors. They have the highest total fat, saturated fat, and cholesterol in their food than any other Asian cuisines.

Filipino cuisine is often served all at once in a single presentation. They general-

ly eat buffet style so people can eat as many helpings as they desire. A fork and spoon are the traditional utensils. The fork is used to guide the food into the spoon, especially when eating rice.

Economy & Fiscal Policies:

The economy in the Philippines has weathered a lot of global economic and fi-

nancial downturns better than regional peers. In 2011 their GDP dropped to 3.9 percent, but sprung back up to 6.6 percent in 2012. The country has a stable banking system and this past year their stock market was Asia’s second best performer. The economy has grown since President Aquino took office in 2010, but unemployment has unfortunately gone down and the quality of jobs has not improved. The country has long term problems with reforming governance and the judicial system, building infrastructure, the ease of doing business, and attracting local and foreign investments.

GDP (purchasing power):

$432.7 billion

GDP (growth rate): 6.6% GDP (by sector):

Agriculture: 11.9%

Industry: 31.1%

Services: 57%

Industries:

Electronics assembly, garments, footwear, pharmaceuticals, chemicals, wood

products, food processing, petroleum refining, fishing.

Budget:

Revenues: $35.96 billion

Expenditures: $41.53 billion

Exports:

$50.96 billion

-semiconductors and electronic products, transport equipment, garments,

copper products, petroleum products, coconut oil, fruits.

Imports:

$65 billion

-electronic products, mineral fuels, machinery and transport equipment, iron

and steel, textile fabrics, grains, chemicals, plastic.

Geography:

The Philippines is made up of 7,106 islands in the western Pacific Ocean, part of

Southeast Asia. They of course have a tropical climate filled with generous amounts of rainfall and gentle winds. The three main seasons are: wet and rainy (June - October), cool and dry (November - February), and hot and dry (March - May). Since this is a group of islands, they are prone to tropical storms. December through May offers the best possible weather because this is the off-season for typhoons.

While tropical storms could be considerd a risk to producing in the Philippines,

any port could succumb to such storms and the Philippines does not have a very negative history with storms compared to other coastline areas.

Labor: Labor Force:

46.36 million

Labor Force (by occupation):

Agriculture: 32%

Industry: 15%

Services: 53%

Unemployment Rate:

7% (country comparison to the world: 77)

Natural Resources:

Fruits (coconut, pineapple, banana), mining (copper), fish, farmland, water.

Products:

Electronics, garments, copper, coconut oil, fruits, sugarcane, footwear, cassa-

vas, rice, corn, pork, eggs, beef, fish.

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