Policies Relating to Laws Regulating Importation

Compliance with U.S. Customs and Other Federal Laws Regulating Imports
The Company is dedicated to full and complete compliance with all laws and regulations applicable to the conduct of its business, including the laws, regulations and procedures of the U.S. Customs Service. The Company will not condone or tolerate illegal activity by its associates or by any party with which it has dealings.

History of The Company's Policies for Complying with U.S. Customs Laws
The Company has always been committed to full compliance with all laws that regulate the products which we purchase and sell. The fact that we generally rely on outside parties for our products has never been an excuse for expecting less than full compliance.

The laws and regulations that affect the products which we import are complex and subject to change. Accordingly, we have taken steps to insure that our associates are aware of emerging issues and responsibilities that may affect our businesses. As the rules governing imports have changed, we have extended those efforts to our vendors and their subcontractors and suppliers to insure that they have the information and resources necessary to properly service our businesses.

We have long recognized that compliance with the laws and regulations applicable to the country of origin of imported merchandise is particularly important and sensitive. Utilizing our Internal Audit staff and the resources of our various business units, we have inspected and conducted capacity studies of overseas factories, conducted in-line inspections of merchandise in production, and collected other data necessary to document compliance with applicable laws. We have notified vendors that their cooperation with our efforts is required as a condition of doing business with us. We have met with vendors to educate them with respect to our expectations and to emphasize our commitment to compliance with all legal requirements, including country of origin regulations. We have established Independent Production Services, a resource which reports directly to the Company, to provide additional assurance of compliance with country of origin requirements and labor standards through a systematic factory qualification program coupled with in-line inspections.

The Standard of Reasonable Care
The importer of foreign-made goods has the legal responsibility to comply with regulations relating to imported merchandise. The Customs Modernization Act of 1993 ("Mod. Act") introduced widespread changes to the customs laws of the United States. Under this new and more demanding legal framework, an importer's failure to adequately discharge its duty to achieve compliance can result in: (1) the assessment of substantial fines and penalties; (2) seizure of the affected merchandise; and (3) restrictions on the importer's future ability to freely bring merchandise into the United States. The Mod. Act requires importers to use "reasonable care" in determining the classification, value and country of origin of goods imported into the United States. The failure to properly classify, value and determine the country of origin of merchandise can result in significant delays in clearing the merchandise through Customs, substantial costs in acquiring new quota, and the assessment by the Customs Service of fines and penalties. The policies set forth in this policy statement are designed to assure adherence to the reasonable care standard and to avoid violations of the laws and regulations governing importation. These policies must be reflected in the sourcing procedures of each affected business unit of the Company.

1. Classification

When a product is classified, it is identified as to character, type and composition. This determines not only the rate of duty that applies, but what other types of restrictions, such as quotas, or other government agency regulations, apply. The Company's policy is that the correct classification of all imported merchandise must be determined, appropriately documented, and accurately communicated to our customs broker and to U.S. Customs. Each business unit's sourcing procedures will address the following subjects:

  • Information needed to classify a product correctly.

  • When to pursue a classification decision from U.S. Customs, either through "preclass review" or an individual binding ruling. In a preclass review, a Customs officer meets with us on a scheduled basis to review a group of products and provide a legally binding decision. We also have the option of requesting a "binding ruling" on a single product, which produces a faster and more targeted decision. The sourcing procedures will prescribe procedures for determining when a decision from Customs is needed, and for obtaining a ruling either through a preclass review or binding ruling.

  • Correct Information To Customs Broker. In practice, our customs brokers are responsible for insuring that all imported merchandise is classified in accordance with the rulings we receive from Customs. Our brokers do so by matching the invoice description of the item with the descriptive information contained in the applicable ruling or preclass. To assure that our customs brokers receive accurate information, the sourcing procedures will contain specific procedures for:

    1. assuring that the invoice description contains the same product identifiers (style number, name and other references) that are utilized in our pre-class reports;

    2. consultation with the Customs Service, or our customs brokers or attorneys, when there is any question regarding the proper classification of an item;

    3. obtaining laboratory analyses from accredited laboratories when classifications depend upon technical criteria (for example, water resistance, fiber percentage, or fragrance composition); and

    4. documenting all advice and analyses received.
2. Valuation
"Dutiable value" begins with the price of the product, adjusted as necessary to include all the cost elements that, by law, are subject to duty. The appropriate amount of duty is determined by applying the applicable duty rate (as determined by the classification of the merchandise) to the dutiable value. It is the Company's policy that all elements of dutiable value must be properly determined and clearly disclosed to the Customs Service. To assure that dutiable value is properly declared, each affected business unit's sourcing procedures will contain the following:

  • A detailed explanation of how dutiable value is determined; and

  • Procedures for consultation with the Customs Service, or our customs brokers or attorneys, when there is any doubt about the dutiable value of any merchandise, and the appropriate method for documenting the advice received in connection with any such consultation.

3. Country of Origin
Country of origin determines how an imported product should be marked, labeled and documented, and may control whether a product qualifies for a preferential tariff program. With respect to textile products and wearing apparel, country of origin also governs the administration of quota programs that restrict access to U.S. markets for many categories of merchandise. It is the Company's policy that all goods imported into the United States must be: (1) properly labeled as to country of origin; (2) properly documented as to country of origin; and (3) accompanied by applicable visas or other documents required for entry.

Each product and container must bear a label which properly identifies the product's true country of origin, determined in accordance with applicable law or regulations.

To avoid the mislabeling or improper documentation of goods, each affected business unit's sourcing procedures will contain the following:

  • A detailed explanation of how to determine country of origin and the methods available for carrying out this responsibility.

  • Procedures assuring that every garment bears a label properly identifying its country of origin.

  • Procedures assuring the following prior to placing an order with a new vendor or supplier:
    1. If the vendor is the importer, that the vendor has certified that it has in place, and follows, an approved country of origin compliance program.

    2. If the business unit is the importer, that the vendor and its subcontractors and suppliers have physical facilities which are capable of manufacturing the merchandise under consideration, within the time allotted, taking into account goods the vendor may be obligated to produce for others (together with additional procedures designed to verify periodically, after the order is placed, that production is actually occurring in the manner contemplated).

  • Procedures assuring that the business unit and its vendors maintain proper records documenting that goods have been manufactured in compliance with country of origin requirements.

Compliance with Other Federal Laws
There are other federal laws and regulations that apply to the domestic and imported products we sell, including those administered by:

  • The Federal Trade Commission with respect to the manner in which products are labeled and advertised;

  • The Consumer Product Safety Commission with respect to testing standards for flammability, and hazards created by small parts and sharp edges, or by excessive lead in paint, dyes or other surface coatings; and

  • The Food and Drug Administration with respect to the safety, quality, testing and labeling of a wide range of products (including, for example, non-prescription sunglasses, toothbrushes, ceramic products, and cosmetic, bath and therapeutic products).

The Company's policy is that all laws regulating our business must be strictly obeyed. The sourcing procedures of each affected business unit will establish procedures to assure compliance with the applicable laws and regulations administered by these federal agencies.