ILAB - Hand-Knotted Carpets

A. Introduction

The use of child labor in the hand-knotted carpet industry has been widely reported and documented in recent years. ¹ International organizations, human rights groups, and NGOs have described the dangerous conditions under which children make carpets, often in bondage and without pay.

This chapter discusses a number of private-sector initiatives to reduce child labor in the hand- knotted carpet industry. Section B provides a brief profile of the industry, followed by a discussion, in Section C, of child labor in the hand-knotted carpet industries of selected producing countries. Section D discusses consumer labeling programs, including their claims, structure and implementation procedures. Finally, Section E reports responses of U. S. importers and retailers of hand- knotted carpets to the child labor issue, based on a recent voluntary survey conducted by the Department of Labor.

B. Industry Profile

Nearly all hand-knotted carpets are made for export, with less than ten per- cent sold for use in their country of origin. ² The largest carpet exporting countries are Iran, India, China, Pakistan, Turkey, Nepal, and Egypt. ³ The United States and Germany are the world's leading importers of hand- knotted carpets. ⁴ The United States, which produces no hand-knotted carpets of its own, imported $329 million worth of hand- knotted carpets in 1996. ⁵

Figure II- 1 below lists the top suppliers of hand- knotted carpets to the United States. As Figure II-1 indicates, India is the largest single source of U. S. imports of hand- knotted carpets, followed by China; together they accounted for about 70 percent of total U. S. imports of hand- knotted carpets in 1996. Pakistan, Turkey, and Nepal accounted for another 25 percent of imports, while the remaining 5 percent came from Romania, Egypt, and other countries. ⁶ For many years, Iran was the largest U. S. supplier of hand- knotted carpets. These imports stopped in the late 1980s due to a U. S. trade embargo, thus making room for a larger volume of exports from India, China, Turkey, and Nepal. ⁷ Table II- 1 shows U. S. imports of hand- knotted carpets by country and dollar value. As Table II- 1 illustrates, there has been a significant increase in hand- knotted carpet imports from India and Nepal in recent years.

A wide variety of U. S. retail outlets sell hand- knotted carpets. Mass mer- chants, do- it- yourself home centers and national chains sold 34 percent of all hand- knotted carpets in 1996. ⁸ The bulk of carpets sold in these stores are low-priced and low-end quality rugs. ⁹ Department stores accounted for another 27 percent of total sales, followed by carpet speciality stores (22 percent), furniture stores (9 percent), and catalog and gift stores (8 percent). ¹⁰

Table II-1
U.S. Hand-Knotted Carpet Imports, 1989-1996,
Top 10 Suppliers in 1996
(in millions of U.S. dollars)

	1989	1990	1991	1992	1993	1994	1995	1996
India	126.9	121.5	129.6	154.5	150.0	154.4	155.4	146.9
China	87.2	76.8	80.6	102.1	86.6	70.3	94.7	83.0
Pakistan	58.6	54.9	62.7	60.4	45.3	47.9	52.3	52.9
Turkey	16.5	18.6	24.2	30.8	23.1	29.1	25.6	21.4
Nepal	2.4	3.2	2.5	2.9	3.7	5.1	7.8	9.5
Romania	3.5	1.6	1.2	0.7	0.5	2.0	3.0	2.9
Egypt	0.3	0.6	0.7	0.8	0.8	1.1	2.0	2.8
Germany	0.6	1.0	1.1	1.0	1.0	0.7	1.0	1.3
France	0.6	0.3	0.2	0.4	0.3	0.6	0.6	0.6
U.K.	0.8	0.7	0.4	0.2	0.4	0.5	0.5	0.5
Total Imports	311.8	292.9	312.1	361.3	319.2	320.3	351.0	329.6

A number of actors are involved in producing, exporting, importing and selling hand- knotted carpets. The chain of production for the carpet industry varies somewhat depending on the country of production, but usually involves the following actors:

Figure II- 2 below illustrates the chain of production and distribution for the hand- knotted carpet industry. This schematic shows the complex flow of communi- cation and goods that is usually involved in the production, import and sale of hand- knotted carpets.

C. Child Labor in the Hand- Knotted Carpet Industry

The use of child labor in the production of hand- knotted carpets in South Asia has been widely reported and documented. Numerous reports have described large numbers of children working illegally in the carpet industries of India, Nepal and Pakistan, despite the fact that these countries have laws restricting the employ- ment of children. ¹³ The actual extent of child labor in the hand- knotted carpet industry remains unknown; reliable statistics are unavailable and existing estimates differ significantly. Nonetheless, reports have documented that many children par- ticipate in almost every stage of carpet making including: dyeing, spinning yarn, weaving, knotting, cutting and washing carpets. ¹⁴

Production of hand- knotted carpets is highly labor intensive. ¹⁵ Weavers sit in front of a loom knotting wool yarn around a warp. When a row is completed, weavers use a long metal bar to beat the knots tightly into place. The knots are then cut, and the weavers begin the next row. Many factors determine the price of hand- knotted carpets, but the major ones
are the number and size of knots per square inch, the complexity of the design and the quality of the wool. ¹⁶ Expensive, higher quality carpets usually have more intricate patterns, more knots per square inch and are made entirely of wool, with the most expensive made entirely of silk. ¹⁷

In June 1997, U. S. Department of Labor officials visited facilities producing hand- knotted carpets in India, Nepal and Pakistan. ¹⁸ Some of the following country- specific information on child labor was collected in connection with those visits.

Pakistan

Estimates of the number of children working in Pakistan's carpet industry, including child laborers in debt bondage, range from 120,000 to 1 million. ¹⁹ In the two major carpet weaving regions of Pakistan, the Punjab and Sindh regions, children have been found weaving in rural village homes, small rural weaving centers, and urban factories. ²⁰

Carpet weaving centers are often located in small enclosed buildings where children generally work and sleep, guarded by watchmen day and night. ²¹ Children knot rugs in small, confined, dimly-lit and poorly-ventilated spaces where they are exposed to chemical dyes that cause numerous skin and respiratory ailments. ²² Some reports have also described instances of abuse and beatings by loom owners. ²³

Child weavers in rural areas sometimes work as bonded laborers. ²⁴ Debt bondage occurs when a family takes out a loan secured by a child's future labor. ²⁵ Contractors hired by carpet exporters "entice residents of small villages to engage in carpet production with loans, equipment, and promises of large sums of cash." ²⁶ Absence from work due to illness, weaving mistakes and delays in the production schedule are often punished with wage deductions creating an inescapable cycle of debt. ²⁷

India

Although there is considerable disagreement over the exact number of chil- dren weaving in India's carpet industry, the use of child labor in carpet production has been widely documented in the major carpet producing region of India. ²⁸ The ILO reports that estimates of child labor in India's carpet industry range from 50,000 to 1,050,000. ²⁹

In India, hand- knotted carpets are usually made in small workshops or loomsheds. ³⁰ Most of India's child weavers are young boys. ³¹ Children may work 10 to 14 hours a day six to seven days a week. ³² They receive little or no time off, even when sick or during holidays. ³³ The long days spent in poorly- lit and cramped positions result in injuries and work related illnesses. Cuts and wounds are com- mon. Loom owners have been known to "treat wounds by putting sulphur from match heads into the cuts and then lighting them on fire, thereby sealing the wound." ³⁴ By the time many of these children reach the legal employment age, their hands are badly damaged, their eyesight has grown weak, and their growth is stunted. ³⁵

Some of the children working in India's carpet belt are bonded laborers, trafficked from the neighboring state of Bihar or from Nepal. ³⁶ One report alleges that 10 to 20 percent of child laborers in the carpet industry are bonded. ³⁷ These children are often "forced to work long hours... for no wages or nominal wages... some being ill- treated, beaten, tortured, abused, branded, and kept half fed, half clad." ³⁸

Nepal

Carpet production in Nepal is concentrated in and around the Kathmandu Valley. Estimates of child labor in the carpet industry range from approximately 3,000 to 150,000. ³⁹ Most of these children are boys and girls between the ages of 12 to 14. ⁴⁰ Recent reports suggest that child labor in Nepal's carpet industry may be declining. ⁴¹

Unlike India and Pakistan, where large amounts of carpet production take place in households and small centers in rural areas, carpet production in Nepal largely occurs in urban centers and factories. Working conditions for children in Nepalese carpet factories, however, are very similar to those previously described for Pakistan and India. The children work long hours for little or no pay in dangerous and unhealthy conditions. ⁴²

As in Pakistan and India, children are also reported to be working in debt bondage in Nepalese carpet factories. ⁴³ Brokers in Nepal, also known as naikes , give loans to parents in rural areas. The parents then send their children to Kathmandu to work off the loan by weaving carpets. ⁴⁴ Young girls are also known to have been trafficked from Nepalese carpet factories into the Indian sex industry; between 5,000 and 7,000 girls ages 10 to 17 are reportedly trafficked each year from Kathmandu to India. ⁴⁵

D. Consumer Labeling Programs in the Hand- Knotted Carpet Industry

1. Introduction

The hand- knotted carpet industry was one of the first industries to attract extensive public scrutiny due to reports of child labor. In the late 1980's, consumer, religious, and human rights NGOs in Europe, North America, and South Asia launched information campaigns showing consumers the conditions under which children could be found weaving carpets.

Media publicity and consumer concern stemming from these campaigns gained the attention of the carpet industry. Carpet producers, exporters, importers, and retailers feared the adverse publicity would lead to decreased sales. ⁴⁶ Their concerns provided an impetus for new efforts � including consumer labeling programs � to address child labor and stem disruption of the market. Actors in these efforts include carpet manufacturers, exporters, importers, and governmental, non-governmental and international organizations. Some of these groups focus on the removal of children from the carpet industry, while others hope to alleviate the broader social and economic conditions that cause children to work. All wish to improve the image of this industry, which provides a livelihood for millions of South Asian families and income for exporters, importers and retailers throughout the world.

RUGMARK®, established in India during 1994 and expanded to Nepal the following year, was the first carpet labeling initiative to address the problem of child labor. ⁴⁷ Three other labeling programs evolved soon after: Kaleen, STEP, and Care & Fair. Kaleen is an initiative of the government of India. STEP, a private initiative of Swiss NGOs and industry representatives, works in India, Nepal and Pakistan with plans to expand to Iran, Morocco, Egypt, and Turkey. Care & Fair was created by German importers and is now established in India, Nepal, and Pakistan. RUGMARK and Kaleen are carpet labeling initiatives, with individual carpets carrying labels. In contrast, the STEP and Care & Fair programs certify entire companies rather than individual carpets.

The four labeling programs discussed in this section are new and still evolving; they differ greatly in focus and scope. The structure of the carpet industry presents inherent challenges to any labeling effort, particularly those with a commitment to monitoring and enforcement. As discussed in Section C, the Indian and Pakistani carpet industries are geographically dispersed over large regions, with weaving often taking place in small loom sheds in remote villages. In these countries and in Nepal, several layers of contractors and middlemen can make the chain of production difficult to trace. Faced with these challenges, some labeling pro- grams, such as STEP and Care & Fair, have deliberately focused their efforts solely on social programs for children and their families in carpet- producing regions rather than certifying carpets as child labor- free and implementing a monitoring system to back up such a claim. Others, such as RUGMARK and Kaleen, have established monitoring components in addition to social programs.

The monitoring and certification programs of the RUGMARK initiative, although still new, are the most developed, with an extensive system of checks and balances. Paradoxically, labeling programs that monitor for child labor are particularly vulnerable to criticism, as mistakes and violations inevitably occur, requiring programs to constantly refine their monitoring and enforcement processes. Initiatives that are limited to "softer" commitments, such as financing child welfare programs, have less risk of not fully meeting their objectives.

This section describes the structure and implementation of each of these labeling programs, based on information obtained from the programs themselves and from U. S. Department of Labor site visits to India, Nepal, and Pakistan. Finally, other related initiatives will be discussed.

2. RUGMARK

a. Program Overview

Rugmark

RUGMARK is a private, voluntary certification program founded in September 1994 to provide market-driven incentives for Indian carpet manufacturers to produce without child labor. The program's founders include Indian and international NGOs, the Indo-German Export Promotion Program, a small segment of the Indian carpet industry, and the United Nations Children's Fund (UNICEF). Conceived at the height of the media campaign exposing theplight of child carpet workers in the early 1990s, RUGMARK aims to reduce the use of child labor in the industry and thereby avoid the risk of consumer boycotts. It also seeks to improve the long-term prospects of children who are removed from jobs in the industry as a result of the program. ⁴⁸

Start- up funds for RUGMARK were provided by the German Development Agency (GTZ). ⁴⁹ By April 1996, the Indian RUGMARK Foundation had become self- sufficient, its operations financed by the licensing fees of participating manufacturers and exporters. The Nepal RUGMARK Foundation, established in December 1995, receives funding from the UNICEF Committee for Nepal, the Asian American Free Labor Institute (now part of the AFL- CIO's American Center for International Labor Solidarity), the German Development Agency, and licensing fees. ⁵⁰ Efforts are now underway to establish RUGMARK in Pakistan.

While RUGMARK originated in India, today it operates as an international trademark and certification program for carpets made according to certain criteria. Its principal goals are to:

The non- profit RUGMARK International foundation was created in Germany in early 1996 to establish the RUGMARK trademark and license its use to national foundations in producing and importing countries. Once fully operational, its board of directors will be responsible for maintaining uniform standards across programs in participating countries of production. ⁵² At present, however, RUGMARK Interna- tional primarily manages the
trademark system.

The RUGMARK trademark was registered in Germany in December 1995 and in the United States in April 1996. In 1996, RUGMARK foundations were established in Germany and the United States to protect the trademark and promote and market RUGMARK labeled carpets domestically. ⁵³ Importers and retailers are authorized to import and sell RUGMARK carpets through licensing agreements with these founda- tions. In the Netherlands, there is a program representative who serves as a contact for importers interested in becoming licensees. ⁵⁴

The RUGMARK foundations in India and Nepal are autonomous, non- profit institutions responsible for implementing RUGMARK criteria locally. They license manufacturers and exporters, operate monitoring and inspections programs, track carpets, and establish rehabilitation programs for children removed from carpet pro- duction. To maintain a balance of interests, the board of directors of each national foundation includes representatives of industry, NGOs, and international organizations.

The RUGMARK label, placed on the back of each carpet, displays the Foundation's logo � a carpet with a smiling face. It is made of silk acetate with an adhesive backing. Below the logo is the inscription "RUGMARK" and a serial number assigned by the local foundation in India or Nepal. Through this number, pro- gram officials state they can trace the carpet back to the exporter responsible and the loom on which it was woven. ⁵⁵ There is no text on the label explaining its significance.

The Indian RUGMARK Foundation states that its label "assures importers and consumers that carpets with this label have been manufactured/ exported by a company which has committed itself to work without illegal child labor, and which is subjected to an effective surveillance mechanism so that it remains so." ⁵⁶ Other RUGMARK foundations and program officials characterize the meaning of the label differently, particularly regarding the degree to which the label guarantees production without child labor. ⁵⁷ RUGMARK officials acknowledge these variances, which they hope to resolve shortly with the formation of RUGMARK International's board of directors under a new constitution. The board will include representatives from each national foundation and will have centralized decision- making authority on RUGMARK standards. ⁵⁸

b. Program Structure

The three main components of the RUGMARK program are producer licens- ing, monitoring, and rehabilitation programs for child weavers. Both the Indian and Nepalese programs function according to the criteria, procedures, and inspection model originally established by the Indian RUGMARK Foundation. Because of this similarity, the following description focuses on structure and rules of the more mature Indian program. The greater centralization of the carpet industry in Nepal has led to certain procedural adaptations, which are also noted.

The RUGMARK program consists of two systems of licensing � one for importers and/ or retailers in consuming countries; the other for exporters and/ or manufacturers in producing countries. ⁵⁹ Importers and retailers who receive a license to import and sell RUGMARK carpets must pay a fee of one percent of carpet export value into a common fund overseen by RUGMARK International and UNICEF. These funds are used to set up educational programs for children removed from carpet work. RUGMARK Germany is considering raising this fee to 1.4 or 1.5 percent to help cover promotional and marketing costs. ⁶⁰ In the United States, RUGMARK licensees must pay a total fee of 1.75 percent of carpet export value. The additional 0.75 percent is used to cover RUGMARK- U. S. A. 's administrative and operating costs. ⁶¹

In producing countries, licensed exporters and manufacturers are required to pay a separate license fee of 0.25 percent of the export value of all carpets exported with the RUGMARK label. ⁶² Their fee is used to finance the local program's administrative expenses, inspections and monitoring, and the issuance of RUGMARK labels.

Carpet exporters and/ or manufacturers applying to become RUGMARK lic- ensees must abide by the following criteria:⁶³They must be a dealer, manufacturer, or exporter of carpets; ⁶⁴

Before submitting an application, prospective licensees must meet with all of their loom owners, contractors, and/ or subcontractors to inform them of their participation in the RUGMARK program, the commitment being made, and their need to cooperate fully with loom inspections. ⁶⁶

As of June 1997, RUGMARK India had licensed 164 manufacturers and ex- porters and certified the export of about 636,000 labeled carpets. ⁶⁷ The newer and more centralized Nepalese program had licensed 27 companies and certified the export of about 6,500 carpets as of May 1997; another 3,000 labels were on order. ⁶⁸ Most RUGMARK carpets were shipped to Germany; far fewer were sent to the United States, Italy, Spain, Switzerland, the United Kingdom, France, the Netherlands, and Japan.

There are 28 RUGMARK- licensed importers in Germany and one each in Belgium, Luxembourg, the Netherlands, Switzerland, and the United States. ⁶⁹ In Germany, RUGMARK carpets account for 30 percent of hand-knotted carpet imports from India and 10 percent of total imports. ⁷⁰ KIBEK , a leading German carpet im- porter supplying almost 15 percent of the German market, exclusively imports RUGMARK carpets from countries where the label is available. ⁷¹ There is one RUGMARK- licensed importer, Odegard, Inc., in the United States. ⁷²

c. Program Implementation

In both India and Nepal, RUGMARK criteria are monitored and enforced through an elaborate system of licensee approval, random inspections, and carpet tracking. ⁷³ License applicants must provide a "loom list" identifying all looms on which their carpets are produced. The list is checked against applicants' export figures over the previous two years, in both value and square meters sold, to determine whether the number of looms reported is adequate to have produced the exports claimed. This procedure is meant to prevent under reporting of looms that could enable manufacturers to utilize illegal child labor on unlisted looms.

Once all application materials are completed, RUGMARK inspectors visit a random sample of looms on the prospective licensee's loom list. If any children are found working illegally, the loom owner, or factory owner in the case of Nepal, is given a short period of time to replace them with adults. Wherever possible, paren- tal consent is obtained so that the displaced children can be placed in rehabilitation programs. Discovery of child labor during a second unannounced visit leads to the rejection of the application. ⁷⁴ (Likewise, if any unlisted looms are found to be work- ing for the prospective licensee, the application is rendered invalid.) This information is entered into a computerized database, enabling the central office to keep track of problematic producers.

When all criteria are met and inspections satisfactorily completed, the applicant is granted a RUGMARK license. Each loom is assigned an individual identification number to facilitate future inspections and tracking of carpets. This loom identification number must be prominently displayed at the loom site, and additions or removal of looms must be reported to the local RUGMARK foundation.

RUGMARK licensees are required to keep detailed records of each order they receive through the program. The licensee must send a copy of each purchase order to the local RUGMARK office, along with detailed information on each carpet's production. Before production begins, each carpet is given a serial number. Licensees must maintain a book for each loom recording the dates of all orders, carpet quality and size, date when production is initiated and completed, the carpet's serial number, and the invoice date and number. ⁷⁵ During the production of each carpet, which can take from one to nine months, RUGMARK inspectors can make unannounced visits at any time to verify that no child labor is being used and that the carpet corresponds with the specifications submitted.

Monitoring is a key component of the RUGMARK labeling system. Inspections are carried out by professional RUGMARK inspectors, but representatives of local NGOs are permitted to accompany them at any time. ⁷⁶ According to program materials, findings from inspections are treated as confidential. When inspectors discover violations by loom owners, the local RUGMARK foundation informs the responsible licensee, and a joint decision is made regarding appropriate actions to be taken. ⁷⁷

Several safeguards have been devised to preserve the integrity of the inspection process:

The inspectors' reports contain details on the looms visited, including information about children found working (father's name and address; age; whether bonded, local, or migrant; and specifics on school attendance), as well as informtion about the carpets being produced and other weavers and their wages. Inspectors are also asked to include information explaining any apparent absence of workers from a loom. The inspector may also note whether any children were found working in off-loom activities such as spinning yarn or clipping, binding, and washing carpets.

As with license applicants, licensees are given one warning before they are sanctioned for the use of child labor. If any children are found working illegally in sites for which the licensee bears responsibility, either directly or indirectly, the licensee is warned and a second unannounced visit is made within weeks. If the children are still present during the follow-up visit, the responsible licensee is decertified and can no longer obtain RUGMARK labels. ⁷⁸

Once a carpet is completed and ready for export, the local RUGMARK foundation issues a label containing the appropriate carpet identification number. The label is then affixed to the back of the carpet by the exporter. ⁷⁹ When the carpet is ready for shipment, the exporter must furnish a copy of the packing list, including the RUGMARK label number and a detailed description of the carpet. This docu- mentation links the carpet back to the actual loom on which it was produced.

As of June 1997, RUGMARK India reports having conducted a total of 22,800 inspections of the 18,400 registered looms. ⁸⁰ During the course of these investiga- tions, 1,060 children were found working illegally on 635 looms. Of these children, somewhere between 15 and 30 percent were bonded; the remaining children were either hired locally or working alongside their families. As of August 1997, RUGMARK Nepal had registered 1,868 looms. Since beginning inspections in December 1996, inspectors had made 1,754 unannounced visits to licensees' facilities, finding 143 children illegally working at looms. Some of the instances were repeated sightings of the same children; none of the children were bonded. ⁸¹

Rehabilitation and education of children found during these inspections is the third major component of the RUGMARK program. These activities are funded through importers' licensing fees. RUGMARK India's initial intent was for its educational programs to be operational before inspections began, so that children removed from the looms could receive services immediately. However, there was a lag between the initiation of inspections and the establishment of complementary rehabilitation facilities. This was due to the early emphasis on loom inspection and monitoring, logistical delays in obtaining funds from importers, and problems transferring funds to India. ⁸² As a result, some working children initially found during inspections had been dismissed and could not be located later, when these services were available.

Today, however, RUGMARK India operates two facilities for children, both of which were established with importers funds:

RUGMARK officials acknowledge that they have had limited success in plac- ing bonded children into rehabilitative programs. They claim that one reason has been the difficulty of locating these children's native villages in remote areas of Bihar and convincing parents to forfeit their children's earnings. To address these difficulties, RUGMARK officials are looking into establishing schools and rehabilitative programs in the areas of Bihar from which children are traditionally recruited. ⁸⁶

RUGMARK Nepal now operates three rehabilitation schools, each of which houses 50 displaced carpet children. The RUGMARK schools have received considerable funding and guidance from UNICEF Nepal, the German Development Agency (GTZ), the Asian-American Free Labor Institute (AAFLI - now part of the AFL- CIO's American Center for International Labor Solidarity) and the Underprivileged Children's Education Program (UCEP). The schools are intended to house, clothe, feed and educate rescued children until they are 14. Most students are 11 and 12 years old; few have any previous education. RUGMARK Nepal also works closely with an AAFLI/ UCEP transit center, which provides short- term support for displaced carpet children between factory and school.

RUGMARK Nepal has advised its licensees to retain their child laborers until they are either placed in schools or returned to their families. ⁸⁷ A baseline survey, carried out by AAFLI in December 1995, identified 268 children in need of placement. RUGMARK Nepal began moving children out of licensed factories a year after the baseline survey, in December 1996. By that time, some of the initial 268 were old enough to work; others had left their jobs or voluntarily returned to their families. On the other hand, the licensing of additional factories had also added new names to the placement list. ⁸⁸

As of September 1997, RUGMARK Nepal had removed a total of 197 children from employment in licensed manufacturers' facilities. Of these, 150 had been placed in rehabilitation schools. The remaining 47 were in the transit home awaiting placement in a fourth rehabilitation school, scheduled to open shortly. ⁸⁹ The closing of AAFLI's Nepalese program in December 1997 could leave the transit home unfunded unless RUGMARK can find alternative funding.

The UNICEF funding of the non-formal component of the rehabilitation programs will be discontinued in February 1998. The RUGMARK Nepal Executive Director has indicated he is now searching for new donors for these programs. He also expressed concern that because of funding difficulties, the Foundation may have to enroll future displaced children in formal schools. ⁹⁰ With little or no previous schooling, child weavers often lack the skills necessary to make this transition. According to a RUGMARK U. S. A. official, however, significant importers' fees have been collected in the United States and Germany from the sale of Nepalese RUGMARK carpets. These funds have not yet been released to RUGMARK Nepal, but are earmarked for its rehabilitation efforts once other sources of funding are phased out. ⁹¹

d. Findings from Site Visits

In June 1997, U. S. Department of Labor officials met with representatives from the Indian and Nepal RUGMARK Foundations and NGOs and visited carpet production sites. Information gathered during these visits indicate RUGMARK is making a good faith effort to implement transparent monitoring and tracking systems to ensure licensees are abiding by RUGMARK standards. Most agree that RUGMARK's very visible presence has helped raise general awareness of child labor in the indus- try and contributed to reducing the use of child labor in carpet production in both India and Nepal.

In Nepal, where there are relatively few RUGMARK licensees, all of whom are concentrated in the Kathmandu Valley, RUGMARK inspectors have had a very physical presence since initiating monitoring in December 1996. Thus far, RUGMARK Nepal has made an average of 65 visits per licensee. Members of the Nepalese industry, which is generally supportive of RUGMARK, are cautiously optimistic that real advances are being made toward eliminating child labor.

In India, where carpet production takes place in small, often remote villages dispersed over a large geographic area, the challenges of implementing an inspection system are enormous. Many proponents of other labeling initiatives and critics of RUGMARK argue that such an effort is simply not possible. Despite the physical difficulties of monitoring, however, RUGMARK is trying scrupulously to maintain the integrity of its inspection and record- keeping programs. During the course of 22,800 inspections of 18,400 registered looms, RUGMARK inspectors have found over 1,000 illegally employed children. These figures illustrate the seriousness with which the monitoring program is being implemented. According to the Executive Director of RUGMARK India, when inspections were first initiated, children were found on every sixth or seventh loom. Today, that ratio is closer to one out of every twelve or thirteen looms inspected. ⁹²

In both India and Nepal, the existing RUGMARK education, transit, and reha- bilitation centers are in full operation. Both programs are planning to establish new schools and rehabilitation facilities to meet present and future needs.

The RUGMARK programs are still very recent, and program officials are still fine- tuning their implementation. Information from site visits suggested some areas in which improvements could be made. Department of Labor officials found two instances where licensees appeared not to have registered all of their looms to national RUGMARK offices. RUGMARK requires that they do so, whether or not the looms are used to produce RUGMARK carpets. ⁹³ One large exporter and RUGMARK licensee in India told a Department of Labor official that he registered only those looms used to produce RUGMARK carpets. ⁹⁴ In a RUGMARK- licensed factory in Kathmandu, another Department of Labor official observed particularly young weavers at unnumbered looms, working alongside adults who were weaving on RUGMARK-numbered looms. ⁹⁵ It was unclear whether these were new looms that had not yet been registered. In the same factory, a 13- year- old boy, observed spinning yarn, was identified as having just left the transit center to which he had been taken earlier.

At least one large producer in Nepal, along with the affiliated importer in the United States, appear to be taking advantage of an informal relationship with RUGMARK while avoiding the licensing process and related fees. During the initial implementation of RUGMARK Nepal, companies were permitted to become annual members at a cost of 5,000 Nepalese rupees, or about $90, without first becoming licensees. Prospective licensees were placed in this status while awaiting or considering licensing. However, some companies that have declined the opportunity to become licensed have maintained, and attempted to gain publicity value from, their RUGMARK membership.

In Nepal, the RUGMARK Executive Director noted that the Foundation has a stock policy permitting producers to attach interim RUGMARK labels to accumulated carpet inventory once they become licensees. ⁹⁶ This is done in conjunction with an agreement, reached in January 1997 among representatives of the various national foundations, to address importers' concerns that introduction of the RUGMARK label could render their other inventory unmarketable. ⁹⁷ At that meeting, RUGMARK rep- resentatives agreed that licensed importers, exporters, and manufacturers would be permitted to request interim tags for carpets produced by RUGMARK licensees before they became licensed. These tags would contain the following text:

To date, none of these tags has actually been used. ⁹⁹ However, there appears to be some confusion in Nepal regarding how this policy should be implemented, if necessary. A RUGMARK- U. S. A. representative stated that this issue would be dis- cussed with RUGMARK Nepal officials to ensure they understand how the policy is to be implemented. ¹⁰⁰

As noted earlier, RUGMARK requires that the contractors and subcontractors of licensees also abide by RUGMARK standards. Certain activities are commonly done off premises, e. g., wool- washing; spinning, dying, and dispensing of yarn; and clipping, binding, washing, and packing of carpets. ¹⁰¹ While RUGMARK does monitor some off-loom activities, its officials acknowledge that these checks are not yet sufficient. The Executive Director of RUGMARK India conceded that more children are employed in these activities than RUGMARK is currently able to detect. ¹⁰²

Site visits and conversations with inspectors underscored the challenges of monitoring carpet production for child labor. Age verification is difficult, particularly in the absence of official documents. RUGMARK Nepal inspectors always request workers to show their national identification card ¹⁰³ or an official attestation of age from the home community. If these are not available, the burden of proof is on the worker. He or she may present circumstantial evidence of having reached the age of 14, such as underarm hair, a beaded necklace worn only by married women, ¹⁰⁴ or the presence of a child of his/ her own.

U. S. Department of Labor officials accompanied several RUGMARK inspec- tors in India. At one loomshed, the inspection team encountered a young- looking boy working at a two- person loom with an adult present. They made a rigorous effort to determine whether the boy was working illegally. The adult, claiming to be the boy's uncle, said he was 14 years old. The inspectors asked the boy a series of questions about his age, school attendance, and class level. They also asked him to bring his schoolbooks for inspection and to read from them to demonstrate he was at the appropriate level. Finally, they checked the palms of his hands for callouses. ¹⁰⁵

Locating the looms reported by licensees can be difficult. In one Indian vil- lage, visited by a U. S. Department of Labor official with RUGMARK inspectors, the latter were unable to locate any of the looms or loom owners on the licensee's loom list. 106 Empty looms are another problem encountered during inspections, since it is difficult to discern whether a loom found empty during working hours is normally operated by an adult or a child.

3. The Kaleen Label

a. Program Overview

Kaleen

The Kaleen ¹⁰⁷ labeling program was established in India in June 1995 by the Carpet Export Promotion Council (CEPC), a quasi-governmental body which oversees the mandatory registration of all Indian carpet exporters and issues export licenses. ¹⁰⁸ The CEPC was established by the Indian Ministry of Textiles and is funded through direct grants from the Ministries of Textiles and Commerce and subscription income from industry members. As of mid-1997, the CEPC had over 2000 exporter members.

The CEPC established the Kaleen label and a Child Welfare Fund to address criticism concerning child labor, which was "creating hurdles" to the growth of the Indian carpet industry. ¹⁰⁹ An ILO study notes that "the Kaleen program is intended to make Indian carpets more acceptable to foreign buyers, who have been wary of purchasing Indian carpets following the international publicity concerning child labor." ¹¹⁰ The study also notes that Kaleen may have been established as an intentional rival to the RUGMARK program. ¹¹¹

The CEPC describes the Kaleen labeling system as having the following features: ¹¹²

According to CEPC promotional material, the label signifies that "the user is abiding by the Code of Conduct adopted by the Carpet Export Promotion Council for the eradication of child labour." ¹¹³ This code requires that exporters and manufacturers ensure that "no child labour prohibited by the Child Labour Act of 1986 is employed in their premises," and that all carpets woven for them be produced on registered looms. Although the Child Labor Act of 1986 prohibits the employment of children below the age of 14 in carpet- weaving, it exempts children working with their families, whether or not they attend school. The CEPC code does not address the employment of children in contractor or subcontractor facilities.

The Kaleen label, printed in blue, pink and white, is made of paper with a self- adhesive backing. It consists of the Kaleen logo � a triangle with an inscription along the edges stating "The Hallmark of Commitment for Child Welfare," and "promoted by the Government of India, Carpet Export Promotion Council." Each label has two numbers denoting the fiscal year and a sequential serial number referring solely to the sequence in which the label was issued. Labels are sent directly to the requesting exporters and may be placed anywhere on the back of carpets.

As of May 30, 1997, 572,000 Kaleen labels had been issued to 219 CEPC members, roughly 10 percent of total membership. ¹¹⁴ According to CEPC officials, most of these carpets were exported to Germany and Scandinavia. ¹¹⁵

b. Program Structure

The Indian Government has stated the Kaleen label will be used on all car- pets exported from India. ¹¹⁶ A CEPC promotional brochure conveys two different impressions, in one instance stating that " each carpet exported from India carries the Hallmark of Commitment" (the logo of the Kaleen label), but later stating that labels are only issued to exporters who meet all eligibility criteria. ¹¹⁷ In interviews with U. S. Department of Labor officials, CEPC officials described the use and issuance of Kaleen labels as strictly voluntary and contingent on fulfillment of eligibility criteria. ¹¹⁸According to the "Terms and Conditions for Issuance of Kaleen Label," ex- porters must meet all of the following standards in order to obtain and use Kaleen labels: ¹¹⁹

Some of these criteria are mandatory for all CEPC members, whether or not they choose to use the Kaleen label. For example, as of July 1995, all CEPC members are required to pay 0.25 percent of carpet export value each quarter into the CEPC-administered Child Welfare Fund. ¹²⁰ The CEPC also requires all applicants for an export license to register their looms, a process they consider "basic to enforcing non-use of child labour." ¹²¹ CEPC members may be de- registered if they fail to contribute their quarterly payments into the Child Welfare Fund, ¹²² if they are found guilty of violating the terms of the code of conduct on three occasions, or if they are found to be selling carpets from non-registered looms. ¹²³ Individual looms may also be de- registered by the CEPC if, during inspection, illegal child labor or other labor law violations are found. ¹²⁴ Members wishing to use the Kaleen label are charged a very nominal fee that defrays the cost of the label.

c. Program Implementation

CEPC officials argue that it is impossible to guarantee that a carpet has been produced without child labor given the difficulties of monitoring a decentralized and geographically dispersed industry. ¹²⁵ The CEPC code of conduct states that it is the responsibility of each member to ensure no illegal child labor is employed on their premises and that all work is done on registered looms. Compliance with the CEPC code of conduct and the registration requirement is self- monitored, with inspections of a small share of the loom sites by an outside organization.

A private- sector research and consulting firm, the Academy of Management Studies (AMS), conducts regular loom inspections on behalf of the CEPC. One of the key functions of these inspections is to ensure that looms used in production are registered. The AMS is under a three-year renewable contract to the CEPC to ran- domly inspect 10 to 11 percent of looms on the lists submitted by members. The AMS inspectorate's activities are funded by the Indian Government. According to the CEPC 1995-96 annual report, 400,000 rupees (approximately $11,400) were spent on loom surveillance activities for the six month period ending on March 31, 1996.

d. Findings from Site Visits

During a site visit to India, the Department of Labor gathered further information on the implementation of the Kaleen program. Although CEPC officials argue that it is not possible to guarantee child labor-free production given the difficulties of monitoring the Indian carpet industry, they have stepped up their monitoring efforts by employing the services of AMS. The on- the- ground presence of AMS inspectors and possibility of inspection are probably raising the awareness of CEPC members regarding the child labor issue. These inspections, however, only cover about 10 percent of registered looms. The CEPC has also increased its child welfare efforts and has been successful in collecting a significant amount of funds from its members. Obligation of these funds to projects, however, has been slow.

AMS inspectors have had difficulties locating registered looms. During the first year of inspections under the Kaleen program (October 1995 through October 1996), AMS attempted to inspect about 9,400 registered looms in 360 villages, or 11 percent of looms registered with the CEPC at that time. Over 2,000, or 22 percent, of these looms were either reported to have been sold or could not be located by the inspectors. Of the remaining looms, 43 percent were found to be idle.

The AMS currently deploys six two-person inspection teams. ¹²⁶ The teams conduct inspections on bi-weekly rotations, typically visiting 20 to 40 looms per day in two to five villages, depending on the distances involved. ¹²⁷ At each site, inspectors are required to fill out a two page inspection form requesting details on CEPC registration, details of the carpet being produced, the names and ages of the loom owners and weavers, and their relationships to the head of the family. ¹²⁸

During its first year of inspections, AMS found approximately 8,300 weavers working on the roughly 4,300 active looms. It reported that just 44 percent of these workers were hired labor; the remainder were family members. Of the 2.6 percent of the weavers (217) who were under 14, about half were family members. Since these workers are not considered illegal under Indian law, a total of 1.2 percent of workers (about 100) were considered illegal child labor. AMS was unable to distinguish between full- and part-time child labor. ¹²⁹

A U. S. Department of Labor official witnessed an AMS inspection in the village of Machwan, near Mirzapur. In this village � but none of three others visited � several of the looms had registration certificates posted, as required by the CEPC. The inspecting team asked to see work orders for the carpets on the looms and informed weavers of the requirement that registered looms be free of illegal child labor.

The CEPC provided detailed information regarding the collection of export fees from its members. These data show that during the first two years of the Child Welfare Fund's existence, a total of 17.4 million rupees (slightly less than a half-million dollars) were collected. Fee collection during the first year (13.6 million rupees) was almost four times greater than during the second year (3.8 million rupees). The CEPC confirms that members have been resisting paying this levy. Ac- cording to the CEPC, if all members were paying the fee, 45 million rupees (close to $1.29 million) would be collected annually. In fact, just over 12 percent of all mem- bers have consistently paid the fee.

Those funds that have been collected remain largely unutilized. Of the 17.4 million rupees (approximately $500,000) collected for the Child Welfare Fund to date, CEPC has spent 6.3 percent, or 1.1 million rupees ($ 31,400) on child welfare activities. An additional 1.4 percent � a quarter of a million rupees ($ 7,100) � was spent on advertisements for the Kaleen label. In addition to these expenditures, the CEPC's 1995- 96 annual report details expenditures out of a Child Labour Fund which appear to be primarily for export publicity abroad. CEPC spent 3.8 million rupees ($ 108,600) on this item during that year. According to the CEPC's Executive Director, expenditures have lagged income generated by the fees because of the need to assess applicant NGOs' competence to carry out proposed projects. ¹³⁰

Most of the 1.1 million rupees the CEPC has spent to date on child welfare activities has focused on non- formal educational programs. ¹³¹ CEPC states that it is currently providing funding for twelve schools, though it is seldom the sole source of funding.

Most CEPC-funded centers provide children with a mid-day meal and a 100 rupee (about $2.90) monthly stipend � the two largest expenditure items in the annual budget for these schools. A U. S. Department of Labor official visited Project Mala in the village of Amoi, where CEPC is currently funding two centers. ¹³² Project Mala provides three years of non-formal and vocational education, along with medical check-ups, one free meal a day, and, until recently, the monthly stipend. Mala found that when it disbursed the stipend directly to a child's parents, they used the money to retire family debt or for other purposes, rather than to further the educational or vocational prospects of their child. Therefore, as of June 1997, Project Mala terminated the stipend and began placing the monthly funds into a special account for each student. After three years in the program, the children will apply to use these accumulated funds. They will receive a 3,600 rupee lump sum (about $103) for projects such as start-up capital for entrepreneurial activities, including the purchase of a sewing machine, or continuing education.

In addition to the non-formal day schools, the CEPC is considering a proposal to establish a boarding school facility for 30 former bonded child laborers. The executive director told a U. S. Department of Labor official that in the future, CEPC hopes to be the sole funder of school programs.

4. STEP Foundation for fair conditions in carpet production and carpet trade

a. Program Overview

Step

The STEP Foundation for fair conditions in carpet pro- duction and carpet trade was established in Switzerland in October 1995. ¹³³ It is a joint initiative of the Swiss Association for a Clean Oriental Carpet Trade (IGOT) � an industry group � and five NGOs. ¹³⁴ STEP, which is an abbreviation for "Stiftung fur gerechte Bedingungen in Teppich-Herstellung und Handel" (Foundation for fair conditions in carpet production and carpet trade), also signals the way this program professes to pro- ceed: "slowly but thoroughly, 'step by step.'" ¹³⁵

Program founders contend that removal of children from carpet production hinges on the ability of their parents to support them. The program therefore targets work and health conditions of all carpet workers, adults as well as children. STEP founders also contend that ultimate responsibility for alleviating exploitative working conditions rests with those who purchase and sell hand- knotted carpets. ¹³⁶ While child labor is a motivating force behind this program, so too are environmental concerns and improving general working conditions in the hand-knotted carpet industry.

The STEP program seeks to promote voluntary responsibility on the part of both producers and importers. Unlike RUGMARK and Kaleen, the STEP program provides a label to companies, not individual carpets. STEP standards encompass a broad range of labor and environmental issues; not solely child labor. The Foundation approves the business ethics of specific importers and retailers by means of STEP licensing agreements, which authorize them to use the STEP logo in their publications and advertising. In turn, STEP maintains a register of approved suppliers that meet its ethical guidelines.

The STEP program is administered through its office in Berne, Switzerland (STEP/ Europe). The STEP Foundation council, comprised of representatives of the six founding organizations, meets quarterly and controls the program activities. STEP programs exist in India, Nepal, and Pakistan, and preparations are underway to establish programs in Iran, Morocco, Egypt and Turkey. ¹³⁷ There are currently two STEP representatives in Nepal and one in India.

b. Program Structure

The STEP Foundation seeks "to increase market opportunities for respon- sible and transparent businesses; enable better working conditions and remuneration for adult workers; provide positive exposure for producers and importers respecting proper working conditions; promote progressive elimination of abusive child labor as part of fair working conditions; support alternative income for families to reduce pressure on children; support educational programs, both for children and for illiterate adults; and provide countrywide monitoring and verification of STEP standards." ¹³⁸

It pursues these objectives using the following four tools:

The STEP code of conduct, covering all hand-knotted carpets sold by license holders, is an agreement between the licensee and the STEP program itself. ¹⁴⁰ Importers and retailers who sign this code agree to take certain steps to improve conditions in the industry: ¹⁴¹

Licensees are permitted to use the STEP logo to advertise their participation in the program. This logo contains the word STEP superimposed on a Chinese symbol for long life, often found on Chinese carpets. ¹⁴² The logo contains no written information about the STEP program. Rather than appearing on individual carpets, it is displayed on licensees' showroom windows, in their advertisements, and on items such as stationary and business cards. The logo is intended to signal that the bearer is attempting to implement STEP-established employment and environmental standards by importing carpets only from STEP-registered producers, i. e., those whose labor and environmental practices have been inspected and approved by Foundation representatives. ¹⁴³

To obtain a STEP license, importers and retailers must first obtain the recommendation of two existing STEP license holders. They must also sign the STEP Foundation code of conduct discussed above. ¹⁴⁴ In considering prospective licensees, the Foundation also takes into account the views of the in- country STEP representatives.

In carpet- producing countries, producers and exporters may participate in the STEP program through inclusion on the STEP register. When an importer applies for a STEP license, all producers and suppliers doing business with the company are required to be on the STEP register. Each supplier must be identified, contacted, advised of, and inspected for compliance with STEP standards. ¹⁴⁵ Registered carpet manufacturers and their subcontractors must agree to allow regular, unannounced inspections by STEP and/or affiliated NGOs.

STEP's administrative and social program costs are primarily paid by European licensees. Although the six founding organizations provide leadership, their financial contributions are relatively minor. The Swiss Federal Department of Foreign Economic Affairs has provided some start-up funds for the program's first five years of operation, to be supplemented by STEP members' contributions. STEP-licensed importers and retailers are expected to pay a fee of four Swiss francs (about $2.40) per square meter for every carpet sold. These funds pay for visits to carpet manufacturing sites, public relations, and support of developmental projects. ¹⁴⁶ Participating manufacturers are not required to pay fees. ¹⁴⁷

c. Program Implementation

As of July 1997, there were a total of 11 STEP license-holding importers in Switzerland representing 22 percent of the Swiss carpet trade. The STEP register now includes 16 carpet suppliers in India, 8 in Nepal, 5 in Pakistan, 2 each in Morocco and Turkey, and 1 in Egypt. ¹⁴⁸

The Indian and Nepalese programs became operational in the spring of 1996. There is no local STEP representative in Pakistan, where monitoring of STEP producers is being handled by the Democratic Commission for Human Development, a local NGO. Although a few producers in Morocco, Egypt and Turkey are now listed on the STEP register, there are no STEP representatives in these countries. According to a STEP Foundation official, possible monitors have been identified in Morocco and Egypt, and production is currently being looked after from Germany. The STEP Foundation plans to make direct visits to producer facilities in Turkey. ¹⁴⁹

In India, a single STEP representative is currently responsible for oversight of the entire program, while in Nepal there are two. These representatives are personally responsible for monitoring as well as a variety of other functions, such as: establishing "fair wage" standards; forging relationships with producers and NGOs; seeking media coverage; helping support social service projects; and keeping the Berne office apprised of new developments.

A STEP Foundation official says that license applicants are pre-screened through the recommendations of existing members. In two cases, applicants in importing countries were refused licenses due to bad references. Suppliers who are found to be employing children are removed from the STEP register. ¹⁵⁰

A recent ILO study noted that the STEP program relies heavily on the integrity of licensed retailers. The study notes that a STEP-licensed retailer could stock carpets from other producers alongside carpets imported from STEP-approved suppliers, with the store's STEP license "labeling" the entire stock by implication. This was found to be occurring in at least one STEP- licensed Swiss business. ¹⁵¹

d. Findings from Site Visits

During site visits to India and Nepal, U. S. Department of Labor officials gathered further information on the STEP program's activities. The STEP office in Kathmandu has run a number of workshops to publicize its environmental and child labor concerns and has also funded two welfare projects. The STEP representative in Nepal stated that it has been difficult to attract reporters or carpet producers to these events because of limited resources for advertising and the fact that so many non-affiliated NGOs are already focusing on the same issues. Ironically, sensitivity to child labor issues is now so widespread that STEP Nepal feels that it risks being considered "just one more of those organizations." ¹⁵² STEP Nepal has no rehabilitation program for former child carpet weavers. However, it has provided funds for two related projects. One STEP- registered factory was given financial support to set up a day care center for the children of single women working in the factory. Funds were also given to a health education and AIDS prevention program for women in the carpet industry of Kathmandu. ¹⁵³

In India, the STEP Foundation's highest priorities to date appear to be social support, education and the environment. The STEP representative in Mumbai (formerly Bombay) contends that the solution to the problem of child labor in the carpet industry lies in providing schooling for children and skills training for adults, particularly women. ¹⁵⁴ STEP India will soon be responsible for two schools in the carpet belt, each serving 50 children. Labor and land to build one of these schools is being donated by the villagers themselves. The second school was initially founded by a three- year ILO-IPEC grant and will now be taken over by STEP. Although STEP India will provide funds and oversight for these schools, their actual operation will be handled by the Center for Rural Education and Development Action, an Indian NGO. ¹⁵⁵ STEP India also plans to operate a women's weaving and literacy training center, and reportedly is sponsoring a community development project in Bihar to help parents keep their children out of the carpet industry. ¹⁵⁶ STEP India also sponsored a workshop focusing on reducing pollution in the carpet industry. STEP program literature contends that monitoring of carpet production is a key element of this program. In Nepal, STEP has established working relationships with eight registered suppliers. The two STEP representatives make unannounced visits to factories once or twice per month. During these visits they look for environmentally irresponsible practices and/or the presence of working children. ¹⁵⁷

The STEP Nepal representative reports that during her first year with the program no children were seen in the factories visited. She expressed some skepticism about reports that there are large numbers of child weavers in the Nepalese industry. Noting that the owners of many large Tibetan carpet factories are Buddhists, she expressed a belief that personal ethics prevented these manufacturers from employing children. However, the representative noted that most of the STEP-registered factories in Nepal are relatively large. STEP has not had access to smaller production sites where child labor could be more prevalent.

STEP India is not monitoring the production processes of STEP- registered Indian manufacturers. According to the STEP India representative, "We must not talk about monitoring and verification � we can't even think of this." ¹⁵⁸ She indicated that there is a gap between conceptualizing this sort of scheme in Berne and actually implementing it in India. She contends that it is not possible to monitor such a decentralized industry where all production is sub-contracted, from weaving to washing, clipping, and finishing. ¹⁵⁹ Indeed, this is a principal reason she considers product labeling an ineffective strategy: "the exporter/ producer has no link to the loom, and the contractor can shift allegiances to different exporters." ¹⁶⁰ According to the STEP India representative:

The STEP India representative offered a number of suggestions about other strategies to combat child labor. These include the establishment of village "vigilance" committees with ombudsmen to inspect local looms and encourage school attendance and the establishment of centralized loom sheds, where monitoring would be easier. ¹⁶²

The STEP code of conduct commits licensees to pay a fair price for carpets that will allow "fair wages for weavers." Country representatives are left to determine what constitutes a fair wage, and to discern what share of the manufacturer's wage bill actually reaches the weavers instead of being confiscated by subcontractors. In Nepal the term "fair wage" is taken to mean the prevailing wage.

5. Care & Fair - Carpet Trade Against Child Labor

a. Program Overview

Care & Fair is a Hamburg- based association of German carpet trade professionals founded in September 1994 in response to adverse publicity concerning child labor in the industry. According to the association's by-laws, its purpose is to support the economic interests and image of the carpet importers and retailers by conducting public relations work and supporting projects to create better living conditions for children in carpet-producing areas. ¹⁶³

Like the STEP program, Care & Fair is a company certification program rather than a product-labeling initiative. Care & Fair/Europe now has nearly 600 members, including carpet and furniture retailers, carpet importers, and wholesalers. While most of its members are German companies, Care & Fair also has members in the United Kingdom, the Netherlands, and Luxembourg. ¹⁶⁴ Care & Fair/ India and Care & Fair/ Nepal are reported to have 102 and 28 members, respectively.

Membership in Care & Fair "is based on moral responsibility and voluntary commitment." ¹⁶⁵ The Association does not attempt to inspect the operations of member companies or guarantee that the carpets they handle are child labor- free. The Secretary General of Care & Fair, who is also president of the German carpet import- ers' association, notes, "We do not guarantee the non-use of child labour due to our conviction that it is really impossible to monitor 280,000 looms (i.e., in India) spread over 100,000 square kilometers." ¹⁶⁶ Instead, the program advertises that its members have obligated their carpet suppliers to honor the terms of Care & Fair's Statement of Demands, a code of conduct which includes eliminating child and bonded labor and contributing to health and education programs for carpet workers and their families.

Members may purchase Care & Fair advertising and demonstration materials confirming their membership in the association and explaining its purpose. These materials bear the Care & Fair logo, a mosque-shaped design depicting two smiling children who appear to be riding on a flying carpet. The words "CARE & FAIR" are displayed in large, colorful letters below the carpet. The words "Aktion Gegen Kinderarbeit" (" Action Against Child Labor") form an arch over the children's heads, and the expression "For Children's Welfare" is written below the program name. On some advertising materials, the German text indicates that the bearer is an agent of Care & Fair, an association against child labor in the carpet industry. Others express the notion that buying a carpet from this dealer is an act of development-aid, since part of the price will be spent on social measures in the country of origin. ¹⁶⁷

Members may place the logos anywhere but on the carpets themselves. Like the STEP Foundation, Care & Fair is an outspoken opponent of product labeling: "... the carpet trade rejects any label on a single carpet generally. It is a fact that one carpet with a label will bring into discredit all carpets without labels...". ¹⁶⁸ By providing company endorsements, Care & Fair validates members' entire inventory.

b. Program Structure

In Europe, Care & Fair is run by an eleven- member advisory board consisting of two NGO representatives and nine members of the carpet trade. Care & Fair/ Europe has set up autonomous associations in India and Nepal to monitor projects in those countries. Care & Fair/ Pakistan is in the process of being established.

Care & Fair maintains a substantial developmental fund to sponsor a variety of social programs aimed at bettering the living conditions of carpet workers and their families. Members (importers and retailers) pay an annual fee of 250 German marks (about $125) plus one percent of the import value of all oriental carpets they import, directly or indirectly, from India, Nepal and/ or Pakistan. ¹⁶⁹ Membership must be renewed annually. ¹⁷⁰ The Care & Fair programs in India and Nepal are funded through a separate fee of 0.25 percent of export value levied on exporters and manufacturers. Care & Fair literature indicates that fees paid by importers, retailers, exporters and manufacturers are passed on to consumers, "who will pay one to three percent more for the carpets in the end." ¹⁷¹

Care & Fair members must include the association's Statement of Demands, or code of conduct, in all purchasing contracts with suppliers. Through this code, the importer requires suppliers to immediately abolish any existing bonded labor and agree "to undertake not to produce or to supply carpets which have been manufactured using illegal child labor." In addition, producers and suppliers must agree to manufacture carpets under humane working conditions, pay at least the minimum wage, and observe other prevailing national employment laws and regulations. Moreover, they must provide basic medical care for workers and their families and ensure that children of carpet workers have access to regular schooling. If there are no public schools, "producers/ suppliers [must] undertake to promote school build- ing and foster the educational system." Although Care & Fair staff do not monitor production sites, the Statement of Demands states: "Producers/suppliers agree that purchasing conditions can also be examined with the assistance of aid organiza- tions," presumably at the buyer's discretion. ¹⁷²

c. Program Implementation

Care & Fair has no system for monitoring carpet producers' compliance with the association's Statement of Demands. Rather, members are expected to exert influence on their own suppliers to "induce them to take measures against the abuse of child labor." ¹⁷³ The Secretary General of Care & Fair notes:

Members are expected to inform the association when cases of illegal child labor are found.

Like the STEP program, Care & Fair maintains a register. However, the Care & Fair register is a list of producers to avoid, rather than a positive list of approved businesses from which to buy. Implicitly, members may purchase carpets from any producer not included on this list. According to the Statement of Demands, which is signed by buyers and suppliers as part of their purchasing contracts, suppliers are held liable for any violations of its provisions. Their failure to comply with these terms gives the purchaser the right to withdraw from the contract immediately and demand compensation for breach of contract. ¹⁷⁵

Care & Fair has collected substantial sums of money for its economic development fund. During 1995, the program's first year of operation, the fund received about 1.4 million German marks (about $700,000) from its 350 retailers and their 1000 retail outlets. ¹⁷⁶ Care & Fair estimates that the present one percent levy on imports could bring in as much as 8 million German marks ($ 4 million) per year. ¹⁷⁷

uch of the funds collected to date remain unallocated, however, a point discussed in further detail below. Nonetheless, Care & Fair has provided financial support to 35 developmental projects in India and Nepal. ¹⁷⁸ Care & Fair is also supporting one school in Pakistan. Most of its projects are schools, health care clinics, or hospitals. In a few cases, Care & Fair appears to provide complete funding of facilities; in most it provides only a portion of funding. Examples include a Care & Fair clinic, which can treat up to 120 patients a day in Jorpatti, India and a day- care center for children of carpet workers in Kathmandu. Care & Fair also finances student lunches, equipment, uniforms and/ or scholarships at schools, and the sala- ries of doctors at clinics and hospitals.

d. Findings from Site Visits

U. S. Department of Labor officials did not visit Care & Fair projects or members' production facilities in India or Nepal. In Varanasi and Mirzapur, both in the carpet belt of Uttar Pradesh in India, a U. S. Department of Labor official observed Care & Fair billboards displaying the organization's logo and conveying information to carpet manufacturers about child labor and Care & Fair's programs.

The billboards state the following:

Care and Fair stands for:

The billboards also request carpet manufacturers and exporters to note the following:

A Department of Labor official was able to speak to Care & Fair's Honorary Secretary in India, who is also a carpet exporter and RUGMARK licensee. According to him, Care & Fair's main projects in India focus on providing health care and schools. He noted that technical and administrative difficulties have prevented Care & Fair from utilizing some of the funds currently on hand. India's strict regulation of foreign contributions has left 5 million German marks ($ 2.5 million) sitting in a fund in Germany awaiting transfer to India. Moreover, some of the funds successfully transferred to India are still sitting unused in a bank. ¹⁷⁹ The Care & Fair Honorary Secretary stated that three hospitals in India are currently receiving funding from Care & Fair, with two more under construction. Two schools receive funding, one of which is part of Project Mala, which offers non-formal and vocational education to children in the carpet belt and also receives funding from the Kaleen program.

6. Other Carpet Labeling Efforts

This section describes other efforts to label carpets with information regarding child labor. These efforts include programs that are still under development and labels used by individual companies.

In April 1996, the Export Promotion Bureau of the Government of Pakistan placed an advertisement in various newspapers announcing its intent to "establish a 'rugmark' for certification of child labor-free manufacture of hand-knotted carpets." The advertisement asked that "highly reputed organizations having expertise in this field" contact the Export Promotion Bureau with their credentials. In October 1996, the Export Promotion Bureau established a Child Care Foundation to select a certification system for carpets and other export goods (sporting goods and surgical instruments) and initiate welfare and certification programs for child laborers employed in these industries. ¹⁸⁰ The Foundation's board of governors includes representatives from the Government of Pakistan, the Pakistan Carpet Manufacturers Export Associa- tion (PCMEA), UNICEF, and human rights NGOs. ¹⁸¹

At the time research for this report was completed, the Child Care Foundation had not yet worked out the details of a child labor monitoring and certification system. According to an official of the Export Promotion Bureau, the Foundation has considered monitoring proposals made by RUGMARK, STEP and Care & Fair. ¹⁸² The Foundation hoped to finalize the details of a proposed system during consultations in September 1997 and implement that system by the end of the year. ¹⁸³ It is unclear whether the Foundation will call upon one of the existing labeling programs or develop its own internal or industry- based monitoring system. Some industry groups, including the Lahore Chamber of Commerce & Industry, advocate the establishment of a RUGMARK program in Pakistan. ¹⁸⁴

As a result of the widespread public awareness of the use of child labor in the carpet industry, it has become increasingly common for individual manufacturers, exporters, or importers to affix a child labor-free label on their carpets. An official of RUGMARK-U. S. A. observed that at least 25 percent of the hand- knotted carpet dealers exhibiting at the Atlanta Home Furnishings Fair in January 1997 were affixing their own child labor-free labels on their carpets. When asked how they could be sure no child labor was used, most indicated they were certifying this fact themselves. ¹⁸⁵ Such labels, containing claims such as "Child labor not used" and "Carpet made without use of illegal child labor," have been found on Indian carpets for sale by both small and large U. S. retailers. No information is provided to consumers, however, on how these claims are backed up and whether any credible monitoring is being conducted.

Tenthou

One U. S. importer, Ten Thousand Villages, currently labels hand-knotted carpets that are produced in Pakistan by families who are part of the JAKCISS carpet weaving collective. ¹⁸⁶ These carpets carry a label stating "This rug was made by fairly paid adult labor," and explaining that "Ten Thousand Villages is proud to support the project JAKCISS Oriental Rugs of Pakistan which produces high-quality, heirloom Oriental rugs by fairly-paid adult labor." JAKCISS, founded in 1987 by Baptist Pastor Chaman Masih, involves over 400 families from 69 villages surrounding Lahore. ¹⁸⁷ Many JAKCISS weavers are seasonal farm workers who rely on the extra income provided by carpet weaving to support their families. ¹⁸⁸ Participating families are provided with a loom and are advanced one-half of the final price of the rug so they can afford to purchase necessary supplies.

Supervisors, based in nine "hub" villages, oversee carpet production. These supervisors ensure that children do not work and that young adults who do work also attend school. ¹⁸⁹ Reverend Masih spends five days a week visiting weavers' homes to ensure children are not working. ¹⁹⁰ Where schools are not available, JAKCISS either builds them or contributes to their construction and operation. ¹⁹¹ Both JAKCISS and Ten Thousand Villages have expressed a desire to participate in the RUGMARK program once it is established in Pakistan. Tufenkian Import/ Export Ventures. Inc., a U. S. importer specializing in Tibetan carpets from Nepal, sells carpets with the company's own label stating "All aspects of production are performed in environmentally friendly and child labor-free conditions, with due respect for the needs and advancement of its workers." Tufenkian's president makes periodic visits to production facilities and has unwritten agreements with producers to monitor for compliance with the terms of the label. The president of Tufenkian is also on the Board of Directors of RUGMARK-U. S. A. While Tufenkian is not yet a RUGMARK licensee, it is currently negotiating a licens- ing agreement with the Foundation. More information on Tufenkian's label and child labor policy is provided in the following section.

E. U. S. Carpet Importers' and Retailers' Policies on Child Labor

Corporate policies on child labor are a relatively new phenomenon among U.S. carpet importers and retailers. Although some importers and retailers are currently participating in the labeling programs described above, rarely do individual companies have their own written policy regarding child labor in the production of hand- knotted carpets. However, in 1994, the Oriental Rug Importers Association (ORIA) developed a voluntary policy addressing child labor in the production of carpets. The policy encourages manufacturers to "take every reasonable step to ensure, to the maximum extent possible, that the carpets are not made by illegal child labor, as defined by national law." ¹⁹² Some ORIA members have incorporated this policy into their purchase order forms, letterheads and company labels.

The Department of Labor gathered information on private sector efforts to combat child labor through a voluntary survey of 15 U. S. importers and retailers of hand- knotted carpets. These companies were chosen based on sales information from trade magazines and the advice of the Oriental Rug Retailers Association (ORRA) and the ORIA. ¹⁹³ Efforts were also made to select a mix of retailers, importers, small and large firms, and U. S. regional markets. Ultimately, ten retailers and five importers were surveyed. Nine companies responded to the survey: four retailers (Shaw Carpets, Lowe's, May Department Stores, Airbase Carpets) and five importers (Nourison, Tufenkian, Masterlooms, Odegard, and Ten Thousand Villages). ( See Box II- 1 for a list of the companies surveyed.)

This section discusses survey results concerning the child labor policies of U. S. carpet importers and retailers. These policies are examined with respect to their transparency, monitoring and enforcement procedures.

1. Survey Results

The survey respondents indicated that they import or sell hand- knotted carpets from one or more of the following countries: India, China, Nepal, Pakistan, and Armenia. The five importers (Masterlooms, Tufenkian, Nourison, Odegard, and Ten Thousand Villages) reported that they import carpets directly from manufacturers in producing countries. Two of them (Tufenkian and Masterlooms) indicated that they own production facilities in Nepal and India, respectively. Two companies (Lowe's and Odegard) noted that they use buying agents to purchase carpets. The remaining three companies (Shaw, Airbase, and May Co.) stated that they do not import carpets directly, but purchase them from carpet wholesalers in the United States.

Of the nine respondents, six indicated that they are either participating in a labeling program or using a code of conduct with a provision on child labor. Table II- 2 illustrates the type of policies of carpet importers and retailers to prohibit the use of child labor in the production of hand- knotted carpets. Four companies who responded to our survey (Masterlooms, Odegard, Ten Thousand Villages, and Tufenkian) stated they sell labeled carpets or plan to do so in the near future. Three companies (Lowe's, Masterlooms, and May Co.) indicated that they have a code of conduct regarding child labor.

a. Labeling Programs

Of the four companies using labels, two (Ten Thousand Villages and Tufenkian) sell carpets with their own labels stating that no child labor was used. The label of one of these (Ten Thousand Villages) also claims that adult carpet workers are fairly compensated. Although three companies (Masterlooms, Odegard, and Tufenkian) reported that they are participating in the RUGMARK labeling program, discussions with Rugmark officials indicate that only Odegard is currently a RUGMARK licensee. ¹⁹⁴

TABLE II-2
Type of Policy Prohibiting Child Labor
(Based on Responses to Department of Labor Questionnaire)

^a Company particiaptes in or has its own labeling program.
^b Company has a formal code of conduct, statement of principles or compliance certificate.
^c Company has a purchase order, letter of credit, or buying agent agreement, which contains a specific prohibition on child labor in overseas production.

Two companies (Masterlooms and Ten Thousand Villages) indicated that the cost of participating in a labeling program is minimal and that such costs can be absorbed by manufacturers and importers. ¹⁹⁹

Most survey respondents do not require their suppliers to guarantee in writ- ing that they do not use child labor. Contractual requirements in manufacturer certificates or purchase orders are rare. Three companies (Nourison, Tufenkian and Odegard) indicated that they rely on verbal agreements or handshakes with their overseas suppliers to assure their child labor policy is respected.

The survey respondents monitor adherence to their child labor policies and labeling programs in various ways.

Most of the companies participating in a labeling program indicated that they rely on the enforcement procedures established by RUGMARK, Kaleen or JAKCISS to address non-compliance with child labor policies. Two companies with their own labels (Tufenkian and Ten Thousand Villages) stated that although they do not have written enforcement procedures, violations of child labor laws by foreign manufac- turers may result in canceled orders or the end of the business relationship. ²⁰² Similarly, Masterlooms indicated that they will terminate their business relationship with any manufacturer that uses illegal child labor in the production of carpets.

b. Codes of Conduct

Three companies (Lowe's, Masterlooms, and May Co.) indicated that they have a code of conduct or policy statement prohibiting child labor. ( See Appendix C for copies of these policies.) ²⁰³

Although some survey respondents do not have written codes of conduct, three companies (Odegard, Ten Thousand Villages, and Tufenkian) stated that they rely on the code of conduct implicit in their labeling programs. However these "codes" only apply to labeled carpets, and not necessarily to all the carpets sold by the companies. The companies' monitoring and enforcement procedures are discussed above.

The survey respondents implement their codes of conduct in various ways. The extent to which companies use contractual arrangements to enforce their child labor policies also differs significantly.

The frequency and thoroughness of the monitoring procedures also vary among the companies.

Enforcement procedures for addressing non- compliance with child labor policies also vary among the survey respondents.

A few survey respondents described obstacles to implementing their child labor policies.

F. Conclusion

Extensive media coverage of the use of child labor in the hand-knotted carpet industry and ensuing consumer campaigns have led to a number of carpet labeling initiatives. Most of these initiatives are based on the notion that labels conveying information on child labor will make carpets acceptable to consumers. For some members of the industry, labeling programs offer an opportunity to stem market disruption caused by adverse publicity and even gain market share. For others, labeling programs are seen as imposing a market disadvantage on carpets sourced from non-labeled suppliers.

Child labor continues to be a problem in the hand- knotted carpet industries of India, Nepal, and Pakistan. While the actual extent of illegal child labor in the carpet industry remains unknown, estimates on the number of working children range from as low as 3,000 in Nepal to as high as 1 million in India and Pakistan. Bonded child labor, where children are forced to work in exchange for an advance taken by their parents, continues to be a problem in the carpet industries of India and Pakistan, though there are no reliable statistics on the extent of the problem.

In Nepal, where the hand- knotted carpet industry is concentrated in the Kathmandu valley, children tend to work in factories. In India and Pakistan, however, children can be found working in small centers and loomsheds in rural villages or urban areas. Children are involved in almost every aspect of carpet production: dyeing, spinning, and unraveling yarn; and weaving, knotting, cutting, and washing carpets. Working conditions are often dangerous and unhealthy. During the various phases of carpet production, children are exposed to chemical dyes and sharp tools. Many develop various respiratory illnesses and suffer from spine deformities and retarded growth from long hours of work crouched in close, dust-filled rooms.

The four major labeling initiatives discussed in this chapter � RUGMARK, Kaleen, STEP, and Care & Fair � are still too new to evaluate their full impact. They are still evolving and expanding. The labeling programs differ greatly in emphasis and scope. While some focus on the removal of children from the carpet industry and their placement in schools or rehabilitation programs, others hope to alleviate the broad social and economic conditions that cause children to work.

Unlike RUGMARK and Kaleen, which label individual carpets, STEP and Care & Fair provide their logo to entire companies meeting their eligibility standards. In all of these programs, a percentage of the import or export value of labeled carpets is used to fund schools or welfare projects in the producing country. RUGMARK and Kaleen have developed inspection and enforcement components to monitor for the illegal use of child labor by licensees or members. RUGMARK has also instituted an elaborate tracking and certification system. STEP and Care & Fair have focused their efforts primarily on social programs for children and their families in carpet-producing regions.

The two programs with developed monitoring components � RUGMARK and Kaleen � have taken different approaches to monitoring. From its inception through June of 1997, RUGMARK India had conducted an average of slightly over 1.2 inspections per loom. In Nepal, RUGMARK inspectors have made an average of 65 visits per licensee facility since beginning inspections in December 1996. In the Kaleen program, only 11 percent of registered looms were inspected during the first year of monitoring. Inspection results have also varied. As of June 1997, RUGMARK inspectors in India had found 1,060 children working illegally on licensees' looms. In Nepal, RUGMARK inspectors found 142 such children as of August 1997. During its first year of inspections, AMS inspectors for Kaleen found 101 illegally employed children on members' looms.

The structure of the carpet industry presents inherent challenges to any labeling effort, particularly those with monitoring and enforcement components. The most comprehensive labeling programs, i. e., those with social, monitoring, and en- forcement programs, have the most difficult task. They are the most vulnerable to criticism, as mistakes and violations inevitably occur. On the other hand, those initiatives limited to child welfare programs have a lower risk of not fully meeting their objectives. They also do not assure consumers that child labor was not used in the carpets they purchase � even though they may convey such a message.

It is difficult to assess the impact of the labeling programs at this early stage. Their visibility and the presence of inspectors, in the case of RUGMARK and Kaleen, have surely raised awareness in the carpet industry of the child labor issue. In addition, they appear to have contributed to a reduction in the use of child labor, at least among participating producers. The rehabilitation and education programs, health care and day care facilities funded by the various programs have surely had a positive impact. Ultimately, the success of the programs in marketing their labels in the various countries will determine whether they can generate sufficient funds to have a lasting impact on child labor in the industry.

Child labor-free labels not associated with any of the four major labeling programs are becoming common in retail outlets in the United States. These labels are affixed by individual manufacturers, exporters, or importers, but no information is provided to consumers regarding how these claims are substantiated. In the absence of any credible monitoring mechanism, the integrity of such labels must be questioned.

In addition to labeling programs, some U. S. importers and retailers of hand- knotted carpets have also developed written policies or codes of conduct prohibiting the use of child labor. The majority of the respondents to the Department of Labor survey indicated that they are participating in a labeling program and/ or using a code of conduct with a provision on child labor. The implementation of the labeling programs and codes, however, vary from company to company. Monitoring of the child labor policies was limited to occasional visits to production facilities by representatives of the U. S. importers. There also appears to be little accountability for child labor policies. In most cases, informal arrangements between U. S. carpet importers and their foreign suppliers took the place of contractual requirements and actual monitoring to certify that the carpets were made without illegal child labor.

This report was produced by the staff of the International Child Labor Program and is published by the U.S. Department of Labor, Bureau of International Labor Affairs.

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