The exchanges operate retail stores similar to  department stores selling apparel, footwear, household appliances,  jewelry, cosmetics, food, and other merchandise. The exchanges  generally did not maintain the names and locations of the relevant  overseas factories. Exchanges Are Less Proactive in Identifying Factories’ Working Conditions

The military exchanges’ methods for identifying working conditions in  overseas factories that manufacture their private label merchandise are  not as proactive as the methods employed by companies in the private  sector. Leading retailers have  been addressing these challenges for as long as 10 years and have taken  three key steps to promote adequate working conditions and compliance  with labor laws and regulations in overseas factories—developing codes of  conduct, implementing the codes of conduct by the clear dissemination of  expectations, and monitoring to ensure that suppliers’ factories comply  with their codes of conduct. Recommendations for Executive Action

As the Secretary of Defense moves to implement the congressionally  directed program to assure that private label exchange merchandise is not  produced by child or forced labor, we recommend the Under Secretary of  Defense (Personnel and Readiness), in conjunction with the Assistant  Secretary of Defense (Force Management Policy), require the Army and  Air Force Exchange Service, Naval Exchange Service Command, and  Marine Corp Community Services to develop their program around the  framework outlined in this report, including creating a code of conduct that reflects the values and expectations that  the exchanges have of their suppliers; developing an implementation plan for the code of conduct that includes  steps to communicate the elements of the code to internal staff, business  partners, and factory workers and to train them on these elements; developing a monitoring effort to ensure that the codes of conduct are using government agencies, such as the Departments of State and Labor,  retailers, and the International Labor Organization as resources for  information and insights that would facilitate structuring their program; establishing ongoing communications with these organizations to help the  exchanges stay abreast of information that would facilitate their  implementation and monitoring efforts to assure that exchange  merchandise is not produced by child or forced labor; and pursuing these efforts jointly where there are opportunities to minimize  costs. We also interviewed officials from industry  associations and labor and human rights groups.
Why GAO Did This Study

The military exchanges operate retail stores similar to department stores in more than 1,500 locations worldwide. The exchanges stock merchandise from many sources, including name-brand companies, brokers and importers, and overseas firms. Reports of worker rights abuses, such as child labor and forced overtime, and antilabor practices have led human rights groups and the press to scrutinize working conditions in overseas factories.

What GAO Found

GAO found that the military exchanges are not as proactive as private sector companies in determining working conditions at the overseas factories that manufacture their private label merchandise. Moreover, the exchanges have not sought to verify that overseas factories comply with labor laws and regulations. A single industrywide standard for working conditions at overseas factories was not considered practical by the 10 retailers GAO contacted. However, these retailers have taken the following three steps to ensure that goods are not produced by child or forced labor: (1) developing workplace codes of conduct that reflect their expectations of suppliers; (2) disseminating information on fair and safe labor conditions and educating their employees, suppliers, and factory workers on them; and (3) using their own employees or contractors to regularly inspect factories to ensure that their codes of conduct are upheld.