Monday, August 31, 2015


Offshore vendors
Must comply
With local, U.S. laws


NESTLE AND COSTCO share the dubious honor of being named in class action suits for allegedly selling products that "slave labor" was used to produce.

According to an article in the St. Louis Post-Dispatch,

    The Swiss food giant follows one last week accusing Costco Wholesale Corp. of selling farmed shrimp from Thailand, where slave labor and human trafficking in the fishing industry allegedly are widespread.

The slavery lawsuits follow the publication last month of the State Department's annual report examining human trafficking in 188 countries, in which the agency cited concerns about slave labor in Thailand's fishing industry and faulted the Thai government's record in fighting exploitation.

The suit against Nestle alleges that the Swiss-headquartered company that produces cat food in its Saint Louis plant, has effectively tricked millions of consumers into supporting and encouraging slave labor on floating prisons,"

    How the plaintiffs arrived at the number "millions of consumers" was not specified.

The Post-Dispatch article noted that

    Nestlé's Thai supplier gets its fish from trawlers whose crews often are men and boys who have been trafficked from Myanmar and Cambodia, according to Thursday's complaint. They are sold as slaves by brokers and smugglers to fishing captains in Thai ports and frequently resold out at sea, the consumers said.

Nestle is said to be working with a non-governmental organization "to identify where and why forced labor and human rights abuses may be taking place" in Thailand and southeast Asia.

THE BOTTOM LINE for Enterprise Risk Management practitioners is that they must investigate not only a vendor's ability to meet its Service Level Agreements (SLAs) or other contracts but they also must assure that the vendor's operation is in compliance with U.S. laws (as well as local-to-the-vendor laws).

Whether or not Nestle and Costco prevail in court, the businesses will lose money defending the accusations and money through lost productivity of employee witnesses. Even if they win, being sued always is a lose-lose situation. In addition to monetary loss, the companies will take an image hit, at least with some customers (e.g., the "millions of consumers" allegedly "tricked" into purchasing the Nestle cat food product).

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