China-Retail-and-Product-Related-Issues New

P.1

China Retail –Challenges and Solutions

China Retail Region

Agenda

Reasons for RTV’s and Charge Backs

Challenges with RTV’s / Charge backs

China Retail & Challenges with Regulatory Bodies

Recommendations & Solutions & Roles & Responsibilities

CONFIDENTIAL P.2

Question and Answer

China Retail Region

High Risk Testing in Local China Labs

China standard operation Guideline

Very important points

CONFIDENTIAL P.2

Question and Answer

China Retail Region

Reasons for RTV’s and Charge Backs

A. CIQ / AIC Testing failures

B. Discrepancy between CIT and Tri-Lingual Labels

C. Wrong declaration on the Product Safety Class

D. Voluntary Pull back during Store walk through Visits

CONFIDENTIAL P.3

China Retail Region

B. Discrepancy between CIT and Tri-Lingual Labels

CONFIDENTIAL P.5

China Retail Region

CHINA PO’s ND CIQ FAILURES / RTV /STORE PULL OUTS - GIS INDIA VENDORS

VENDOR Category No. of Styles Seasons

A Denim 6 Spg 11 Sum 11 Fall 11 Hol 11 Spg 12

B Woven's 2 Spg 11

C Knits 5 Spg 11 Sum 11 Fall 11 Hol 11 Spg 12

D Denim 1 Spg 11

E Woven’s 2 Sum 11 Spg 12

F Woven's’ 2 Sum 11 Hol 11

G Woven’s 3 Sum 11 Spg 12

H Woven’s 2 Sum 11

I Denim 5 Fall 11 Spg 12

J Woven’s 3 Hol 11

K Woven’s 1 Hol 21

L Denim 2 Spg 12

M Knits 2 Spg 12

36 5 7 4 8 12

CONFIDENTIAL P.4

China Retail Region

CITChina Information Tag

Test report Reference

CONFIDENTIALP.6

China Retail Region

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On Site finding: Wrong Labeling.• Product labeled as Skirt, for a Top.

CONFIDENTIAL P.7

China Retail Region

On Site finding: Wrong Labeling of Standards• China Product standard labeled as FZ/T 73025-2006 for knits.• Correct FZ Standard should read as FZ/T 81014-2003

CONFIDENTIAL P.8

China Retail Region

On Site finding: Wrong Class Labeling of Class.• Safety level should be A for baby<24m

CONFIDENTIAL P.9

China Retail Region

On Site finding: Wrong Labeling of Size• Size should be Length x Width instead of “XS”

CONFIDENTIAL P.10

China Retail Region

On Site finding: Wrong Labeling FZ/T vs QB/T• Textile Belt : FZ /T 63005 Instead of QB/ T

4/05/2012 CONFIDENTIAL P.11

China Retail Region

Examples : Cases of Charge backs and Penalties

GISVENDOR HUB

ActualDEPT_DESC Color Units in

DC

RetailRMB

VendorTestingResults

CIQ TestingFailure

Resolution Penaltyimposed

Total Loss

Pay Penalty &

X HK MENS DENIMTrueBlack

250 499.00 Pass C/F to Wet Return Bal .Rubbing Quantity to

Vendor

RMB 55,888

RMB 613200( $USD 91,659)

Y HKMENS TrueBOTTOMS Black 950 299.00 Pass C/F to Wet Pay Penalty &

Rubbing Destroy RMB148,512

CONFIDENTIAL P.12

China Retail Region

Supervision on Production

China Customs

CIQ

QTS

AIC

Role of China Regulatory BodiesNo Tolerances given on Failures

CONFIDENTIALP.13

China Retail Region

Challenges with China Regulatory Bodies

CIQInspections

at DC’s

CIQ AIC AICTesting at InspectionsTesting at

China in GAP ChinaLabs Stores Labs

ChinaProduction/ PI teams

CONFIDENTIAL P.15

China Retail Region

Recommendations and Solutions

Control pH at washing stage, in the Range 5.0-7.0. Club Japan/HK/ China quantities together, for washing.

Ensure garments sent for GB testing truly represents Bulk.

Ensure tests under GB 18401 are 100 % passed, since NO Tolerance allowed. Take information from GB report to fill up CIT/ Tri-Lingual Order form Check correctness before ordering to AD; recommend to attach a GB report. Re -confirm the correctness of CIT/ Label, against GB report, once received. Ensure tags and Labels are issued and attached correctly to China PO’s.

CONFIDENTIAL P.16

China Retail Region

Roles and Responsibilities

• Adjust pH during Garment washing Vendor Laundry In-charge / Production

• Sending Bulk Rep samples for GB Test…….. Vendor ‘s Merch

• Selecting Correct Product FZ Code ………… Testing Labs / GIS / China PI

• Checking Pass/ Fail Status of GB Test……… Vendor’s Merch

• Re-work of Bulk / Re-test, in failure cases….. Vendor’s Production/ Merch

• Filling up details for CIT / Label Order……… Vendor ‘s Merch/ Store Purchase Team

• Reproducing Details/ Printing of CIT/Labels. Avery Dennison, HK

• Checking CIT / Label details on Receipt…… Vendor’s Store Purchase/ Merch

• Attaching Correct CIT/ Labels to Product…… Vendor’s Production/ Packing Team

• Verification during Shipment Inspection…… Vendor’s QA ‘s

CONFIDENTIAL P.17

China Product Memo No. 6b 7-11-2013

Product Testing Program Revised - High Risk Testing in Local China Labs - Holiday 2013 Forward

This Memo announces Gap Inc.’s new testing program for compliance in the China market. Beginning with Holiday ’13, testing styles to China protocols in the sourcing regions is replaced with testing High

Risk garment styles in local China labs. Testing to Gap Inc. protocols for our other markets continues as usual in the sourcing regions. Methods and standards on Gap Inc. protocols are being updated to more effectively capture global

requirements, including China’s. Scope: All Gap Inc. Brands in the China market.

BACKGROUNDGarments and textile products offered for sale in the China market must comply with China National Standard GB 18401-2010: General Safety Technical Code for Textile Products and the applicable individual China product standard (designated FZ standards).

Imported products are subject to testing under this Standard at Customs entry by CIQ1. In addition, official agencies such as AIC2 may pull products from stores for testing. Failures prevent product from entering China or require removal from sale, with fines up to five times the value of the retail stock.

Up to now policy called for vendors to submit finished product samples to regional laboratories approved by Gap Inc. for testing to the China standards. Products were tested in duplicate--according to both regular Gap Inc. protocols for North America and the China standards. Vendors paid for the cost of testing under Gap Inc. protocols, while Gap Inc. paid for China testing.

Gap Inc. supplemented the program in two ways after our 2010 entry into this challenging market:

To improve the Customs clearance rate for infant styles with high pick rates, in 2011 Gap Inc. joined a voluntary CIQ program for advance testing of selected fabrics in the CIQ lab3. Fabrics are tested to GB 18401 and fiber content. Only a small number of styles participated in this pilot.

For Summer ‘13 products, Gap Inc. initiated a program of identifying styles with features that increase their risk of failing China inspection testing. These High risk garment styles are submitted in advance of shipment for testing in local China labs.

NEW CHINA PRODUCT TESTING PROGRAMRationaleAfter 3 years of experience in China testing, Product Integrity, Corporate QA, and GIS technical teams have developed detailed understanding of the causes of failure under China standards. This knowledge can be put to use early in the product pipeline to trigger timely decision-making by Merchandising and Vendor Management (VM) on styles at high risk of failure in government inspections. Thus before bulk production of high risk styles, efficient decisions can be made to modify, re-direct, cancel or accept risk.

Testing Program ElementsA. Early identification of High Risk stylesB. Selective Bulk Fabric Pre-Testing at CIQC. Selective Bulk Garment Testing at China Local LabsD. Discontinuation of China Testing in Labs in Gap Inc. Sourcing Regions

E. Early Identification of High Risk Styles1. Product Integrity (PI) assesses styles for high risk characteristics under GB 18401 and selected GB & FZ standards.

At Line Adoption China PI initiates the Master List for High Risk Styles, supplemented by risk assessments from GIS-PI in the sourcing offices. High Risk properties and filters within each category (denim, wovens, knits, sweaters) determine if a style will be selected for testing in bulk

fabric, bulk garment, or both stages.

2. China PI/China Production makes initial recommendations to Brand Global Production and Brand China Merchandising for early decision-making if feasible on design changes, back-up sourcing, dropping style, or continuation.

3. GIS Category Management (VM) notifies vendors if their styles are designated as high risk.

F. Selective Fabric Pre-Testing at CIQ1. Finalized Master List for High Risk Fabric Testing is used by GIS VM to instruct vendors to submit selected bulk fabric samples to China

headquarters for testing by CIQ. Production fabric samples are sent by vendor to:

ATTN: Swing Su (re: CIQ fabric pretest) Gap (Shanghai) Commercial Company Ltd. 1st Fl., Building No. 6800 Changde Road, JingAn District 200040, Shanghai, ChinaTel: Tel: +86 21 2219 9668

Fabric sample submission: 1.5 yards full widtho For garment-washed styles, fabric must be submitted in washed form.o Samples must be accompanied with the following information by style, e.g.:

Technical Bulletin #174e:  Labeling Products for China (Gap, Gap Outlet, and Old Navy) – Spring’14  It replaces TB #174d++ Labeling Gap and Outlet Products for Hong and China(Sept 2012). This bulletin updates product labeling requirements in China and references:Brand differences in China care-content labels:  Gap Specialty, Outlet, and Old Navy take different approaches to complying with China labeling requirements. Gap Brand Hong Kong products’ switch to the GFLLabeling Impact from lack of China Test Report:  Appropriate China standard, grade, and other information for labels must be determined without use of a China Test report.  The new China Product Standards Guideline tool will help.China size conversion charts:  These are removed from the Bulletin and posted separately. You will be able to access Technical Bulletin #174e as well as previously published technical bulletins from Gap Source Library, on GapWeb.  Under Select a Category, choose Product Guidelines & Testing, then Technical Bulletins.  For vendor/supplier and international access to Gap Source Library, please contact the Vendor Management Administrator in your GIS region. There is a security procedure established to enable vendor/supplier access to this Gap website.

Labeling Products for China (Gap, Gap Outlet, Old Navy) - Spring'14

Microsoft Excel Worksheet

China standard operation Guideline

ON Boys Woven Bottom  Dept-  1 -A very important information received   “for both Japan and China markets, the qty’s being allocated to these areas SHOULD NOT HAVE  sensor tags attached (even if the Brand and CDA markets have sensor tags). “

2-HK PO is not supposed to be hold due to GB test failure for China shipment.

3- we are following up closely. Apart from common GB testing process, we have are doing “ bulk verification “ test for PH only (for China orders only) that are pulled by our QA team and tested by ITS .  This is applied for all China styles and cc’s. Shipment is released upon pass PH test only regardless of GB result.   We will add crocking testing into bulk verification testing in addition to PH (seeing below incident).4- HK is not part of China so we can not hold HK for fail test report of china .

Very important points

 As most of you are already aware  the challenges  currently being faced for China testing and hangtags ( CIT ) / Labels. Brief steps to solve this are as below :

Labels & CIT Tags:

Once the GB report ( equivalent of GPT for US) is recd – The product Name / Safety Category / Product Standard / Product Grade is  mentioned on the report.

 While ordering Tags / labels from your supplier ( Avery Denison ) please enclose the copy of the GB report and order form along with China po

Once you receive the label and CIT tags in house – please check if they are same against GB report

For QA to check in production floor please attach the label & CIT tags on GB report so that there is something to compare.

If running multiple styles in factory for China at same time -  Issue labels and CIT tags for one style at time to avoid mix up or interchanging them while attaching  

QUOTE—BY JOTHI (Director SL & Egypt Spoke Office)

Ph/CF to rubbing/light / Formaldehyde etc – for Wash Program

Since you already do testing prior to commence production but it is important that these meet Bulk standards for all markets.

For Japan & China – our recommendation is to wash ALL these garments together without mixing with other markets.

The reason for above recommendation is to keep focus on these loads.

Also we strongly recommend to keep the standard a little tighter for all above parameters by one point so that when china labs test them we have no issues.

We also recommend you to internally test garments from these loads in your in-house labs to ensure they meet if not exceed china standards comfortably

For Non wash program – this will need to be fixed at fabric stage.

Contd…. QUOTE—BY JOTHI (Director SL & Egypt Spoke Office)

By

Khaled Ali