The Confederation of Wearable Exporters of the Philippines (CONWEP) announced that 4,577 workers from 10 companies have been retrenched and 500 put in forced leave in the first months of 2024 amid a soft market for garments and contentions on US non-tariff policies.
In a Viber message to reporters, CONWEP Executive Director Maritess Jocson-Agoncillo said the retrenchments were done for "varying reasons" such as "a soft market, the lack of orders or orders pulled out because of cheaper costs in other countries, and detention due to the United States Customs’ Uyghur Forced Labor Prevention Act (UFLPA)."
CONWEP member companies have been affected, with $5 million to $6 million orders compromised overall, she noted.
Nine of the factories reported retrenchment or implemented forced leave of a total of 3,077 workers as of January to April. 500 of those workers were put on forced leave, but will hopefully be recalled back once orders resume.
Meanwhile, CONWEP's largest member company Luen Thai (L&T)'s factory in Clark, Pampanga retrenched 2,000 workers due to detained orders in the US, barred by the UFLPA.
The UFLPA, enacted in 2021 and effective by 2022, prohibits the importation to the US of goods "mined, produced, or manufactured wholly or in part in Xinjiang, China," citing alleged forced labor operations in the Xinjiang Uyghur Autonomous Region.
“Despite our strict adherence to UFLPA-compliant sourcing practices, we are currently being required by US Customs and Border Protection (CBP) to prove the origin and production practices of all elements of our supply chains, which has led to prolonged delays in clearing recent U.S. shipments, causing significant business interruption and order losses,” the firm explained in a statement released on Monday, May 6.
Jocson-Agoncillo told reporters in a Zoom interview that, as of February, nearly $5 million of L&T Clark's shipments have been detained, most of which were orders due on December last year.
L&T Clark, which produces apparel for 12 to 14 US and European brands, said the indefinite status of the shipments held by the CBP has made full capacity production unsustainable in the factory, leading to the implementation of forced leaves for the past months, and finally retrenchment of around 60 percent of their workforce.
Jocson-Agoncillo said that only 1,400 out of 3,500 workers in L&T Clark’s factory retained their jobs, resulting in a reduced factory utilization rate of 20 to 30 percent.
The retrenchment program was announced on April 26, and done in coordination with the Department of Labor and Employment (DOLE). CONWEP shared that each retrenched employee was given a severance package ranging from P70,000 to P75,000 on average.
“All affected employees received comprehensive severance packages that meet legal standards. The retrenchment was executed smoothly and peacefully. Further, we are open to address any future clarification that the retrenched employees may file before the labor office,” said L&T.
"I admire the company. Despite the losses it's incurring, they prioritize the payment to the workers...This thing that they did is really for thinking of their social compliance to the workers. It's humanitarian," said Jocson-Agoncillo.
External forces
L&T emphasized that the primary reason for the retrenchment of their workers is “the result of external policies beyond our control.”
Jocson-Agoncillo described it as a “temporary setback because of a major non-tariff barrier, compliance, sustainability issue that is also one of the concerns of the industry.”
"We're trying to really monitor it. It is a detention mechanism if you are using Xinjiang cotton, and you have to go through the supply chain mechanism to articulate, 'No, I am compliant. I did not use cotton from Ugyhur.' If you look at the USCBP data, there are also detentions from other countries like Nicaragua," she added, noting that the Philippines has the second largest detained by the USCBP after Nicaragua as of February.
Weeks prior, she shared that some detained orders have been released with the support of government intervention, particularly of the Department of Trade and Industry (DTI)’s efforts to engage with Trade counterparts in the US like US Commerce Secretary Gina Raimondo.
They are hoping that 40 to 50 percent of the shipments will be released soon, she noted.
Temporary setback
Despite this, the company remains positive that it will rebound its business, with CONWEP forecasting this to occur by the end of this year or early 2025.
“We are committed to handling this transition with the greatest respect, integrity, and transparency, maintaining our pledge to our employees and stakeholders,” said L&T.
“Once these conditions improve and orders resume, our goal is to rehire our skilled workforce and restore normal operations,” it added.