By Clare Baldwin and Katherine Masters

PHNOM PENH/NEW YORK Walmart and Centric Brands are investigating their supply chains in Cambodia over allegations that inmates at the country's largest women's prison were illegally employed to produce garments for export, following questions posed by Reuters and inquiries from a U.S. industry group about labour practices there.

The American Apparel and Footwear Association (AAFA) wrote to Cambodia's ambassador to Washington, Keo Chhea, in November, expressing "strong concerns regarding credible reports" that inmates at Correctional Center 2 (CC2), near Phnom Penh, were producing garments and other textile products for export, including to the U.S., as part of a rehabilitation program.

Details of this and a subsequent letter from AAFA in February pressing Cambodian officials on the matter, both reviewed by Reuters, are being reported for the first time. Neither letter named the companies allegedly involved.

International trade of goods made by convicts is illegal in the U.S. and in Cambodia, which has received preferential U.S. trade terms on billions of dollars of products over recent years. The International Labour Organization (ILO), of which Cambodia is a member, permits prison labour provided it is not forced.

Cambodian Ministry of Commerce Secretary of State Sok Sopheak, who chaired an inter-ministerial committee investigating AAFA's allegations, told Reuters that Cambodia had fined three local companies $50,000 each and suspended their export licenses for three months through July 31 for using CC2 inmates to sew hotel slippers for export to the European Union and Japan. The value of the slippers exported last year was about $190,000, he said.

The companies, which Sopheak confirmed were W Dexing Garment (Cambodia), IGTM (Cambodia) and Chia Ho (Cambodia) Garment Industrial, did not respond to requests for comment. Reuters could not determine which hotels ordered the slippers.

The Office of the U.N. High Commissioner for Human Rights said it had visited CC2 and raised concerns with authorities about forced labour. It said it learned in February that Cambodia was investigating and that the prison workshops had been suspended.

AAFA's first letter was copied to Pan Sorasak, Cambodia's commerce minister, and Ken Loo, secretary-general of the Textile, Apparel, Footwear and Travel Goods Association in Cambodia. AAFA's second letter added Aun Pornmoniroth, Cambodia's economy and finance minister, who is also a deputy prime minister. None of the government officials addressed in AAFA's correspondence responded to questions from Reuters. Loo said his trade group "constantly" reminds members to comply with local law and international labour standards.

Four people familiar with the matter, including two former CC2 inmates, said other items produced in the prison appeared to be linked to Walmart and Centric Brands, the licensing partner for IZOD and other labels including Calvin Klein, Tommy Hilfiger and Under Armour. Both Walmart and Centric source goods from Cambodia.

The people showed Reuters a reusable Walmart-branded shopping bag and a polo shirt with IZOD branding which they said were made in the prison factories where the inmates had worked and which they said they brought out with them upon their release, the most recent in January. Reuters is not disclosing their identities, nor those of two other inmates interviewed for this report, due to concerns about their safety.

Information printed on the items' tags – names of importers, style numbers and shipment codes, and codes issued by the U.S. Federal Trade Commission – indicated they were destined for the U.S. and Canada, trade records from data providers Panjiva and ImportGenius show. The records do not disclose the factory of origin, supply-chain movements or subcontracting relationships within Cambodia, and Reuters could not independently establish whether the items were made in the prison.

The U.S. companies, along with Walmart importer Travelway Group International, said they were investigating their supply chains in response to Reuters' queries.

"We find the allegations very concerning," a Walmart spokesperson said in early June. "Forced labor of any kind is abhorrent, and we believe all people should be treated with dignity and not be exploited." The spokesperson said the investigation was ongoing as of mid-August.

Centric told Reuters in an email in June that it had "placed on hold" imports from a factory in Cambodia and would "immediately terminate" any supplier found to be using prison labour. It said in early August that it "has not found any evidence supporting the claim that prison labor was used" to make the polo shirt in question but had "terminated" its relationship with the factory, which it would not identify.

The supplier was audited by Better Factories Cambodia (BFC) and Worldwide Responsible Accredited Production (WRAP) for each of the past four years, and by amfori's Business Social Compliance Initiative since 2022, and there was no indication of issues related to prison labour, Centric said.

"Without having the polo in-hand for closer inspection, it is impossible to definitively confirm its authenticity, including whether it is counterfeit or unauthorized," Centric said.

Authentic Brands Group, which owns the IZOD brand, and BFC said they took forced-labour allegations seriously.

Once a year BFC conducts unannounced, two-day assessments of all Cambodian factories that produce garments and travel goods for export, said the ILO, which helps run the monitoring initiative.

When asked about the IZOD-branded polo shirt and shown photographs, the ILO said tracing a garment to a particular factory and assessing working conditions in prisons were not within the initiative's mandate.

A spokesperson for amfori said members were responsible for monitoring their suppliers and subcontractors, but that to the best of his knowledge amfori had not encountered cases of forced or prison labour in Cambodia and had not found a connection between its members' businesses and CC2.

WRAP also said it was investigating the case.

The Office of the U.S. Trade Representative did not answer questions from Reuters about potential repercussions of such labour at CC2.

$1.75 TO $5 PER MONTH

Reuters pieced together details of garment manufacturing in CC2 through interviews with four women released as recently as January after completing drug sentences of up to two years. Reuters verified the women served time in CC2 through prison and court records.

The former inmates said they worked standard hours and made shirts, trousers, hotel slippers and shopping bags. Refusing to work often meant being moved to a different cell or forced to kneel, though some prisoners avoided the factories by paying prison guards, they said.

"We didn't want to work but we had to work. When we were in the prison we were equal to zero," said one former inmate.

Cambodia sets a minimum $200 monthly wage for garment workers, but the women said they usually received about $1.75 to $5 per month.

All the former inmates said they used their factory earnings to pay for their cells to be cleaned, for electricity, fans, water, laundry soap, sanitary pads, or additional food.

Three women said they did not have employment contracts, and that guards simply took their names before they began working in the prison factories.

Cambodia's Ministry of Interior, the General Department of Prisons and the official in charge of CC2 at the time, Klot Dara, did not respond to requests for comment. Reuters could not determine who owned the factories or details of their arrangement with the prison.

An ILO spokesperson said that if a prisoner declines to work, the government must ensure they do not face threats or penalties.

"A good indication of whether prisoners freely consent to work is whether the conditions of employment approximate those of a free labour relationship," the spokesperson said.

CAMBODIA INVESTIGATES

Prison labour at CC2 potentially puts Cambodia at odds with the U.S. Generalized System of Preferences, which grants duty-free benefits to eligible developing nations. The program has lapsed and is awaiting U.S. lawmakers' reauthorisation.

While the program excludes textiles, eligibility for its benefits – through which Cambodia sold $2 billion worth of goods to the U.S. in 2020 – in part depends on the beneficiary country prohibiting forced labour.

Cambodian commerce ministry officials met with other government, prison and trade association representatives in February and March to discuss AAFA's concerns about whether international norms for producing export goods were being followed in Cambodia, the ministry said on its official Facebook account.

On March 17, Sopheak told AAFA president and CEO Stephen Lamar and senior vice president of policy Nate Herman, the U.S. embassy in Phnom Penh, Cambodia's U.S. ambassador, and others, that Cambodia would clarify the law to distinguish between prison production for rehabilitation programs and commercial subcontracting, the commerce ministry posted on Facebook the next day.

Cambodia held an election in July. In mid-August, Sopheak told Reuters progress on legal clarification would need to wait for the new government to be officially announced, and would depend on its priorities.

(Reporting by Clare Baldwin in Phnom Penh and Katherine Masters in New York. Additional reporting by Siddharth Cavale in New York, John Shiffman in Washington and Kristina Cooke in Los Angeles. Editing by David Crawshaw and Kay Johnson.)