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Sourcing Guide for Garments Industry

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Sourcing Guide for Garments Industry Powered By Docstoc
					Sourcing Guide for Garment Industry
             of Serbia
Table of Contents




1. Sourcing Management

        1.1. Introduction to sourcing management                       4
        1.2. Sourcing strategy after 2005 (When quota is phased out)   11
        1.3. Domestic and International Sourcing                       13
        1.4. Production Sourcing and Priorities                        17
        1.5. Summary                                                   21


2. Quality Standards                                                   22


        2.1. Fabric Performance Testing                                23
        2.2. Definition of Test Methods and Quality Standards          25
        2.3. Eco-Labeling                                              34
        2.4. Eco-Tex                                                   39
        2.5. Fabric Specification Sheet                                41
        2.6. ISO 9001 Quality Management Systems                       43
        2.7. ISO 14001 Environmental Management Systems                44


3. Guide to Import – Export Operations                                 45


4. Annexes                                                             68

List of international and domestic fairs                               59
Testing labs                                                           60
1. Sourcing Management
1.1 Introduction to Sourcing Management
This section looks at the basic process of researching and managing the sourcing of fabric
and trimmings, an area, which, if not controlled well can impact quality and delivery.

There are two elements to the process of sourcing fabrics and trimmings: the first is the initial
research to find novel items to put into the collection which will differentiate the range from
the competition and the second is the sourcing of bulk fabric and trims for production.

a) Research

Selecting fabric and trimmings can be one of the most exciting and frustrating elements
within the garment production process. The Internet and trade publications are useful tools in:

        • Finding suppliers
        • Providing information on minimum orders
        • Price points
        • Fiber content
        • Virtual samples.

To build relationships with mills and knitters, there is nothing like attending the major fabric
and yarn fairs.

                         Table 1: Common Yarn and Textile Fairs


            •       Expofil and Pitti Filati for yarn
            •       Elite London, Moda in Milan
            •       Prato Florence
            •       Premier Class Lille and Premier Vision Paris for fabric
            •       Moda Amond for trimmings.


It is advisable to work closely with fabric mills to develop a new fabric of value to both
fabric supplier and garment producer. Many international fabric companies do not have
representation in Serbia, which means that communication will have to be carried out directly
with mills overseas. Also, there are very few of Serbian fabric producers willing to work with
the garment producers on new fabric developments.

b) Costing and Payments

When importing fabrics from within Europe, a VAT number will be required. Care must be
taken to ensure that fabric prices (often ex-factory) are converted into delivered to warehouse
price, including all costs (freight, insurance, duty, and clearance costs.) The difference can be
as much as 30% depending on the country source.

Two important terms are FOB (Free on Board) - the price includes delivery on the ship and
the CIF (Carriage, Insurance and Freight). The price includes all these three items.



More details about international payment can be found in INCOTERMS 2000
(http://www.iccwbo.org/incoterms/preambles.asp) and in the chapter “Practical Guide to
Import – Export Operations”.

It is important to keep a record of all fabrics and trimmings within the sample room, as this
will be required at a later stage when costing garments. Records should be in the form of a
fabric order book (Tables 3, 4) and should include all the details about:

                            Table 2: Details of Samples Records



         •       The supplier/ Serbian agent
         •       Fabric quality
         •       Width
         •       Composition
         •       Color
         •       Price
         •       Quantity of sample order
         •       Cost of shipment/delivery


Payment terms must be negotiated with suppliers when placing orders. Common methods for
payments are:

       • Cash payment against an invoice before shipment
       • Pre-pay for bulk fabric orders for new customers
       • Factors (credits can be obtained against orders placed by recognized credit worthy
       retailers to finance fabric purchases).

Payments and commercial terms vary significantly so it is important to ensure that all costs
are taken into consideration. European suppliers often quote ex-factory, without freight,
insurance and clearance so these costs need to be included. It is also important to check
carefully through the payment terms and conditions, including inspections and returns.
Some fabric suppliers require Letters of Credit (L/C) from a bank. In this case terms for
payment can be included. A 90day L/C would mean payment after 90 days. The interest cost
could be of either the supplier or buyer account. Standard contracts for imported goods and
details on these payment methods can be found in the chapter “Practical Guide for Import –
Export Operations”.

c) Minimums

Minimum quantities are often an issue. Some new businesses may only be looking for 200
meters, yet the standard minimum for most fabric mills is 500 meters. Consideration must be
given when planning the range to ensure that fabric usage is spread over a number of styles
so that minimums can be met.

Always establish minimum order quantities for bulk when sampling, to avoid problems later
when a minimum order of 1000 meters per color might be required. Bulk sampling, may be
an option, i.e. purchase 100 meters, use 10 meters for sampling now and use 90 meters later
for production. You risk losing 90 meters of fabric if samples do not produce orders. If orders
are greater than fabric bought, there may be difficulties in repurchasing fabric. If bulk
sampling is used in the initial stage of growing the business, at some point there will need to
be a transition to bulk orders. Mills supply sample lengths generally on the assumption that
this will lead to bulk orders. It is likely that the relationship will deteriorate over time unless
volume is achieved.

d) Delivery and Quality

“50% of all delays in manufacturing are caused by fabric faults or late delivery”

- Supply chain benchmarking study –

On time fabric delivery is paramount, yet this is an area where many garment producers feel
they are most regularly let down and often feel helpless when they are dealing with a foreign
mill. Constant vigilance on the state of the order needs to be maintained.

Lead-time varies with:

        • Point of origin
        • Shipping methods
        • Materials are open stock or custom designed
        • Products are performance tested before production begins.

Imported fabrics or accessories may require 6-9 months’ lead time, while domestically
produced fabrics may require a few days to 3 months depending on availability and
additional processing. Lead times for materials may be reduced significantly when Quick
Response (QR) programs are put in place.

Open stock materials have the advantages of:

        • Shorter lead times
        • Lower prices than goods made to the apparel firm’s specifications.
        • Immediate delivery
        • Availability in basic colors such as red, blue, black, white, and the fashion colors
        of the season.
        • Easy to reorder because mills make them to stock
        • Available in common fabrications such as poplin and chambray.


Mills develop sample yardage, swatch sets, and sample of garments of open-stock materials
that are displayed at trade shows for potential buyers. Sales reps may also show them to
potential customers.

Working fabric mills may develop special structure designs or fashionable items in woven or
knitted fabrics. Fabric ordered to specifications may take extra time because they have to go
through the sample approval process before the goods are produced.

Apparel firms with basic product lines often place large orders with mills for basic greige
goods like print cloth, and use converters to print or finish the fabric as needed. Prices of
greige goods are based on conditions in the market. For example, cotton prices are affected
by favorable or unfavorable growing conditions, a major insect infestation in one of the
major producing countries, or unusually high or low demand for cotton fiber in the world
market. If prices are expected to rise, orders may be placed many months ahead of the actual
need. This locks in the price and guarantees the manufacturers that the fabric is available for
garment production.
Delivery is also related to production forecast which require sharing of data with the supply
chain to ensure Quick Response. However, unless the garment buyers are willing to share
their data with suppliers and manufacturers, manufacturers will constantly run into problems
that cannot be solved. If manufacturers could receive timely forecast data, they could
schedule both the ordering of fabrics and trim, and production. Manufacturers would be able
to make intelligent decisions about what to prioritize based on the knowledge of the situation
and the flow of their own factory. As an example of causes for late delivery is errors in
specifications by the buyer usually result in reworking of patterns and markers. However, if
the problem is not caught until the sewing floor, specification errors will result in costly
garment rework. Even small errors in bills of materials (such as a wrong shoulder pad or size
zipper) can result in production delays. This is another error that probably would not be
discovered until the operator attempted to set the zipper. A typical zipper has a 4 week
delivery, so the schedule impact is immediate and severe.

Late deliveries lead to increased cost such as:

        • Airfreight instead of sea
        • Overtime costs
        • Cancelled orders if final delivery dates cannot be met.

Poor quality of raw materials will affect delivery. Controls need to be put in place to ensure
that:

        • The mill has the capability to deliver consistent product
        • Fabrics are inspected prior to delivery and
        • Inspection certificate included as a requirement within the payment terms
        • Fabrics are inspected prior to cutting

Other problems associated with in the garment producers sourcing process:

        • The mill has no forecast of potential volume for production
        • The mill is given the actual order late as the garment producer calculate to the last
        meter on final confirmation of orders
        • Finance is not put in place to guarantee payment and the mill holds of putting the
        order into the production planning process because of internal financial controls.

Garment producers should also be aware of the key trends in overall demand for fabrics as
shortages of key fibers or base fabrics can occur because of either excess demand (a fabric
may become very “hot”) or a sudden lack of supply (e.g. a cashmere shortage brought about
by severe weather conditions in India or Mongolia).

If a fabric is not delivered it is advisable to have a substitute supplier, however, the fabrics
must be a close match in color, handle and weight.
                           Table 3: Sample of Fabric Order Book

Supplier Quality Width Content Color Price Quantity Value Delivery Cancellation
                 Weight                                   Date     Date




                            Table 4: Sample Fabric Receipt Book

Supplier    Quality,    Color         Lot      Quantity Inspected Approved Comment
            Description               no




                                   Table 5: Tips and Hints


 Questions to ask when you are sourcing or ordering fabrics:

         • What is the minimum order?
         • What is the price per meter?
         • Where is the delivery point?
         • Is the carriage cost included in the total cost?
         • What are the delivery dates of sample fabrics?
         • Are there premiums for sampling?
         • What are the lead times for delivery of bulk production?
         • What are the differences between the sample fabric and bulk production?
         • If larger quantities of fabric are purchased, will there be a discount?
         • Have any other designers ordered the same item/fabrics?
         • What are your payment terms?
         • Are bank or trade references required before production?
         • What are the care instructions for fabrics/trimmings?


e) Quality Control

It is recommended that all sample fabrics be tested before a sample garment is produced to
ensure that fabric will perform as required. Alternatively a test certificate could be provided
by the supplier. Inspections can be made to fabrics through specialist organizations, but this
normally increase cost by 3-5%. Similarly test certificates for colorfastness, fabric strength
etc can be required.

If a certain percentage of faults are acceptable in a fabric some suppliers will mark the faults
at the roll edge. This allows the factory to lay the fabric to minimize waste. When ordering
fabrics check for defects, such laddering or tearing and ensure that the finish is satisfactory
prior to cutting. When fabric is delivered, check all quantities immediately. Substandard
deliveries must be dealt with and the implicated supplier must be notified at once. Reporting
defects four weeks later is too late. Most companies stipulate that if the fabric is cut, it has
been accepted and the supplier is nom longer responsible. Quality standards and
specifications are discussed in details in the next chapter, called “Quality Standards”.

                            Table 6: Quality Control Check List


          • Tears and Snagging
          • Laddering
          • Fraying
          • Irregular shading
          • Width
          • Handle
          • Finish
          • Shrinkage
          • Puckering
          • Colorfastness
          • Pilling
          • Weight
          • Any unacceptable flaw



f) Quality Control Protocol: Case Study

The following is a case study of quality control protocol conducted in sourcing contract
between two companies: The items sourced are knitted 100% merino wool garments and
fabrics.
                             Table 7: Visual Defect Inspection

Defect                                            Description

General Appearance

Fabric Flaws                                      Slubs, holes, irregular knitting/weaving,
                                                  dyeing or finishing defects

Color                                             Poor match of color when compared to
                                                  approved lab dips

Shading                                           Variation in color between and/or within
                                                  panels or within a set

Soilage/stains                                    Dirt, oil, grease, pencil, pen, marker, chalk

Thread Ends                                       Thread not trimmed

Skewed/Distorted                                  Sloppy sewing or cutting results in irregular
                                                  or distorted construction.
Stitch Quality


Stitch defects                   Includes: skipped, broken, run-off, puckered,
                                 in-correct tension, open seam, needle
                                 cut

Stitch count                     Stitches per Inch

Thread quality                   Type and color

Needle holes                     Conspicuous seam repair

Labels& Embroidery

Poor placement
Not sewn securely
Incorrect label
Missing label
Embroidery incorrect

Trims

Substituted part
Omitted part
Damaged part
Poor setting                     Missing stitches, distorted design,
                                 Sloppy setting of zippers, buttons, snaps

Packaging

Packaging damaged                Crushed, torn, soiled, wet
Garment incorrectly identified   Style/size/color, hand tags differs from
                                 garment
1.2 Sourcing Strategy after 2005 - When Quota Is Phased out
The apparel business has never been better for the apparel buyers. With tariffs and non-tariff
barriers being dismantled, economic conditions in the world keep apparel prices falling. The
deadline of quota phasing out is in sight, textiles/ apparel can be sourced at attractive rates
from all over the world. The question is what you want to achieve for your sourcing strategy?
How will you get your deliveries? Is it on time? Are the raw material shipped from half way
around the world? How many middlemen are involved? The answer is that yours sourcing
strategy should be based on a balance of cost and non- cost factors such as:

         • Shipping / lead time
         • Politically Stable Environment
         • Telecommunications
         • Worker efficiency level
         • Small runs
         • Raw material supply
         • Internal Transport
         • Profit Transfer / Investment ease
         • Language / Cultural barriers.

a) Major Sourcing Countries

The following is a brief analysis of the major sourcing countries:

China
         • Large population of over 1.2 billion implies massive textile industry to cloth its own
         people. This gives it enormous advantages.
         • Abundant raw material available. Largest and second largest producer of Cotton and
         Synthetics.
         • Very low cost production.
         • China has a totally vertical industry. It has 40 million spindles, the world's
           largest weaving capacity.

China will be a huge powerhouse in the post quota period. However, other regions of the
world particularly those part of free trade agreements with US and Europe are likely to
continue to offer great advantages over China even beyond 2005. China will remain a source
for the more traditional 3-6 months lead time and is not a viable alternative for production in
which quick turnaround is a factor.

Mexico

Mexico with its close proximity to the US has enjoyed a rapid growth in its apparel sector. In
the last decade of XX century Mexican apparel exports have doubled. The Mexican industry
focus was on mass production and high output. This scenario does not coincide with recent
market trends in US. Currently US apparel industry is surviving by focusing on choice,
differentiation, more styles and seasons. This requires that production be geared towards
small lots, lower inventories and quick response. Mexican apparel industry needs to adapt to
these challenging market demands.
Turkey

Turkey with its close proximity to EU has over the years grown into a leading textile
exporting country. The major items are knitted apparel such as jerseys, cardigans, pullovers
vest etc and jeans. Turkey’s focus has been on women’s wear market to cater to the fashion
needs of this growing segment. The recent economic and financial turmoil in the country has
lead to a close down of many apparel companies. Wide fluctuation in energy costs and high
interest rates have made many producers uncompetitive.
1.3. Domestic and International Sourcing
a) Domestic Sourcing

In spite of great increase in international sourcing over the past 20 years, domestic sourcing
still has many advantages. Domestic sourcing is sometimes called “speed sourcing” or “quick
response” because of:

        • Easy access to the manufacturers
        • Minimum turnaround time
        • Flexibility
        • Short lead time
        • Nearness to market
        • Eliminates many language and cultural barriers
        • Eliminates tariffs and customs.


Priorities for domestic contractors can be summarized in the following Table:


                        Table 8: Priorities for Domestic Contractors


         • Location
         • Ability to work closely with the contractor
         • Specialization in certain types of products
         • Availability of equipment and skill of workforce




b) International Sourcing


Potential challenges with international sourcing include:

        • Communications
        • Culture
        • Financial, legal, and political issues
        • Quality
        • Lead times
        • Selection of international contractors.


Developed textile producing countries generally offers more reliable service, production
skills, and quality control than developing countries. They have also higher wages; when
price is the most critical criteria, one of the developing countries may be the best choice.

Requirements for International Sourcing

When sourcing internationally, textile firms may use agents. Agents are familiar with:
       • Trade laws
       • Language
       • Culture
       • Production capabilities of apparel/textile manufacturers and contractors in their
       country.
       • The comparative abilities and performance records of the contractors in their
       country.


Companies that source large quantities of goods in certain areas of the world often establish
regional sourcing offices to work with sourcing agents. The sourcing manager or
representative of the firm should make an on site evaluation of the factory which is producing
their products although an agent may be extremely beneficial in developing and working with
contractors in a particular country. All factories should be visited before a contract is
established for doing business.


Trade advisors are one of the best sources of current information on world trade. They advise
on:

       • Trade agreements
       • Developing trade actions
       • Quota usage
       • Potential transshipment violations
       • Upcoming trade negotiations.

Legal counsel is essential for the complicated sourcing process. Attorneys that specialize in
international trade law can assist with contracts and agreements, letter of credit, purchase
order terms.

Custom brokers are licensed third parties used to interface with customs on behalf of the
customer. Customs brokers can help determine product classifications for quotas and tariffs,
provide documentation for customs, make payment for duties, and execute other transactions
that Customs required.

Quality Auditors can be hired to provide independent evaluations of fabric and finished
goods. When starting up a sourcing program and working with an agent for the first time, it is
often recommended to use an outside auditor to monitor quality of the goods. Quality
auditors may also test for fiber content, flammability, care, etc.

International Sourcing Using the Internet:

Selecting fabric and trimmings can be one of the most exciting and frustrating elements
within the garment production process. The internet is now a useful tool in finding suppliers,
providing information on minimum orders, price points, fiber content, and even virtual
samples. The easiest way to search for fabric and accessories is to log on one the search
engines (e.g. www.google.com, www.yahoo.com) and use the key word “fabric sourcing”.

The followings are some of names and websites for Internet fabric sourcing:


www.Fastextile.com
www.textiles-clothing.europages.net
www.Paginialbastre.ro/firme.php
www.BuyTextiles.com
www.Buyfabric.com
www.distinctivefabric.com/?google=fabric3
www.fiber2fashion.com/tradedirectory/fabric-buying-house-directory.asp
www.business.com/directory/retail_and_consumer_services/home_and_garden/fabrics/
www.fabricshub.com;
www.tradeagency.net;
www.europages.com
www.its-guide.com
www.apparelsearch.com/Apparel_Search_2.htm,
www.aaaoe.com/product/offer/31.php,
www.textiledatabase.com/,
http://www.ncsli.org/dsl/.


c) International Sourcing Check List

On making the decision for international sourcing, there are many issues that need to be
evaluated by a knowledgeable person from the sourcing firm. It is essential to evaluate
business practices, ethics, and services relative to the firm’s priorities and needs. At the plant
level the sourcing firm needs to evaluate a facility’s capability to produce the product desired
at the determined quality level. There are also many human rights and health and safety
issues that a socially responsible firm will want to monitor. A sourcer needs to verify
firsthand that the code of conduct is being honored. Violations are easy to overlook
especially with just one visit. The checklist in the following Table provides some key
elements that should be considered in evaluating sites and facilities prior to making a
sourcing commitment. It is much easier to make a wise decision based on first hand
information and analysis of capabilities than to enter into agreement and find major
violations of human rights and safety issues and a contractor’s inability to produce the
volume and quality product needed. Surprises need to be avoided.


                         Table 9: International Sourcing Check List

Country Level
   1) Does the country have minimum legal age for manufacturing employment?
   2) Does the country have minimum wage?
   3) Does the country have standard number of hours for a work week and standard
       practices for overtime?
   4) Is there a political unrest in the country?
   5) Is the economy stable in the country?
Agent Level
   1) What is the relationship between contractor management and agent?
   2) Is communication good between the contractor and agent?
   3) How much time does the agent or agent’s representative append in the plant?
   4) Who manages the operation on a day to day basis?
Vendor level
   1) Is the company financially stable?
   2) Is the company vertical?
    3) Does the contractor subcontract work?
    4) Does the company provide housing and meals for employees?
    5) Does the company operate in a free trade zone?
    6) Does the company keep good employee records for citizenship and number of
        hours worked?
    7) What the contractor’s product strength?
Plant level
    1) What types of garments are currently being produced?
    2) Who are the plant primary customers?
    3) How many workers are employed?
    4) What type of equipment is being used?
    5) Are the machine properly maintained?
    6) What is the degree of automation in cutting? In assembly?
    7) What are the bottleneck operations?
    8) How were the operators trained?
    9) Is skill level of operators adequate?
Quality
   1) How is the quality monitored?
   2) Are specifications are available to operators?
   3) Are specifications in the appropriate language?
   4) How many inspectors do they have?
   5) Are In-line inspectors performed?
   6) Are final statistical audits performed?
   7) What percent of products is audited?
   8) How have they been rated on previous audits?
   9) What is the plant’s audit pass rate?
Human Rights
   1) How many workers in the room?
   2) Are the workers of legal age?
   3) Are there children present?
   4) How many hours do they work per day? Per week?
   5) Are the workers allowed break time?
   6) Is there forced overtime?
Plant Safety and Health
   1) How many exits are there?
   2) Are safety regulations posted?
   3) Is the level of lighting adequate?
   4) Are there enough rest rooms?
   5) Is the ventilation system adequate?
   6) Is the drinking water safe?
   7) Are electrical outlets grounded?
   8) Are there fire safety exits? Sprinkler systems? Inspected Fire Extinguishers?
Shipping
   1) How products will be shipped?
   2) Will additional processing be required in the distribution center?
   3) Does the plant have Electronic Data Interchange (EDI) capacity?
   4) How they insured against theft?
   5) How safe transportation from the plant to the port?
1.4 Sourcing Priorities and Processes:

Sourcing can be a profitable way for a firm to do business but it requires a great deal of
advanced preparation, knowledgeable individuals, attention to detail, careful planning and
timing. Losses can be minimized if the sourcing firm is well prepared. Prior to sourcing
decisions, locations, plants, and potential contractors should be visited and evaluated.

a) Selecting a Vendor

Factors that drive sourcing decisions include:

        • Cost
        • Product quality
        • Specialization
        • Timing.

Company priorities will often determine where, what, and how products will be sourced. For
some firms sourcing involves extensive research and analysis of countries, agents, and
contractors especially is the development of long term business relationship.

Firms need to determine the level of risks they are willing to assume and the level of
involvement they wish to maintain. A trade advisor can be extremely helpful with initial
investigations and determine the business needs, legal restrictions and potential advantages
and disadvantages of sourcing in particularly country.

The assistance of trade advisor never replaces a first hand evaluation of a contractor and
production plant. There are many issues that need to be evaluated by a knowledgeable person
from the sourcing firm. It is essential to evaluate business practices, ethics and services
relative to the firm priorities and needs.

American Textile Company: Case – Study

The American Textile Company is a case study for successful sourcing. The followings detail
the steps taken by American Textile Company for vendor selection and how to manage
sourced production goods. www.americantextile.com

Background

One of the largest supplier of protective and health bedding products in the USA. Mattress
Covers, Pillow Covers For Home Use.

Problem in 1995

Labor intensive business, labor not readily available, labor costs rising raw material and
sourcing limited.
SOURCING STRATEGY:

WHAT DID WE NEED?
Production geographically close   WHAT DID WE FIND?
Control                           El Salvador
                                  Use manufacturing and purchasing
Mutual trust                      expertise
Competitive labor rates           Consider the partners friends
Ease of communication             Not necessarily lowest
Non-ownership of assets           English speaking management
Deliberate growth                 Do not own facility nor capital equipment
                                  Patient in developing business
STEPS:

PHASE
Research                          ACTION
                                  Shake lots of hands; talk to lots of people
                                  in the industry; visit lots of factories
Testing
                                  Finalize acceptable cost; place a variety of
                                  small orders; establish consistent
                                  production
                                  Become familiar with: turnaround time;
                                  customs clearance; freight
Ramp up
                                  Research/test raw materials from regional
                                  suppliers; research data exchange options
                                  Evaluate capital investment to improve
                                  control and reduce costs
                                  Regular production with volume products


CHANGES:


Number of *SKU’s:
Type of Business:                 From 10,000 to 850
                                  From Manufacturing to Hybrid
Plan Production                   Distribution
Own materials
Manufacturing relocation:         Do Not Own Capital Assets
Source of Materials               From USA to El Salvador & China
                                  From USA and China to USA, China,
Speed to Market                   Pakistan
                                  From Shipped in 1-2 Weeks to Shipped in
                                  2-3 Days
                                  (*SKU: Stock Keeping Unit)
Results

          • Sales increased 4 times
          • Profits increased 4 times
          • Market share 80% (protective & health bedding @ retail)

Conclusion

          • Success relies on trust
          • Never over-communicate
          • Study and understand non-production related costs
          • Be deliberate and grow business over time
          • Reduced labor costs are just part of the savings

b) Fabrics and Trim Sourcing

It is essential to have all fabric and trim items for a style available before production starts.
This is often a problem when styles are produced in a firm’s own plants but it is an even
greater problem when sourcing is done internationally.

The first issue in managing fabric and trim is to determine:

          • Where it will be sourced?
          • Will the fabric be ordered in the producing country?
          • Will the fabric be inspected and lab tested before it is shipped out of the producing
            country?
          • Will the fabric has a statement of origin, value statement, and shipping documents
            in order to satisfy customs?
          • Will styles that include several different fabrics have different import duties?

Extra trim should be allowed for all contracted garments. The primary concern for
contractors tends to be efficient use of time and little priority may be given to economically
using fabric and trim. Firms frequently use a 5-8% trim allowance when using domestic
contractors. When using international contractors this allowance should be doubled.
Production delays due to lack of trim can be extremely costly in terms of delivery. Trims
ordered in producing country should be tested for performance requirements in the country
where purchased and any substitutions should be monitored closely.

Finishing and packaging may be done by the sourcer or vendor. If the vendor is expected to
do the finishing, specifications should be developed specifically for these operations and a
finishing sample should be available in the finishing department. It should be tagged, folded,
and packaged in the approved method.

As long as appropriate quality specifications, methods, samples, and a quality program are in
place there are controls to manage production. None of these provide guarantee that all
products will meet a sourcer’s expectation but the more information that is made available
the less guesswork is involved.
c) Quality Management of Sourced Goods

Quality instructions must be precise and understandable to the contractors. Quality
instructions include method descriptions, tolerances for each operation, and step-by-step
inspection procedures. These are part of quality manual and/or tape that shared with the
vendor. These form of basis for quality audits and inspection procedures. According to many
quality standards, there should be in line quality auditors that monitor styles while they are
being produced to identify problems before products are completed. Final inspection verifies
that garments meet specifications before leaving the plant. If using international sourcing a
post inspection final audit may be used to detect defects before goods leave the country. If
defects are found before garments are shipped the problems can be corrected at the factory
that was responsible. It is extremely difficult and costly to have to make repairs in Serbia
after faulty goods have been shipped.

Sourcing firms may handle the quality inspections and audits in a variety of ways. Some
firms may use in country independent quality audit firms. Larger firms may set up a regional
quality audit center in the country where production is done and train the quality auditors to
the system used by the firm. Serbian firms may use Serbian based quality managers to do
quality reviews on a routine basis. If a full package sourcing is used, quality inspections may
be left to the agent or the sourcer may use some combination of quality management
components to ensure delivery of a specified products. More responsibility for quality can be
placed on the contractor if the sourcing firm specifies the acceptability requirements for
quality audits in the Letter of Credit. If products do not meet the sourcer’s standards the
contractor is not paid. This is not as simple as it sounds as many stipulations must be
identified and documented, but problems can be averted if provisions are made upfront.
Quality standards and specifications are discussed in details in the next chapter.

Case-study:

The following is a typical quality management/inspection procedure in a contract for sourced
goods:

       • Standard fabric inspections should be expected using standard procedures
         by fabric spreaders and cutters
       • In-Line sewing Quality Assurance by supervisor or Quality Assurance personnel
         should be expected
       • 100% final inspection is required for:
               o Critical measurements as indicated by the buyer specifications (e.g.
               length, width, weight, etc)
               o Visual inspection using Acceptable Quality Level Inspection 4.0 level
               II. Upon production order completion, all shipments must undergo
               AQL 4.0 Level II Inspection by the manufacturer/agent. If the shipments
               deemed acceptable, then the manufacturer shall issue an AQL
               Certificated stating so. This AQL Certificate is a required document on
               all Letter of Credits (L/C). Company will then issue a written approval
               to release the shipment. Company reserves the right to conduct an AQL
               inspection on site, or upon receipt, either by Company personnel or an
               independent agency. If the production order fails the AQL 4.0 LEVEL
               II inspection then 100% inspection shall be required to determine which
               pieces are first quality shippable.
    • Accept/reject Threshold:
    Example: a 100 unit run of style XYZ, under 4.0-LEVEL II, 20 units are
    inspected. If 3 units are rejected, the lot of 100 units is rejected.” Accept on
    2, Reject on 3” Based on US military standard 105D, BS 6001, ISO 2859,
    DIN 40080

Summary:

    • Develop a long term relationship with your suppliers
    • Key contacts and relationships should be built gradually
    • Be aware of fabric technology developments which yet have to be proven
    commercially
    • Aim to work directly with mills and engineer your custom made cloth
    • Monitor exchange rate
    • Ensure costs of fabric include all costs
    • Allow plenty of time for sourcing and allow delays
    • Always note supplier’s minimum quantity-no fabric means no business
    • Keep good relationships with business partners
2. Quality Standards
2.1 Fabric Performance Testing
Fabric Performance testing involves formalized exacting procedures and requires trained
technical personnel and laboratory facilities for their undertaking. However, understanding
the procedures and the meaning of the results of these tests can be and should be understood
by all textile professional, both technical and non-technical. There are also reasons for textile
testing besides quality control. These include development of new fabrics, analysis of the
cause of the cloth problems, determination of the acceptable consumer performance level,
and adherence government regulations. After the fabric tests are performed, the results must
be studied in order to determine whether the fabric should be used for intended end use. Is the
fabric strong enough to be made into men’s trousers? Will the swimwear fabric fade too
quickly from repeated exposure to the sun? Is the shrinking of the shirting fabric considered
excessive? The answers to these questions and many others determined the suitability of the
fabric for the desired use. The importance of the test must also be decided. For example, the
fact that a 100% wool coating fabric fades very quickly when washed should not be
considered important because the coat will undoubtedly be dry cleaned and not laundered. If
however, the fabric is considered to be very weak for this purpose, then the fabric should be
rejected for this end use because of strength is an extremely important property of the coats.

a) Types of Test Methods

Although textiles testing in broad scope, encompassing many textile properties, most of tests
performed on textiles can be grouped into the following major categories:

        • Physical tests: These tests are physical or mechanical in nature. Examples including
        breaking strength, abrasion resistance and pilling propensity
        • Tests to determine colorfastness properties: These tests are used to determine the
        resistance of dyed or printed fabrics to color change under various conditions.
        These include colorfastness to sunlight, washing and crocking (rubbing off color)
        • Chemical tests: In these tests, chemicals are used as part of the test procedures.
        Examples include fiber identification using the solubility method, determine
        antibacterial activity in fabrics
        • Optical tests: In these tests a microscope or another magnifying devise is used.
        Examples include inspection of textile defects

b) Test Methods

There are several technical and scientific organizations are the leaders in publishing methods
for testing textile materials in the world:

        • The International Organization for Standardization (ISO)
        • The German Textiles Standards
        • The American Society for Testing and Materials (ASTM)
        • The American Associations of Textiles Chemists and Colorists (AATCC)
        • The American National Standard Institute (ANSI)
The following Table illustrates the common textiles / apparel test

                         Table 1: Common Textiles/Apparel Tests
Strength Tests                  Definition of Tests                  Important For
Breaking strength               Force required to break a fabric     Woven
                                when it is under tension (being
                                pulled)

Bursting strength               Amount of pressure required to       Knits, felts, non-woven, laces
                                rupture a fabric

Surface Friction Tests          Definition of Tests                  Important For
Abrasion Resistance             Resistance to wearing away of        Most end uses
                                any part of a material when
                                rubbed against another material

Appearance Tests                Definition of Tests                  Important For
Pilling                         Formation of pills on the surface    Hydrophobic fibers and fabrics
                                of the fabric                        with fuzzy surfaces

Wrinkle resistance              Ability to recover from folding or   Smoothness and crease retention
                                bending
Color Fastness to               Definition of Tests                  Important For
Crocking                        Resist transference of color by      Linings, upholstery, colored
                                rubbing from one colored textile     sheets, and others
                                material to another

Dry Cleaning                    Dry-cleaning process                 Dry cleaning articles

Light                           Sunlight                             Outdoor articles, curtains, and
                                                                     draperies

Washing                         Laundering process                   Washable articles

Frosting                        Localized flat abrasive action       Rear pockets of trousers and
                                                                     others
Functional Tests                Definition of Tests                  Important For
Shrinkage                       Growth or decrease in the length     Apparel fit, interior appearance
                                or the width of the fabric           an others

Flame resistance                Ability to resists burning           Safety

Durable press                   Finish that results in a garment     Garment appearance
                                being highly resistant to fabric
                                wrinkles and seam puckering
2.2 Definition of Test Methods and Quality Standards
1. Color Fastness

a) Color Fastness To Light

Definition

Color change under the influence of light.

Method of Testing

ISO 105 B02 - Exposure of a sample of the fabric to be examined under artificial light in an
apparatus fitted with Xenon lamp (Xenotext) in parallel with a range of blue standards, the
humidity of the apparatus being checked with a red reference.

b) Color Fastness to Perspiration

Definition

The change and/or the staining of the dyed fabric must not be beyond the value specified
under the influence of perspiration.

Method of Testing

ISO 105 E 04
Impregnating then stowing at 37 C two samples of fabric to be examined in contact with
white reference fabrics in solutions of histidine, the one acid, and the other alkaline.
Evaluating after drying of the change of color of the samples and of the staining on white
reference fabrics compared with the gray scale.

Note:

If the garment if made up of white or light colored parts next to dark ones, the staining must
be 4-5. The clothing manufacturer should specify the standard when drawing up the contract.


c) Color Fastness To Dry Cleaning Using Perchlorethylene

Definition

The change and staining of the dyed fabric during dry cleaning must not alter beyond the
value specified.

Method of Testing

ISO 105 D 01

A sample of the fabric to be examined bagged in a cotton material with steel discs is treated
by mechanical stirring in the cleaning solvent for 30 minutes at 30 C. After drying the
degradation of the color of the sample is judged compared with the gray scale.
d) Color Fastness to Washing

Definition

Change and/or staining of the color of the fabric after washing.

Method of Testing

ISO 105 C 06

A sample of the fabric to be examined together with white reference fabrics is treated by
mechanical stirring for 30 to 45 minutes in a washing solution containing a detergent with or
without sodium perborate, temperature depending on the article.

After drying and rinsing the change of the sample and the staining on reference fabrics are
compared with gray scales.


Note:

If the garment is made up of white or light colored parts next to dark ones, the staining must
be 4-5. The clothing manufacturer should specify the standard when drawing up the contract.


e) Color Fastness to Rubbing

Definition

Staining of the color after rubbing dry and wet.

Method of Testing

ISO 105 X 12

Two samples of the fabric to be examined, one taken warp ways and one weft ways, are
rubbed with a dry and a wet piece of white cotton fabric.

The bleeding on the white fabric is compared with the gray scale.

f) Color Fastness to Pressing or Ironing

Definition

Change and or staining of the color after pressing or ironing the fabric. The damp test enables
change and/or staining after pressing and/or ironing to be assessed.

Method of Testing

ISO 105 X 11
Dry ironing: The sample of fabric to be examined is put on to a piece of dry white cotton, and
ironed under specific conditions. Subsequently, the sample of fabric to be examined is put on
a piece of dry white cotton and covered with a piece of wet white cotton fabric and ironed
under specific conditions.


g) Color Fastness to Spotting: Water


Definition
The fabric in question, after being sprinkled with water and dried, is spotted, the color or
appearance of the surface being modified.


Method of Testing

ISO 105 E 07

The fabric in question is spotted in one area with distilled water. Subsequently the water is
worked in the specimen with a glass rod. The change of the color of the sample is judged
with the gray scale after 2 minutes and after drying.

h) Color Fastness to Rubbing: Organic Solvents

Definition

The fabric in question is spotted. The color or appearance of the surface being modified after
a test simulating the removal of a stain using a solvent.

Method of Testing

ISO 105 D 02

The fabric in question is rubbed in one area with a white cloth impregnated with solvent. The
degradation of the sample and the bleeding on the cloth are compared with the gray scales.


2. Fiber Content

a) Composition

Definition

The natures of the fibers of the fabric and/or their proportion in the case of a mixture differs
from the conditions stipulated in the contract.

Method of Testing

Qualitative and quantitative analysis:
In countries of the European Union one must necessarily follow:

       • The EEC ruling 72/276/EEC of 17th July 1972 the Official Journal of the
         Common Market countries - 31st July 1972, page L 173/1 and following - for
         binary mixtures.
       • The EEC ruling 73/44/EEC of 26th February 1973. The Official Journal of the
         Common Market countries dated 30th March 1973, page L 83/1 and following
         for triple mixtures.

Outside the European Union unless there are special regulations:

       ISO 5089 - preparation of reduced samples then
       ISO 1833 - for binary mixtures
       ISO 5088 - for triple mixtures


3. Fabric Construction

a) Number of Ends and Picks

Definition

The number of the ends and/or picks per centimeter, warp yarn and/or weft yarn of the fabric
delivered, do not comply with the specification set out in the contract or with those of the
standard sample.

Method of Testing

Follow the standard of the purchaser's country. If there are no standards, the following
comments will be useful:

       • Count at least 100 ends or picks the counting being carried out in 5 places placed on
       a diagonal between the 2 selvedges and situated at least at 15 cm from these.
       • The average of the results will be rounded up so that the final result is given to one
       decimal point.
4. Weave

Definition

A different weave from that of the typical sample or that specified in the contract.

Method of Testing

Testing will be carried out according to ISO 7211.

5. Fabric Mechanical Properties

a) Breaking Strength and Elongation

Definition

The breaking strength and elongation necessary for fabrics and linings for garments are lower
than:

        • The necessary minimum values
        • The values specified in the contract or in the absence of these, of the typical sample.

Method of Testing

An increasing force is applied to a specimen with a width of 5 cm excluding any fringe with a
dynamometer of which the jaws are separated 200 mm when starting the test.

b) Breaking Strength (Grab Method)

Definition

The breaking strength from fabrics must not be below:

        • The necessary minimum value
        • The values specified in the contract or in the absence of this, of the typical sample.

Method of Testing

An increasing force is applied to specimens, which are larger than the jaws of the
dynamometer.

c) Tear Strength

Definition

Resistance of a fabric to a tearing force, or Resistance of yarns in a fabric to tear less than the
characteristics set out in the contract or otherwise to those found in the standard sample
provided.
Method of Testing

ISO 9290 - This method is intended to determine the tear strength of fabrics. The method is
applicable to all types of woven fabric in which a tear will proceed from an initial cut in a
direction parallel to the warp or weft threads.

d) Seam Slippage

Definition

Displacement of the yarn used for the fabric due to a force exerted perpendicularly to the
seam and producing an opening parallel to the seam.

Method of Testing

NF G 07 117 (French Standard).

A sample consisting of two pieces of fabric sewn together with a lock stitch: 301 (ISO 4915),
the seam being 1 cm from the edge, parallel to the length, as follows:

Linear density of       Mass in gr/m² of        Needle Nm                No of stitches per
sewing thread           fabric                                           cm
20 Tex 30 Tex 50        100 100 to 200 200      65 to 70 75 to 85 90     4.5 - 5.5 4.5 - 5.5
Tex                                             to 100                   4.5 - 5.5

The sample is placed in jaws 25 mm wide of a dynamometer so that the seam is
perpendicular to the direction of the force exerted and equidistant from the two clamps which
are 75 mm apart. The slippage caused by the movement of the yarn held by the sewing thread
is estimated visually. The risk of slippage of warp on weft and weft on warp is estimated.

e) Resistance to Abrasion

Definition

Fabric wears out too quickly for normal use.

Method of Testing

No testing method has yet been standardized internationally, although the test methods
worked out by the national organization may be used.

ASTM D 1175

BS 5690
DIN 53528 - 53863
SN 198529
6. Pilling

a) Resistance to Pilling

Definition

The fabric tends to pill quickly and the pills remain on the cloth.

Method of Testing

The test is carried out using the Random Tumble Pilling Tester in accordance with test
method ASTM 3512.

7. Snagging

a) Resistance to Snagging

Definition

The resistance of a fabric to the pulling or plucking of yarns or filaments from a fabric
surface.

Method of Testing

ASTM D 3939 - 93

A fabric specimen in tubular form is mounted on a rotated cylinder. A mace (spiked ball)
bounces randomly over the specimen thus causing snags to a certain degree.
The degree of snagging is evaluated with standard photographs (5 = no snagging, 1 = very
severe snagging).

b) Resistance to Dry Raveling

Definition

The fabric tends to unravel too easily.

Method of Testing

The test is carried out using the Random Tumble Pilling Tester as follows:
Take three squares with sides of 130 mm out of the fabric to be tested. Unravel to reduce the
sides to 120 mm. Cut off the frayed edges.
Place the three samples in one of the cages of the Random Tumble Pilling Tester, lined with
cork. Turn on the apparatus for 120 seconds. Remove the threads, which are only holding to
the sample along half their length. Measure the lengths warp ways and weft ways of the
fabric, which is not frayed. Deduct the length of the fringes.
8. Dimensional Stability (Shrinkage)

a) Dimensional Stability to Washing

Definition

Change in dimensions of fabric sold as washable after washing.

Method of Testing

In accordance with ISO 5077
Wash in a drum-type washing automatic machine with distilled water containing 5 g/l.
detergents. If no distilled water is available use a commercial detergent observing the
instructions of the detergent supplier. Wash during 30 minutes without spinning and dry flat
at room temperature.

b) Dimensional Stability to Dry Cleaning

Definition

Change in dimension after dry cleaning.

Method of Testing

In accordance with ISO 3175
Test a sample previously submitted to the test B 9.2 (page 22) given in the first part of the
recommendations. Carry out 3 dry cleanings using perchloroethylene (in charged bath) in an
industrial dry cleaning machine.

9. Crease Recovery

Definition

Insufficient crease recovery properties of the fabric.

Method of Testing

EN 22313. This method is intended to determine the angle of recovery of fabrics from
creasing in either the standard atmosphere for testing or one of higher humidity and
temperature. The method is applicable to all types of fabrics but some types of fabrics may
tend to curl resulting in an unacceptable precision in making measurements.

** ISO 9867. This method is intended to evaluate the appearance of textile fabrics after
induced wrinkling. It is applicable to fabrics made from any fiber or combination of fibers.
Summary of Test Standards Commonly Used for Textiles/Apparel

Summary Of Standard Tests

                   Serbian                 German            ISO             USA (AATCC)
Color Fastness     See web site:           DIN EN 20105      ISO 105-C06     Test method 61
(Washing)          www.jugoinspekt.co.yu
Color Fastness     See web site:           DIN EN 20105      ISO 105-D01     Test method
(dry cleaning)     www.jugoinspekt.co.yu                                     132

Dimensional        See web site:           DIN 53894         ISO 3759+ ISO   Test method 96
Stability          www.jugoinspekt.co.yu                     5077
(Washing)
Pilling            See web site:           ISO 12945-2       ISO 12945-2     Test method 93
                   www.jugoinspekt.co.yu



JUGOINSPEKT BEOGRAD – expert, independent and neutral internationally recognized
organization , specialized for inspection of quality and quantity of goods. JUGOINSPEKT
BEOGRAD is a renowned, worldwide internationally recognized organization with long-
lasting experience in inspection of quality and quantity of products in the agriculture and
food industry, mining and energetic, chemistry, ferrous and non-ferrous metallurgy, oil and
derivatives production, production of machinery, wood and textile industry, paper industry
and other fields of economy.

The company has been working on the domestic and international market and is a
member of the International Federation of Inspection Agencies in cooperation with over
200 similar organizations in the world. JUGOINSPEKT BEOGRAD has made,
documented and certified quality system according to the International standards ISO
9002. By contacting them you can find all the Serbian standards that address requirements
for textile and accessories.


Web sites for International Quality Standards

The following is the web sites for international standards

-ISO:
www.iso.org

-ASTM
www.astm.org

-ANSI:
American National Standard Institute

www.ansi.org
2.3 Eco-labeling (Öeko-Tex standard 100)
a) Issuing Agency

The International Association for Research and Testing in the Field of Textile Ecology,
founded by the German Institute Hohenstein and the Austrian Institute for Textile Research.

The Öeko-Tex 100 standard was developed by a European group of textile institutes as a
testing program to screen for the presence of certain hazardous elements and compounds
within consumer textiles. The Öeko-Tex certificate authorizes the products with the
internationally recognized Öeko-Tex signet.

b) Objective

The Öeko-Tex label is to guarantee that textiles do not contain hazardous substances in
amounts that could impair human health within normal conditions of use.

c) Main Features

The specifications exclusively contain parameters that can be tested on the final product. In
other words, though the criteria in somewhat exceed legal national standards, the life cycle of
the product is not considered. The label may also be awarded to products containing synthetic
fibers.

The textiles are tested for Acidity/alkalinity (pH level), pesticides, dyestuffs (banned azo
dyes, allergenic dyes), formaldehyde, chlorinated phenols (e.g. pentachlorophenol),
phthalates, biocides, flame retardants, carcinogens or allergens, extractable heavy metals,
dibutyl and tributyl tin (DBT and TBT), dye-carriers (chloro-organic compounds), volatile
compounds (e.g. solvents), loose dye/color, odors. The product classes included under Oeko-
Tex are fibers, yarns, fabrics and accessories, products with direct contact to skin (blouses,
shirts, underwear, etc.), products without skin contact (e.g. outer fabrics, linings, stuffing),
household (decorative) products (tablecloths, floor coverings, mattresses, etc.).

d) Application Procedure

Manufacturers and importers of yarn, fabrics or final products may apply for the label. On
contacting one of the relevant institutes, they are sent a questionnaire with queries on the
product's composition. During a personal meeting with the official in charge from the
certifying institute the prospective procedures and an estimate of costs are discussed.
Certificates of pre-products are recognized for applicants of later production stages. The
applicant must provide representative samples for test purposes, add detailed information and
grant their correctness. The samples are tested by the institute to which the application for
certification or extension of the certificate was made. In addition, spot-tests are carried out in
the plant. Product groups may be formed so that similar products only have to undergo those
tests, which refer to differences in material or employed techniques.

In addition to the annual license fee, costs depend on the analyses to be carried out by the
certification institute. The holder of a certificate must grant constant quality within the whole
production series by implementing a quality assurance system according to the ISO standards
and carrying out internal tests in conformity with the Öeko-Tex specifications. The institute
takes random tests on sales products twice a year. If two tests show deviations, the mark may
be withdrawn. The institute may publish the withdrawal of authorizations in a suitable form.

Applicants pay a fee of between 440 and 680 ECU (between USD 475 and 740). In addition,
all costs of testing (typically between 260 and 2600 ECU) are borne by the applicant as well.

As of February 1998, nearly 700 companies have had their products (about 1400 to date)
certified.

e) Validity

Generally certificates are valid for a period of one year, regardless of changes of the
standards. Changes in the production process or the properties of the product automatically
end the authorization

f) Standards

Öeko – Tex 103 –Direct skin contact


                                                For Garments
Certain azo-dyes                                Prohibited
Formaldehyde                                    75 ppm
Pentachlorophenol                               0.05 ppm
Pesticide                                       Total 1 ppm
Other Compounds                                 prohib chlorogenic carriers
Quality or process demands                       Yes
Arsenicum                                       1.0 ppm
Antimony                                         -
Lead                                            1.0 ppm
Cadmium                                         1.0 ppm
Chromium                                        Cr VI prohib , Cr 2.0 ppm
Mercury                                         0.02 ppm
Nickel                                          4 ppm
Copper                                          50 ppm
Cobalt                                          4 ppm
Zinc                                            -
Öeko – Tex 103 – Without skin contact

                                        For Garments
Certain azo-dyes                        Prohibited
Formaldehyde                            300 ppm
Pentachlorophenol                       0.05 ppm
Pesticide                               Total 1 ppm
Other Compounds                         prohib chlorogenic carriers
Quality or process demands               Yes
Arsenicum                               1.0 ppm
Antimony                                 -
Lead                                    1.0 ppm
Cadmium                                 1.0 ppm
Chromium                                Cr VI prohib , Cr 2.0 ppm
Mercury                                 0.02 ppm
Nickel                                  4 ppm
Copper                                  50 ppm
Cobalt                                  4 ppm
Zinc                                    -
Öeko – Tex 106 – Baby clothing

                                            For Garments
Certain azo-dyes                            Prohibited
Formaldehyde                                75 ppm
Pentachlorophenol                           0.05 ppm
Pesticide                                   Total 0.5 ppm
Other Compounds                             prohib chlorogenic carriers
Quality or process demands                   Yes
Arsenicum                                   0.2 ppm
Antimony                                     -
Lead                                        0.2 ppm
Cadmium                                     0.1 ppm
Chromium                                    Cr VI prohib , Cr 1.0 ppm
Mercury                                     0.02 ppm
Nickel                                      1 ppm
Copper                                      25 ppm
Cobalt                                      1mg/kg
Zinc                                        -




Öeko –Tex 109, 110 – Textile furnishing fabrics and curtains

                                            For Household and furnishing Textiles
Certain azo-dyes                            Prohibited
Formaldehyde                                300 ppm
Pentachlorophenol                           0.5 ppm
Pesticide                                   Total 1ppm
Other Compounds                             prohib chlorogenic carriers
Quality or process demands                  Yes
Arsenicum                                   1.0 ppm
Antimony                                    -
Lead                                        1.0 ppm
Cadmium                                     0.1 ppm
Chromium                                    Cr VI prohib , Cr 2.0 ppm
Mercury                                     0.02 ppm
Nickel                                      4 ppm
Copper                                      50 ppm
Cobalt                                      4 ppm
Zinc                                        -
Öeko –Tex 111, 112 – Upholstery fabrics, Blankets, cushions (and their filings)

                                             For Household and furnishing Textiles
Certain azo-dyes                             Prohibited
Formaldehyde                                 75/120 ppm
Pentachlorophenol                            0.5/0.05 ppm
Pesticide                                    Total 1.0/0.5 ppm
Other Compounds                              prohibit chlorogenic carriers
Quality or process demands                    Yes
Arsenicum                                     1.0/0.2 ppm
Antimony                                      -
Lead                                         1.0/0.2 ppm
Cadmium                                      0.1 ppm
Chromium                                     Cr VI prohibited , Cr 2.0/1.0 ppm
Mercury                                      0.02 ppm
Nickel                                       4/1 ppm
Copper                                       50/25 ppm
Cobalt                                       4/1 ppm
Zinc                                         -
2.4 Eco-Tex
a) Issuing agency

Eco-tex: Institute for Applied Ecology

The label was developed for members of the Eco-tex Consortium, an independent association
of about 130 companies in the textiles sector that provides assistance in the development of
ecologically optimized fabrics and garments.

b) Objective

To identify environmentally sound products by official certification.

c) Main Features

Eco-tex has neither standards, nor a product label. The main goal is a comprehensive,
economical assistance programmed to guarantee the ecological optimization of the product.
Criteria relate to the process of production as well as to the final product.

In the manufacturing process, the use of various chemicals such as chlorified substances,
biocides, flame-retardants, carcinogens and allergens, are prohibited. The final product has to
comply with limit values for formaldehyde, heavy metals and pesticides, as well as be
recyclable.

The Consortium sets limits that are more stringent than existing law.

Non-members may not apply for certification; however, all manufacturers and retailers in the
textile sector may apply for membership.

The services provided to producers comprise the following procedures, out of which
membership fees include information, access to the eco-tex® database, the analysis of the
audit and certification of one product group:

       • Definition of goals
       • Corporate decision
       • Audit
       • Result
       • Analyses
       • Evaluation of audit
       • Correction
       • Assistance
       • Certification
       • Monitoring

The key element is the environmental audit on which all subsequent steps 'are based. The
auditing and "eco-check" systems are employed conform to the European Council directive
on Environmental Management and Auditing Systems (EMAS). Deficiencies with respect to
production site, product line and processes are identified, then solutions elaborated. A
monitoring system can be implemented to control improvement and maintenance of
environmental standards.

d) Application Procedure

An audit is required to verify the veracity of the applicant's claims. The audit includes
questionnaires on the process, as well as onsite inspection by Eco-tex experts.
The whole textile chain is subject to investigation, thus the system incorporates
environmental auditing, certification and monitoring. Membership is possible for producers,
trade and non producing institutions. According to the member's category a certain range of
services is offered.
For product certification eco-tex®~ has established a set of criteria encompassing chemicals
in use, residues of hazardous substances, bio-degradability of sizes and recyclables of the
product. Textile products of any stage of production and regardless of material of the fibers
can be certified.
Co-operation with SGS, a worldwide certifying and testing company, provides testing
facilities in most countries. Consequently the main area of operation is countries outside
Europe. Applicants may, but need not, use the eco-tex label.

e) Validity

The certificate is valid for a year and it may be used globally.
2.5 Fabric Specification Sheet
The table below illustrates a typical fabric specification sheet for a European retailer

Characteristics                          Test Methods          Supplier Data

1. Construction Characteristics:

a- Material composition                  Directive             …………………………….
b- Fiber content                         96/73/EC              …………………………….
c- Kind of fiber                                               [ ] spun [ ]filament
d- weight                                96/74EC               g/sq.m       g/l.m
e- Overall width                                               Cm
f- Minimum usable width                                        Cm
2. Processing Characteristics

a-Length of repeat/panel print                                 …………………….Cm
b-Width of repeat/panel print                                  …………………….Cm
c-Width of printed borders                                     …………………….Cm
d-Printed border constant width                                [ ] yes [ ] no
e- Bias distortion                                             %
f- Napped Goods                                                [ ] yes [ ] no
3.Washing/Bleaching/Ironing              ISO 3758
4.Mechanical and Physical Properties
a- Tensile force                         ISO 13934-2                       N
b- Seam force                            ISO 13935-2                       N
c- Seam slippage                         ISO 13936-1                  mm at N load
d- Tear force                            ISO 13937-1                       N
e- Abrasion Martindale                   ISO 12947-2                   revolutions
5. Dimensional Stability to                                    Length %          Width%

a- Steaming                              DIN 53894-2
b- Washing                               ISO 3759 +
c- Dry cleaning                          ISO 3759
d- Tumble drying
6. Color Fastness                                              Color Change         Staining
a-Light                                  ISO 105-B02                            Light Heavy
b-Washing                                ISO 105-C06
c-Dry cleaning                           ISO 105-D01
d-Water                                  ISO 105-E01
e-Perspiration, acid                     ISO 105-E04
f-Perspiration, alkaline                 ISO 105-E04
g-Dry heat                               ISO 105-P01
h-Dry rubbing                            ISO-105-X12
l- Wet rubbing                           ISO-105-X12
Characteristics                          Test Method           Supplier Data

7. Oeko Tex requirements                 [ ] yes      [ ] no   Certificate number
8. Trade Specific Information

                                [ ] yes   [ ] no
a-EU origin quality according
to directive 1207/2001

b- Custom Tariff no.
2.6 ISO 9001
Quality Management Systems

The ISO 9000 standard provides the common definition of quality in management systems.
Its primary concern is the process and how the organization manages and controls its
processes to ensure that the product meets the customer's requirements. Companies
implementing ISO 9000 quality systems can be assured of a greater level of control, and in
many cases profitability, within their operation. Those opting for an internationally
recognized certification body such as ISO will also enjoy the benefits of having a credible
and experienced partner for their future operations.

The Route to Certification
                                    ENQIRY FORM RECEIVED
                                               ↓
                                     OUR PROPOSAL ISSUED
                                               ↓
                                 YOUR ACCAPTANCE RECEIVED
                                               ↓
                        YOUR QUALITY MANNUAL & PROCEDURES RECEIVED
                           (REPORT ISSUED DETAILING ANY OMISSIONS)
                                               ↓
                        EVALUATION OR PRE-AUDIT CONDUTED (OPTIONAL)
                                               ↓
                                       AUDIT CONDUCTED
                              ↓                                ↓
                                                     MAJOR NON-COMPLIENCE
                              ↓                                ↓
                          AWARD            ←        VERIFICATION VISIT TO
                       RECOMENDED                    CONFIRM COMPLIENCE
                               ↓
                               ↓       →
                                               ↓
                                      CERTIFICATE ISSUED
                                               ↓
                                      AWARD PUBLICISED
                                               ↓
                                   ON-GOING SURVEILLANCE




Beyond Registration

Organizations holding this certificate of registration are entitled to publicize their
achievement with the use of the Ml Certification logo on stationery, advertising and for other
promotional purposes (in compliance with the Rules and Regulations). In addition, optional
strategic reviews are available to ensure that your company is developing along with
recognized international benchmarking activities.
2.7 ISO 14001
Environmental Management Systems

The ISO 14001 standard is primarily concerned with environmental systems. It aims to
ensure that a company's product has the least harmful impact on the environment during
production and disposal or by pollution and by the depletion of natural resources.

The Route to Certification
Stage 1 COMPLETED PREPARATORY INFORMATION FORM RECEIVED
Stage 2 OUR PROPOSAL ISSUED
Stage 3 YOUR ACCEPTANCE RECEIVED
Stage 4 (PROJECT MANAGED IN CONSULTATION WITH YOU)
Stage 5 GAP ANALYSIS
(i.e. where you are, and what the Standard requires) This is an optional service of up to two visits
that many clients find useful.
Stage 6 PRE-CERTIFICATION ASSESSMENT
This entails a review of your environmental management system (EMS), documentation (including
legislation, aspects and impacts analysis etc) and a brief overview of your operations, focusing on
operational control. At this stage we can agree areas for development prior to certification assessment.
Using this approach has meant that, at the time of writing, none of our clients have had to be
referred (an unsuccessful certification assessment).
Stage 7 CERTIFICATION ASSESSMENT
While documentation is necessary to support the EMS, our approach concentrates on the actions
and controls that are in place to prevent pollution and ensure continual improvement (including
legislative compliance). Considerable emphasis is placed on interviewing members of your organization
at every level.
Stage 8 AWARD RECOMMENDED SUBJECT TO CLOSURE OF NON-CONFORMITIES
Stage 9 AWARD PUBLICIZED
Stage 10 ON-GOING SURVEILLANCE

Beyond Registration

As a holder of the certificate you are entitled to publicize your achievement with the use of
the Ml Certification logo (subject to certain conditions). Through our surveillance activities
and with the help of our international office network, we are able to provide you with
valuable on-going support and guidance.

EMAS

In addition to the requirements of 14001 there is a need for a detailed environmental
statement which is verified and submitted to a 'competent body' for registration.
3. Guide to Import & Export Operations
Context

The Serbian garments industry is one of the most dynamic sectors of the economy with an
important contribution in the total import-export operations.
An important part of the garment manufacturing companies are part of lohn contractual
arrangements with partner companies from Europe and USA.

The rest are developing their own collections which are mainly sold on the Serbian market.
However, most of the Serbian garment manufacturing companies are planning to develop or
increase export operations in the near future and they realize that for this purpose they have
to undertake specific development steps.

The import operations are also very important for the garment producers, since more and
more companies seized the difference in the cost / quality ratio between sourcing from Serbia
(from Serbian suppliers or importers / agents) and having their own external sourcing
agreements. Import operations may be a better return in the value chain, but it also require
know-how and additional costs.

The present chapter will try to provide a set of practical tools for both export and import
operations for the Serbian garments manufacturers.

External Sourcing Steps

The most important steps a company has to undertake when sourcing abroad are:

1) Identification of external suppliers

2) Evaluation of received offers and selection of external suppliers

3) Concluding import –export contracts with selected suppliers

4) Implementation of concluded contracts (delivery, quality control, reception,
payment)

1) Identification and selection of external suppliers

Evaluation of potential suppliers

When choosing a supplier for a component, product or service, one is inclined to focus on the
obvious criteria of price and it is easy to ignore, or forget, the hidden costs described bellow:

        • Cost of lead time

When suppliers need a lot of notice, the responsiveness to changing market conditions is
impaired. Another aspect is related to the horizon effect with respect to forecasts. A lead time
of 6 months requires a forecast of demand of 6 months. Therefore it is more difficult to be
accurate with such a forecast than with one for 6 week. In the garments industry the lead
longer time is a serious risk because of the continuous change in style, season, etc.


        • Cost of quality
A supplier who delivers poor quality at best incur costs of inspection, at worst such a supplier
will incur costs to the customer’s reputation. In the garment industry low quality of fabrics
and trim means automatically low quality of final product. A low quality supplier may incur
extremely high cost and even permanent image damage.

        • Cost of unreliable delivery

When supplier’s delivery promises are not kept then operations are disrupted and sales lost.

In general, when sourcing abroad, five factors are considered to be the main ones in the
analysis of potential suppliers:

1. Quality – specification and conformance to specification
2. Cost – not only delivered cost but all the other costs which add up to the “Lifetime
Cost”
3. Delivery – Lead time and reliability of delivery promise
4. Development capability
5. Management quality

When choosing between several suppliers the factors listed above may be combined into a
single measure to give a supplier rating.

Each supplier is given a rating for each factor. The scale used is inevitably arbitrary and its
size should be influenced by the relative importance of the factor concerned.

i.e. If the quality of the goods and the reliability of delivery are very important, then they may
be scaled 1-10. The size of the supplier and its likely survival in the market may be rated less
important – scale 1-5.

The ratings for each factor are added to give an overall supplier’s rating.

The main objectives to be taken into consideration when selecting a good range of suppliers
are:

        • Lower prices for materials and items used;
        • Faster inventory turnover
        • Continuity of supply
        • Reduced replenishment lead times
        • Reduced transport cost
        • Reduced materials obsolescence
        • Improved suppliers’ relationships
        • Better control of quality
        • Effective administration and minimization of organizational effort

In order to reach these objectives, the whole process of sourcing should be effectively
managed. In important issue is whether the sourcing process should be centralized and to
what extend. In many garments manufacturing units, the purchase department is not a stand
alone department, but it is included either in the operations department or the marketing
department.
This kind of approach may work up to a certain size of the company, but cannot ensure
efficient sourcing in the long run.

When sourcing is from abroad, things are becoming even more complicated and a team (or at
least one or two qualified persons) must take over the external purchasing operations.

The principal benefits associated with a professionally organized purchasing department may
be summarized as follows:

        • The possibility of standardizing specifications and establishing common needs
          regarding quantity, quality, specifications, etc;
        • The possibility of more economic purchase through, for example, larger batch
          quantities;
        • The reduction in administrative cost through the purchase of larger quantities
          on few occasions, possibly from fewer sources;
        • The possibility of purchase staff specialization and thus increased knowledge
          of sources and supplies;
        • The possibility of the use of more effective, detailed and accurate purchase
        information and records.

The standard contracts for import sourcing: contents and hints

When negotiating an import contract, the beneficiary has to pay attention to all the provisions
included taking into consideration that some of them may imply additional costs for the
importer that reflect in the total purchase price and automatically in the total production cost,
such as the delivery terms (that are further detailed); there is a strong relation between final
price, insurance and delivery terms.

The import-export contract provides for the following main terms: parties, object of the
contract, price, delivery terms, payment conditions, guarantees, reception of goods,
arbitration, guarantees, transport of goods.

a. The parties of the agreement, in which each part is thoroughly identified with exact
name, address, registration numbers and legal representatives.

b. The object of the contract which contains the exact identification of goods, the agreed
quality according to standards, quantity agreed (expressed in a commonly agreed
measurement unit), any specifications involved, origin of goods, packaging.
If no such reference on quality can be established by both parties, there will be special
appendices to the contract called technical specifications.

Regarding packaging, this contract paragraph mainly refers to the way the goods are packed
and whether the cost of packaging is included in the selling price or not. The special labeling
for fragile or dangerous goods may also be part of the contract.

c. The price of goods. Price can be expressed per unit or per total, mentioning exactly the
currency commonly accepted. In international contracts price vary always according to the
delivery arrangements established in the contract.

d. The delivery obligations. This part of the contract includes Terms of delivery, which
stipulate the exact place and time on which the sellers’ rights and obligations regarding the
risk and transportation are transferred to the buyer. The delivery terms are regulated by
INCOTERMS 2000, uniform regulations from the International Chamber of Commerce in
Paris.

In the present form there are 13 optional delivery conditions, which become mandatory once
included in the international trade agreement between the parties.

INCOTERMS 2000

Incoterms are standard trade definitions most commonly used in international sales contracts.
Devised and published by the International Chamber of Commerce, they are at the heart of
world trade. Among the best- known Incoterms are EXW (Ex works), FOB (Free on Board),
CIF (Cost, Insurance and Freight), DDU (Delivered Duty Unpaid), and CPT (Carriage Paid
To).

ICC introduced the first version of Incoterms - short for "International Commercial Terms" -
in 1936. Since then, ICC expert lawyers and trade practitioners have updated them six times
to keep pace with the development of international trade.

The English text is the original and official version of Incoterms 2000, which have been
endorsed by the United Nations Commission on International Trade Law (UNCITRAL).
Authorized translations into 31 languages are available from ICC national committees.

Correct use of Incoterms goes a long way to providing the legal certainty upon which mutual
confidence between business partners must be based. To be sure of using them correctly,
trade practitioners need to consult the full ICC texts, and to beware of the many unauthorized
summaries and approximate versions that abound on the web.

ICC now publishes a brief introduction to Incoterms on a new special section of its website.
The section does not provide all the answers but will help understanding of what Incoterms
are for and how they are organized. The site describes how to order Incoterms in the original
English version and many of the world's main languages from ICC Publishing in Paris and
New York, or ICC national committees around the world.

The site includes the Preambles to each term. The Preambles explain the areas the terms
cover but do not spell out the obligations of buyer and seller - information that can be
obtained only by consulting the full published texts of the 13 Incoterms.

As the guardian and originator of Incoterms, ICC has a responsibility to consult regularly all
parties interested in international trade to keep Incoterms relevant, efficient and up-to-date.
This is a long and costly process for ICC, which is a non-governmental, self-financed
organization. The work is financed out of sales of Incoterms 2000 and related publications,
which are protected by copyright.
Serbian Copy of Incoterms 2000

Copies of Incoterms 2000 in Serbia can be obtained from the Chamber of Commerce and
Industry in Belgrade.

       • Group E – ex-works

               1) The seller is fulfilling the delivery obligation at the gate of its headquarters

       • Group F (group of non paid transportation – the seller deliver the goods to a
       buyers’ carrier)

               1) Free carrier (delivery to carrier in a certain place) – FCA
               2) Free alongside ship (delivery in the port, next to the ship) – FAS
               3) Free on board (delivery on the board of the ship) – FOB
               4) FBO stewed – the seller has the obligation to arrange goods on ship

       • Group C – group of paid transportation – the seller has the obligation to pay for
       transportation, without taking the risk after forwarding of goods.

               1) Cost and freight (CFR) – the seller pay transportation, but does NOT pay
               insurance
               2) Cost, insurance and freight (CIF) – pays for both transportation and
               insurance
               3) Carriage paid to (CPT) – is used for the terrestrial transportation, the seller
               pays for transportation only
               4) Carriage and insurance paid to (CIP) is used for the terrestrial
               transportation, the seller pays for transportation and insurance

       • Group D (group arrival) – the seller pays for all related costs of transportation and
       insurance until the final destination is reached.

               1) Delivered at frontier (DAF) – is used for the railway and highway
               transportation. The seller is fulfilling the delivery obligation in the moment
               when the goods were put the buyer’s disposal, with export duty paid, at the
               frontier of the exit country, but before the frontier of the import country.
               2) Delivered ex-ship (DES) – The seller is fulfilling the delivery obligation in
               the moment when the goods were put at the buyer’s disposal on the board
               of the ship without import duty paid, but in the final destination port.
               3) Delivered ex-quai (DEQ) – The seller is fulfilling the delivery destination
               in the moment when the goods were put at the buyer’s disposal on the
               dock, in the final destination port, with import duty paid.
               4) Delivered duty unpaid (DDU) – used especially with post and parcel
               delivery. The goods are put at the buyer’s disposal in the final destination
               point, with import duty unpaid.
               5) Delivered duty paid (DDP). The goods are put at the buyer’s disposal in
               the final destination point, with all import duty paid.

The obligations which bind both seller and buyer (10 for each) are part of two special
chapters of the INCOTERMS 2000: chapter A and chapter B.
Here is also mentioned the agreed time of delivery which can be established by the two
contract parties either as a fixed calendar date or as a variable one (i.e.: six months from the
opening of the letter of credit).

In this chapter should also be clearly stipulated who will make the receipt of goods and
where the receiving process should take place. The receipt will be done from quantitative and
qualitative point of view. In the specific case of textiles, the qualitative receipt has to be done
according to the quality requirement of the contract, namely a quality standard, sample, etc. It
is unlikely that a piece by piece reception can be done, but a random inspection for quality,
including specific quality testing has to be undertaken and clearly stipulated in the export –
import contract.

        e. The payment conditions include the payment modality: letter of credit, incasso,
        wire transfer, bank guarantee, which imply immediate payment, at a certain date, at
        the conclusion of the delivery

        f. Guarantees - The payment guarantees are generally under the form of bank letter
        of guarantees and are provided by the buyer / importer. The bank letter of guarantee
        is a very used instrument since it has two major advantages: it does not affect the cash
        flow of the buyer and it increases significantly the level of trust between the two
        business partners. This is a common practice in the international commerce,
        especially at the first few transactions between new trade partners.

        g. Specification of the law to be applied, as this type of contract implies two parties
        from different countries. Claims and disputes may arise. No matter how trustworthy
        both partners are, there are many situations when claims may arise. The most usual
        claims can be related to: delivery term, quality and quantity. The settlement of
        disputes has to be clearly expressed in any contract. The most usual settlement
        clauses are: penalties to be paid to the affected party, discounts on the future
        deliveries, image reparatory payment, etc.

The clause of jurisdiction establishes how and where the potential disputes are going to be
settled:

        • by mutual agreement
        • via arbitration Courts

The arbitration courts are a function of the Chamber of Commerce and Industry of Serbia,
and they are being used more and more by Serbian companies.

It is always important to be mentioned the country where arbitration will be used or the
legislation under which any dispute will be settled. It may be the case when the parties agree
that arbitration will be undertaken in the country of the seller/ exporter or in the International
Chamber of Commerce in Paris, as a neutral party.

If no mention is made in this respect, the legislation which will govern the contract will be
the one of the country where the contract is signed.
        h. Validity of the contract, which also includes the conditions when the contract
        becomes null. Force Majeur is the chapter which foresees the conditions under
        which the parties will be exempted by the contract obligations in case of for force
        majeur.
        It is very important the detail in which the special conditions are described.
        Generally, if no dispute arises, the cease of contract can be done with the agreement
        of both parties.

        i. Signatures and stamps of the two legal representatives

Once the import-export contract has been agreed, then the actual delivery-reception of the
products according to the contractual provisions follows.

Delivery – reception implies another series of contracts, such as transport and insurance
contract. The responsible part for taking care of the formalities is either the seller or the
importer, depending on the delivery conditions agreed.

Transport of goods can be made by train, by road, by sea or by air, depending on how quickly
the goods are needed, location of the two parties, costs willing to be paid, but also type of
products. Each means of transportation implies a specific document/type of contract, used in
the international transport practice:

        • By road – CMR letter
        • By train – CMR letter
        • By air – airway bill
        • By sea – charter party

Each of the transport contracts mentioned above is signed in three copies, one for each party
involved: seller, importer (beneficiary) and transport company or forwarder.

The insurance contract is represented by the insurance policy, through which the insured
party (owner of goods) agrees with the insurance company to transfer a series of risks to be
covered in case the loss occurs, in return of an insurance premium paid by the beneficiary.

For a better coverage, the beneficiary must take into consideration all the possible risks that
may occur to be included in the insurance policy. The insurance practice mentions groups of
insurance risks, such as group A, B, C, but also standard insurance policies.

Another step is represented by the customs procedures (the moment products enter the
beneficiary country).

In Serbia, the Customs authority has a complex role, very similar to that in the European
Union. The main functions of the Customs Authority are:

        a) Fiscal - all importers have to pay import taxes according to the customs tariff of
        Serbia
        b) Control – random physical and documentary control for all imported goods.
        c) Statistical – on the basis of the customs declaration for import. The data is sent to
        the National Statistics Biro.
The documents needed for imports in to Serbia:

        • Customs Import Statement
        • License of import (if necessary)
        • The specification, necessary when goods are diversified
        • The International transportation document
        • The external invoice
        • Payment documents according to the payment agreements
        • The international buying – selling contract
        • Prove of VAT payment – 18% of the customs value of goods
        • Prove of payment of the import duty according to the Customs Tariff

Specific details related to product clearance when in Serbia are available under the Customs
authority site http://www.fcs.yu/

Regarding this procedures, in case that a company decides, a representation contract with
specialized companies called “Comisionari Vamali” (Customs Clearance Companies) can be
signed.

In order to be able to use the services of a specialized company, special juridical and legal
representation documents have to be signed.

Others companies decide to develop their own customs clearance operations through their
internal import division.

Types of imports in Serbia

        • The permanent import
        • The temporary import

In Serbia the temporary import is regulated by the Custom Law article no. 139 paragraph 2
which introduces in Serbia the “draw-back” customs regime. The “draw – back” regime is a
specific regime for the imported goods which are going to be re-exported.

The temporary import is a very common practice in the garment industry for the lohn type
contracts. The fabrics and trims are imported with a temporary regime until production is
finalized and the garments are exported back in the customer’s country.

This type of import is different from the permanent import in the sense that import duty is
paid and then is reimbursed to the importer.

The condition for reimbursement of the import duty is that both temporary import and final
export operations are done via the same Customs Unit.
In this case, the necessary documents are:

        • Import statement, with the mention “draw- back”
        • Export statement and a personal statement of the owner company or of its legal
        representative through which is required the reimbursement of the paid import duty.
A special case related to the export – import operations is the one related to the export or
import of samples or master patterns.

In the garments industry there is a common practice when contracts and various agreements
are signed based on samples approvals. Samples also play an important role in the quality
control in the sourcing operations.

Therefore, it is very important to know how samples can circulate from one country to the
other without payment of regular duties.

Samples have to reach not only business partners, but are an important item when it comes to
participation to various international trade shows and industry fairs.

In the case samples are forwarded, the Convention of International Customs comes into
force. According to this Convention, a special booklet is issued which allows the samples to
circulate in various countries without need to fulfill the customs related formalities and
without payment of related import – export duties.
The main condition for this facility to be put into practice is the return to Serbia of the
respective products qualified as samples.

If a sample is sold in the one of the destination countries, there is the possibility of
transformation of the temporary import into a permanent import with the obligation of
payment of all related customs duties according to the rules and regulations valid in the
respective country.

Another option in case of sample forwarding is the use of services of a Forwarder. The
procedure is simpler but it involves higher costs.

Payment methods for international sourcing contracts

The international payment methods can be defined as the totality of banking instruments, of
the operations and of the documents through which the seller is cashing from the buyer the
amounts foreseen in an international import export contract.

The most usual payment modalities used in the international commerce are:

1) The documentary letter of credit
2) The incasso
3) The wire transfer
4) The bank guarantee
5) Bill of Exchange)

1) The Documentary Letter of Credit

The documentary letter of credit (L/C) is a payment modality used in the internal and
international commercial relationships in all countries. It has an extensive use because it is a
safe payment modality for the seller / exporter.
The main characteristic of the letter of credit is the intervention of at least two banks (the one
of the seller and the one of the buyer) in the payment arrangement.

This is why when a contract is concluded and prices are negotiated, it is mandatory that the
cost of banks commissions is also taken into account.

The letter of credit is opened by a bank from the order and in conformity with the instructions
of the buyer / importer and it is approved or confirmed to the seller / exporter by another
bank, usually from the country of the seller / exporter. This second bank is called confirming
bank. For the seller / exporter, the letter of credit represents a firm and permanent payment
promise from a bank.

This payment promise is conditioned by the presentation of a set of documents by the seller /
exporter.
The exact description of the set of documents is stipulated in the conditions of the letter of
credit and is usually the same with the ones stipulated in the import - export contract.

The seller / exporter can use the approved letter of credit from the paying bank (the bank of
the importer) in order to obtain advance payment from banks from its own country, so that he
can prepare the export.

From the point of view of the importer, the letter of credit is a firm and non changeable
promise of payment which is conditioned by the presentation of the seller / exporter of a set
of documents, usually the prove of delivery of goods, according to the signed contract.

The delivery documents are to be presented to the paying bank via the seller / exporter bank
at a certain term and has to fulfill all delivery conditions exactly as stipulated in the import –
export contract.

Though this payment modality is part of the import – export contract, the letter of credit is a
separate contract in itself, to which the import-export contract is not opposable in Court. This
means that, the letter of credit is even a stronger agreement between the two business
partners, due to the involvement of at least two banks.

Due to its stand alone status, the letter of credit can have special clauses, which may have no
connection with the import – export contract, but are generally drafted in the spirit of the
partner’s agreement.

The economic functions of the letter of Credit.

        • Instrument of safety and control

The letter of credit has as main function the insurance given to the seller that the payment
will be done with certainty, if the delivery conditions are fulfilled in a proper manner, as well
as the insurance given to the buyer that the exporter has exactly fulfilled all delivery
conditions. In the implementation of this double guarantee, the main role is played by the
involved banks. In the process, a series of very strict juridical relations are created via the
banks, but in the end, the most important factor is the trust the seller / exporter and his bank
have in the bank of the buyer / importer. On the other hand, the buyer / importer has to have
full trust in the bank of the seller / exporter, that it will carefully analyze the delivery
documents and that these documents are fully reflective the reality. (i.e. as long as the
delivery documents are accepted as fulfilling the conditions of the letter of credit, one can
even export sand instead of sugar!).

        • Instrument of credit

A letter of credit can facilitate a export preparation loan to be obtained by the seller / exporter
from a local bank. In such a case, the seller/ exporter has to make sure the opening of the
letter of credit is made few months before of the date of delivery, and stipulated as such in
the import – export contract. It is a common practice that the letter of credit is considered as a
reliable collateral by banks.

Classification of the letters of credit

        • Amendable – they can be amended or canceled without prior consultation of the
        issuing bank. This is valid mainly in theory and it is not used in practice due to the
        lack of insurance to be generated.
        • Non – amendable – they generate firm juridical relationships between the paying
        bank and the beneficiary (seller / exporter). It generates an insuring guarantee for the
        fulfillment of the contractual clauses, on the condition that the conditions stipulated
        in the letter of credit are strictly respected. It cannot be modified unilaterally, and for
        this all parties involved have to fully agree of the conditions. For the acceptance of
        the two corresponding banks, the one of the seller / exporter and the one of the buyer
        / importer, a thorough analysis take place, including a presentation of financial
        statements of the respective banks and information gathering from the banking
        community. If necessary, a third bank gets involved in the arrangement, named
        confirming bank. The cost of the confirming bank, as an additional insurance given to
        the seller / exporter are quite high and the payment for these additional costs are to be
        bared by the seller / exporter.
        • Letter of credit with address in the country of the seller / exporter. This means
        that the cashing of the final payment is done at the front desk of the bank in the
        country of the seller / exporter.
        • Letter of credit with address in the country of the buyer / importer. This means
        that the cashing of the final payment is done at the front desk of the bank in the
        country of the buyer / importer.
        • Letter of credit with address in a third country, established by all involved
        parties.
        • Partial letter of credit. This type is stipulating partial payments according to
        partial deliveries. If one delivery was not made accordingly, the bank is exempt by all
        obligations related to the remaining payments.
        • Complete letter of credit. The payment is done once, upon one single delivery.
        • Letter of Credit with immediate payment. In this case, the payment is done upon
        submission of the right delivery documents.
        • Letter of credit with term payment. In this case, the payment is done after a
        certain number of days after the presentation of the right delivery documents.
Conclusions:

        • The letter of credit is a completely separate contract from the import – export
        contract.

        • In the letter of credit are taken into account only the documents, not the goods.

        • In order to be put into effect, the documentation related to the letter of credit has to
        be FULLY drafted according to the letter of credit. This is why the conditions of the
        letter of credit have a sterling importance and have to be analyzed with a lot of
        attention by all parties, before signature.

        • The banks only take into consideration the text of the letter of credit, being the only
        binding document.

        • The banks are not responsible for the authenticity of the documents and the validity
        of their content.


2) The Documentary Incasso

In this payment modality, the involved parties are the seller / exporter and the buyer /
importer. The involvement of banks is minimal, the main role is the one of the mutual trust.
Because of this reason, the use of the documentary incasso is diminishing.

The banks are receiving the delivery documents and keep them at the exporter’s disposal
until payment is made. The documents are not released until the payment is not made, but the
decision of payment is with the buyer. He decides when, and how much he pays.

The incasso is cheaper than the letter of credit. It is generally used when the demand for the
respective goods is very high.

A good method of diminishing the risk involved by the documentary incasso is the
forwarding of goods via a forwarding company or at the disposal of o certain bank, therefore
not addressed directly to the buyer / importer.

3) The payment order

The order of payment is an order given by the buyer / importer to his bank to pay a certain
amount to the seller / exporter.
The order stipulates the purpose of payment and it is generally used as an advance payment.
Upon reception of the respective amount, the seller / exporter delivers the goods according to
the import – export contract.

If wire transfer is used, the buyer / importer has to make sure that the paid amount is to be
reimbursed if the delivery is not made according to the clauses of the import – export
contract.
4) The bank letter of guarantee

This payment instrument has a much more complex juridical involvement and it is more
difficult to be used. The main problem when using the bank letter of guarantee is that there is
not an internationally accepted procedure and the local banking regulations always prevail.

It is common that banks escape responsibility in case of non payment through local
regulations which are not fully familiar to the seller / exporter.

5) Bill of Exchange

The bill of exchange is considered a written order given by a person named drawer to another
part called drawee to pay a certain amount of money on spot or at maturity to a beneficiary.

It is used for short term crediting, the maturity usually does not exceed 90 days.

Out of all the means of payment mentioned above, a conclusion would be that for regular
customers one can use any type of payment, and for new contacts it is advisable to use the
documentary letter of credit.
4. Annexes
List of international and domestic fairs in 2005
Testing labs (In Serbia or neighboring countries)
Annex 1

International garment fairs:

        • Feninver, Sao Paolo, Brasil, January

Feninver is a Brazilian Garments and Fashion Accessories Fair dedicated to the garment and
fashion accessories market.

        • International Fashion Fair – Tokyo, Japan, January

The International Fashion Fair is the only Global Business-Oriented Fair in Japan. Exhibit
items includes ladies wear, men’s wear, casual item, children’s & maternity wear, inner wear
& leg wear, leather & fur clothing, bag, shoes, accessory, display, information & system.

        • Hong Kong Fashion Week , January

The major exhibits include all kinds of Fall/Winter clothing, fashion & clothing accessories,
garment related products, services & supplies like ladies' wear, men's wear, babies and
children's wear, sportswear, lingerie, evening wear, handbags.

        • InNaTex – Frankfurt, Germany, January

This is a leading trade fair for natural and organic textiles held two times every year.

        • India International Garment Fair – New Delhi, January and July

India International Garment Fair (IIGF) is one of the world's largest and most popular
apparel fair, considered by organizers to be a perfect amalgamation of fashion, design and
quality. Organized twice a year.

Official web-site: www.indiaapparelfair.com

        • Global Fashion – Düsseldorf, Germany, February and July

Global Fashion, Private Label, Production & Sourcing, taking place parallel to and within
cpd woman_man, the world’s largest fashion trade fair, is a platform for non-branded
producers addressing volume buyers and private label customers. Global Fashion is a prime
opportunity for non-branded producers to meet new customers. It is also a first choice for
branded manufacturers to look for new suppliers and products. Organized twice a year.

        • Copenhagen International Fashion Fair - February - August

Exhibitors within the following product categories exhibit at CIFF: women's fashion, men's
fashion, children's fashion, young fashion, jeans, shoes, bags and leather goods,
lingerie/swim wear, accessories, other. Organized twice a year.


        • The ASAP Global Sourcing Show, SUA, Las Vegas, February

Held twice a year, ASAP has become known in the U.S. apparel industry as the premier show
and one-stop marketplace for sourcing apparel overseas. Featuring hundreds of
manufacturers of men’s, women’s, children’s apparel, textiles, and leather from over 35
countries, ASAP also features its unique Match Making Sessions and Educational Seminars
on the latest international trade laws, innovative financing, labeling and quality assurance.

       • InterTextil Balticum, Riga, Latvia, February

This event is an International Exhibition of Textile, Clothing, Leather Garments and
Production Equipment INTERTEXTIL BALTICUM that will take place in Riga, Latvia.
Fashion shows and new clothes collections’ presentations were held during all days of the
exhibition.

       • Moda UK - Birmingham, February

The national trade women wear biannual exhibition previews of the collections, providing an
important overview of women wear trends for the coming season. Now in its sixth season,
Moda UK will preview over 700 women wear collections covering women’s mainstream
fashions, casual wear, eveningwear, occasion wear, accessories and bridal wear.

       • Moda UK - Birmingham, February

Moda Menswear the UK s national men’s wear show enters its sixth season, it remains the
only national trade exhibition for mainstream and lifestyle men’s wear, providing a much
needed commercial platform for men’s wear brands and buyers across the UK and Ireland. It
will preview over 150 collections, covering tailoring, casual wear, shirts and knitwear,
underwear and accessories, which provide an important overview of men’s wear trends for
the coming season.

       • Turkey Textile Industry Fair, February, Istanbul

ITSE is International Textile & Accessories Exhibition. It is the unique and the biggest
exhibition which brings together all the textile industry companies (fabric, yarn and textile
accessory) takes place and presents their products, continues its development day by day. In
the meantime, it gives the opportunity to presents the latest trends of textile industry in a
meeting point of well-known international buyers.

       • Seamlessworld & Innovation Knit, Milan, February

This is the 2nd International Show of Seamless wear. It will be time for introducing new
companies, which have brought in all their experience and expertise offering innovative
products with great future in mind.

       • HYPE and Futura Fair– Dublin, Ireland, February

HYPE is the Ireland’s fair for street wear, sportswear, jeans and design-led casual wear,
related to Futura Fair, Ireland's only Women wear, Menswear, Children’s wear, Footwear and
Accessories Trade Fair. Allows regional participation.
        • Spin Expo – China, March (Sourcing Fair)

International offer from European and Asia producers organized by specialists in the field,
targeting on quality and creativity: fibers & yarns for knitwear, fibers & yarns for circular
knit a weaving for apparel, fibers & yarns for upholstery, knitwear & knitted fabrics, light
creative machinery for knitwear, textile computerized technology (CAD/CAM/CIM), design
& styling, trade publications.

        • CPM Collection Premiere - Moscow , Russia, March

International Trade Fair for Women-, Men-, Kids wear, bridal wear, lingerie, accessories
exclusive. CPM is the only fashion trade fair in Russia of international standing, offering a
professional atmosphere for Western labels and high level Russian brands. The products to be
offered at the show are women’s ready-to-wear, knitwear, infants / children’s wear,
leisurewear, leatherwear, leather and fur fashion, lingerie items, swim and beachwear,
hosiery, footwear, accessories, fashion jewelry, etc.

        • Cairo Fashion – Cairo, Egypt, March and September at the same time with
        Cairo Textile (Sourcing Fair)

The International Exhibition for types of Ready Made Clothes. Show fields include -
women fashion, men fashion, lingerie, men & women night wear, sports wear, special
garments, knitted garments & tricot, related to Cairo textile, which includes yarns, fabrics,
lining, narrow weaves, buttons, labels, models, zippers models & rack systems, textile,
machineries, tricot. Organized twice a year.

        • Textile Expo-Dubai, March

Textile Expo Dubai, the International Machinery Trade fair for the textile and fabric industry
will take place at the Airport Expo Dubai – DUBAI WORLD TRADE CENTRE in March.
The exhibitors to the show include manufacturers from all sectors of the textile machinery
industry (spinning, non-woven, weaving, knitting, dyeing and finishing, garment
making, testing, software, leather and shoe making) as well as dyestuffs and chemicals,
fabrics, fiber and yarn producers.

        • READY TO SHOW – Milan, Italy, March and September, at the same time
        with Intertex Milan

READY TO SHOW marked the first time that such an event was organized in Italy to give
non E.U. apparel, accessory, textile and leather manufacturers direct access to major
European buyers, including importers, private label large retailers and all other users of
imported apparel and textiles.

Intertex Milano is the International Textile Exhibition in Italy dedicated to producers outside
E.U. Selected collections from non E.U. exhibitors, mainly manufacturers of fabrics for
women’s, men’s and children’s wear, laces, embroideries, knitted and woven fabrics but also
accessories, yarns and clothing. Both are organized twice a year.
        • INDIGO Paris – March (Design Fair)

This event is an International Exhibition of Design and Textile Production. Taking textile
creation a step further, Indigo presents the opportunity for fashion and home furnishings
professionals to meet leader in fields of design and textile creation. A collection of new
designs, an ideas forum and IT applications that will help realize the future collections. The
exhibitors include designers, CAD designers, design studios and workshops, and art schools
from all over the world.

        • Source It – Sourcing fair, Hong Kong, March

Product groups include fibers & yarns, trimmings & accessories, fabrics, garment,
specialized machinery, dyeing & finishing facilities, design services and other related
services.

        • CHIC – Beijing, China, March – April

The fair is divided into 2 sessions: March for men’s wear and casual, as well as April
for Women’s wear, Children’s wear and accessories.

        • Motexha Series – Dubai, April and September

This event is the largest fashion & textiles trade event in the Middle East. It takes place twice
a year and is the host to more than 750 exhibitors from more than 30 countries annually.
Products include ladies & men’s fashion, textiles, leather goods, lingerie, swimwear and
bridal wear. Organized twice a year.

        • SIBA – Piacenza, May (Sourcing Fair)

The International Exhibition of Buttons, Accessories, Raw Materials, Machinery and
Technology. The well-established bi-annual exhibition dedicated to buttons widens its
interests towards all fashion accessories. SIBA was born in 1971 in order to satisfy clothing
industry's needs. Today the well-established bi-annual exhibition distinguishes itself for the
selection of the best traditional and advanced button industries, both in national and
international. A section of the exhibition is dedicated to raw materials, machines, colors,
instruments and technologies. SIBA expands its interests towards all fashion accessories,
including metal small parts, buckles, zippers, strings, pearls, mother of pearls, beads, strass,
crystals, trimmings for cuffs, collars, edgings, and also laces, glasses, foulards, labels, leather
articles and components for jewels.

        • Bangkok International Fashion Wear – June Thailand

BIFF 2005 prepares to flaunt the region’s latest collections of ready-to-wear, brand name
clothing, silk and ethnic products, textiles, yarns, threads and a huge variety of accessories,
all in the form of customized and finished products.

        • ShanghaiTex 2005 – June

Since its inception in 1984, ShanghaiTex has been successfully creating enormous business
opportunities for overseas suppliers and China users in the industry. It is now being widely
recognized as the leading International show for the textile industry in China that worldwide
suppliers can totally rely on for their promotional activities.

• BGate – Sofia, Bulgaria, October

Balkan Apparel & Textile Exhibition is the only dedicated event in Bulgaria for the textile
and apparel industry.

For more information about organizers, location, participants and participation registration
forms, please visit the web page http://www.fibre2fashion.com , the Upcoming Fairs and
Events section.
Annex 2

1) International Quality labs – Serbia offices

• JUGOINSPEKT BEOGRAD

Trg Republike 3/I; 11000 Belgrade; YUGOSLAVIA
Telephone: ++381 11 622-166; 622-187
Fax: ++381 11 2626-349
E-mail: Office@Jugoinspekt.co.yu

Jugoinspekt Beograd is a renowned, worldwide internationally recognized organization with
long-lasting experience in inspection of quality and quantity of products in the agriculture
and food industry, mining and energetics, chemistry, ferrous and non-ferrous metallurgy, oil
and derivatives production, production of machinery, wood and textile industry, paper
industry and other fields of economy.

				
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