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Dilemma for Norwegian firm launching new toy: Produced by dubious Chinese company

The Norwegian family firm Neptun Toys has patented the right to produce a so-called "diving shark" invented by The Future in Our Hands' (FIOH) founder Dammann. To get the toy in production they contacted the American toy company Safari Ltd., which demanded that the toy be produced in China, even though Neptun Toys would have preferred another production country. The shark is now being produced by Happy Crafts in South China, one of the 12 factories that have been criticised for miserable working conditions. There are no signs that the conditions at the factory have improved. Neptun hopes to be able to influence the working conditions in a positive direction, but it accepts the general prohibition of free trade unions in the country.
Artikkelen er mer enn to år gammel. Ting kan ha endret seg.
The Norwegian family firm Neptun Toys has patented the right to produce a so-called "diving shark" invented by The Future in Our Hands' (FIOH) founder Dammann. To get the toy in production they contacted the American toy company Safari Ltd., which demanded that the toy be produced in China, even though Neptun Toys would have preferred another production country. The shark is now being produced by Happy Crafts in South China, one of the 12 factories that have been criticised for miserable working conditions. There are no signs that the conditions at the factory have improved. Neptun hopes to be able to influence the working conditions in a positive direction, but it accepts the general prohibition of free trade unions in the country.


By Morten Rønning
Norwatch
 
In November 1998, NorWatch presented a report written by the Hong Kong-based organisation Asia Monitor Resource Center (AMRC), which discussed the working conditions of 12 toy factories in the Guangdong province in China. AMRC works specifically with questions related to conditions of work, contracts and salary scales within the industry (see NW 19/98 and 23/98).

The factories, which all produce for the Western market, received sharp criticism in several areas: low salaries, forced overtime, deposit payments at hiring, prohibition of sick leave and resignation, and trade union ban.

A good idea
FIOH-founder Erik Dammann has developed the diving shark, a weight-based plastic toy which swims "by itself" under water. In 1995 the company Neptun Toys AS was established, with the inventor and his family as shareholders. The toy was patented, and a test production was carried out in Norway. This production failed. According to Neptun Toys, the technology required to weld the plastic in the toy does not exist in Norway or elsewhere in Europe. At this point of time the company was almost bankrupt.

In order to ensure a wide distribution, Neptun Toys went into negotiations with the American toy company Safari Ltd. in 1998. Neptun Toys negotiated with Safari, aided by the Norwegian National Guidance Agency for Inventors, and lawyers. In 1998, a contract was signed, which gave Safari the rights of production, sale, distribution and global marketing of Neptun Toys' patent for three years. Production started in the spring of 1999 at Happy Crafts in China. Neptun Toys will receive royalty incomes varying from 0.5 to 1 kroner per item from Safari's sale of the toy, which goes by the name Torpedo Shark (1USD = 8,5 kroner).

Happy? Crafts
In the AMRC report, Happy Crafts is criticised for several things. This goes for all the 12 factories that were mentioned in the report.

The number of employees at Happy Crafts was almost 800 in 1998, mainly women aged 18-25 years. The daily working time was 9 hours, and the employees work 7 days a week. The women had four days off per year, plus one day per month, that is a total of 16 days per year. In the peak season, they worked 5-7 hours overtime per day. This implies a working day of up to 16 hours, and many of the employees complained to AMRC that they only got six hours of sleep per night.

The women had to pay a deposit of 50 RMB plus 1.5 monthly salary when they started to work at the factory. This was to ensure that the workers did not quit. Many employees have had difficulties having the deposit returned when they wanted to leave. The factory provides free beds in a dormitory for its employees, and 55 RMB per month are deducted from their salaries for meals.

The women had one-year contracts with the company, and the average salary was between 400 and 1000 RMB, plus a possible bonus of 40 RMB per month (1 RMB = 0.89 Norwegian kroner). The minimum salary in the country is 350 RMB per month for a normal working day. In periods with low production the salaries are below this minimum.

The working contracts of Happy Crafts do not permit resignation or sick leave. At the same time, the employees have experienced to be laid off without payment, and without having their deposits returned. Happy Crafts does not accept organisation in the only legal "trade union" in China, the Communist Party's own ACFTU, according to the AMRC report.

"If you do not want to work overtime, but (have) less wages, go to work in Tri-S. If you want get more wages, but work overtime nearly every night, go to Happy Crafts."
May Wong, Asia Monitor Resource Center, 6. March 2000

No improvements
May Wong in AMRC was responsible for the report. The report was the result of interviews with the workers, done after working hours, because the companies were not very accommodating, and to ensure that the workers could speak freely. The last time May Wong visited Happy Crafts was in August last year. She says to NorWatch that the working conditions described in the report have not improved since then. The workers still complain about having to work late at night.

One of the factories that was mentioned in the AMRC report, Tri-S, has later been certified by the Social Accountability-8000 Standard. SA-8000 is a certificate based on different criteria of working conditions in factories. However, the SA-8000 has several shortcomings, for example it accepts the general trade union ban in China. The certification of Tri-S has resulted in shorter working days, but at the same time salaries are lower than at Happy Crafts. May Wong describes the choices of the workers in the following way:

- If you do not want to work overtime, but (have) less wages, go to work in Tri-S. If you want get more wages, but work overtime nearly every night, go to Happy Crafts.

Good-bye, freedom to organise
According to Neptun Toys, the company has wanted to ensure that it does not profit from exploitation of cheap labour in developing countries. Therefore, it has a passage about workers' rights in its agreement with Safari, based on parts of the Universal Declaration of Human Rights and some ILO conventions. However, the declaration's demand for freedom to organise are not among Neptun Toys' demands for production. Neptun Toys has not been willing to comment on why this is not part of the agreement.In addition, the company demanded that itself, possibly with the help of others, must be allowed to inspect the production. Neptun Toys claims that the contract is unique with respect to demands on conditions of production at the factory where the toy is produced.

Early in the process, Safari Toys said that the toy would have to be produced in China. 80% of all toys in the world are produced in China, where low salaries, lack of real trade unions, weak legislation on working conditions and exploitation of young women ensures low prices on goods produced mainly for Western markets.

No resources
Today, Neptun Toys is a company without employees, and it has lost its capital stock. The company therefore claims that it is not able to examine the production in China itself, as it has demanded admission to from Safari. In a letter to NorWatch, chairman of the board Brede Dammann suggests that the certification company Det Norske Veritas could be used to control the working conditions of Happy Crafts, but that such a control is not possible unless the company is able to pay for it. To NorWatch, Neptun Toys points out that if the production in China does not follow the guidelines of the contract between Safari and itself, this is contrary to the terms of the contract, and may be a reason for termination of the agreement. However, the company is uncertain of how to prove a possible breach of contract, and in this connection it has contacted various instances for advice.

NorWatch has asked to see both the agreement between the two companies, and the correspondence about working conditions, but we have not been given access to this documentation. The company has been unwilling to answer NorWatch's question about whether the agreement between Neptun Toys and Safari has been made available to the employees of Happy Craft, whose working conditions it was intended to improve.

Neptun Toys in China
In 1998 the Norwegian company Neptun Toys AS sold the license to its patented "diving shark" to the American company Safari Ltd. for a period of three years. The following year, Safari Ltd. started production at the factory Happy Crafts in China. The product is so far sold mainly in the USA. So far, Neptun Toys' income from the sale is low, but it is expected to rise as sales increase.

Neptun Toys AS is mainly owned by the inventor Erik Dammann's family. Brede Dammann is chairman of the board of the company, and Jaran Dammann is managing director.

Norwatch Newsletter 6/00