2017 BRINGS PRODUCT QUALITY ISSUES AND ETHICAL CHALLENGES

ASIAINSPECTION Q2 BAROMETER

HONG KONG, APRIL 6, 2017

ASIAINSPECTION (AI)

A LEADING GLOBAL QUALITY CONTROL AND COMPLIANCE SERVICE PROVIDER THAT PARTNERS WITH BRANDS, RETAILERS AND IMPORTERS AROUND THE WORLD

TO SECURE, MANAGE AND OPTIMIZE THEIR SUPPLY CHAIN

today announces its 2017 Q2 Barometer, a quarterly synopsis on outsourced manufacturing and the quality control services industry.

SOURCING GEOGRAPHIES: CHINA MAKES A STRONG START IN 2017

+20%TAIWAN

+10%MALAYSIA

+5.0% VIETNAM

+16%CHINA

SOUTH AFRICAN REGION +23.5%

YEAR

OVE

R Y

EAR

GRO

WTH

2017 BRINGS CHALLENGES TO HUMAN RIGHTS IN SUPPLY CHAINS

Percentage of “Red” (non-compliant) factories rose to 30% , from 27% in 2016

Average ethical scores at 7.9 out of 10

Most violations found in working hours and wages

30%of "Red" factories

ETHICAL AUDIT SCORES VARY BY REGION

SOUTHEAST ASIA

8.8

C. SOUTHERN CHINA

7.9

NORTHERN CHINA

7.1

SOUTH ASIA

8.5

ETHICAL COMPLIANCE TRENDS BY INDUSTRY

MOST IMPROVED

IN Q1 2017 VS. 2016

Bodycare and Accessories

8/10 (10-pt improvement)

WORST PERFORMER

IN Q1 2017 VS. 2016

Toys and Juvenile Products

7.3/10 (8-pt drop)

TOP ISSUES AMONG WORST-PERFORMING

INDUSTRIES

Health & Safety

STRUCTURAL SAFETY DETERIORATES FURTHER

69%

30.5%

FACTORIES IN NEED OF REMEDIATION

COMPLIANT FACTORIES

Decreased from 37% in 2016and 41% in 2015

4% 65% in need of improvementwith critical safety risksFA

CTOR

Y CO

MPL

IAN

CE Q

1 20

17

PRODUCT QUALITY: OVERALL LITTLE IMPROVEMENT ON 2016

MANUFACTURING QUALITY TRENDS BY REGION

Inspection failure rates remain high in

South Asia:Bangladesh: 61.7%

India: 55.3%Pakistan: 52.6%

China shows gradual improvement over the

long term, with Beyond AQL rates around

30%

Turkey makes strides in product quality: rate of failed inspections pushed under 20% , a

two-year low

QUALITY PERFORMANCE DISPARATEBY INDUSTRY

Tex tiles remains the worst offender: 41.7%

products short of specifications

Toys & Juvenile Products rejection rates remain flat around 30%

Accessories and Eyewear show

improvement at 21.3% and 15% Beyond AQL

rates (down 3 and 4 points

compared to 2016)

SAFETY RECALLS RAMPANT IN THE E&E SECTOR

Hoverboards under massive product safety investigation after a deadly fire

Large home appliances at risk of fire and explosion

Laptop batteries of leading brands

QUALITY IN LAB SHOWS NO TANGIBLE IMPROVEMENT

INDUSTRIES AT RISK

Toys and childcare articles

Food contact items

MAJOR VIOLATIONS

Pb PhtLead and lead

paintPhthalates Excess levels

of restricted chemicals

7) CHEMICAL COMPLIANCE: A CHALLENGE FOR SUPPPLIERS TO US AND EU MARKETS

Test results for

SHIPMENTS TO THE US

8% children’s products contained lead

11% toys contained phthalates

8% food contact items failedFDA chemical requirements

SHIPMENTS TO THE EU

5%+ failed REACH requirements for restricted or banned chemicals

11%of toys contained

phthalates

AsiaInspection (AI), a leading global quality control and compliance ser vice provider

that partners with Brands, Retailers and Importers around the world to secure, manage and optimize their supply chain.

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