COSTCO WHOLESALE CORPORATION
VENDOR CONDUCT OF CONDUCT

I. PURPOSE.
Costco Wholesale Corporation is committed to protecting the working rights and safety of the
people who produce the merchandise it sells, while recognizing and respecting the cultural and legal differences found throughout the world. To these ends, Costco:

1. prohibits illegal child labor, compulsory prison or slave labor and physical abuse of workers;
2. expects its vendors to comply, at a minimum, with the applicable labor and environmental laws and regulations of the country where the merchandise is produced; and
3. encourages its vendors to work to achieve “Above and Beyond Goals.”
Through this approach, Costco believes that practical and realistic protections and improvements for workers will occur. Costco’s Vendor Code of Conduct applies to all Vendors who provide merchandise to Costco. Costco will seek to identify and utilize Vendors who share our commitment and reserves the right to conduct, or have conducted on our behalf, audits of production facilities and business practices in order to monitor such Vendors’ commitment.
Costco reserves the right to cease doing business with any Vendor who does not share our commitment. This Vendor Code of Conduct may be amended by Costco; its enforcement and/or interpretation rests solely with Costco; and it does not confer or create any rights in favor of any party other than Costco.

II. DEFINITIONS.
Above and Beyond Goals mean programs and policies adopted and implemented by Vendors and Facilities that exceed the local laws and seek to continuously improve the working conditions of employees and the protection of the environment. Costco will seek to utilize Vendors and Facilities who strive to achieve Above and Beyond Goals and demonstrate a continuing commitment to the protection and improvement of workers’ rights, safety and the environment.
Costco means Costco Wholesale Corporation, its subsidiaries, affiliates and joint ventures, including Costco Wholesale Canada Ltd., Costco Wholesale UK Limited, Costco Wholesale Korea, Ltd., Costco President (Taiwan), Inc., Costco de Mexico, S.A. de C.V., and Costco Wholesale Japan, Ltd., and is referred to collectively as “Costco.”
Facility means the primary factory, processing or manufacturing plant that produces the goods and/or services integral to the production of the Merchandise. The Facility may be owned by the Vendor or may be a subcontractor. The Vendor is responsible for ensuring the Facility’s compliance with this Code of Conduct, regardless of the Vendor’s relationship with the Facility.
Merchandise means all goods described in any Costco purchase order and all packaging,
including pallets, instructions, warranties and other materials and services normally included with such Merchandise.
Vendor(s) means the entity which provides the Merchandise to Costco and includes the
entity’s parent, affiliates, subsidiaries, agents, representatives, principals and family members, and other businesses, names or tradenames used by such entity in relation to the sale of merchandise to Costco.

III.FACILITY SUPPLIERS AND SUBCONTRACTORS.
Vendor is responsible for ensuring compliance with Costco’s Code of Conduct by all Facilities and their suppliers or subcontractors that produce or provide materials or services that are used in the manufacture, processing or production of Merchandise sold to Costco.

IV. DOCUMENTATION.
All documentation that may be needed to verify compliance with Costco’s Code of Conduct and with all the applicable laws and regulations of the country where the merchandise is produced must be maintained on-site at the Facility. All such documentation is to be made available upon the request of Costco or its third-party auditor.

V. CHILD LABOR.
All workers shall be at least fourteen (14) years old unless the applicable local law allows otherwise. Vendor and Facilities must maintain official and verifiable documentation of each worker’s date of birth, or lacking this documentation, have some legitimate means of confirming each worker’s age.

VI. COMPULSORY PRISON OR SLAVE LABOR & PHYSICAL ABUSE.
Vendors and Facilities shall not use any compulsory prison or slave labor, or inflict any physical abuse or corporal punishment.

VII. LABOR AND EMPLOYMENT STANDARDS.
Vendor and Facilities shall comply with all national and local, provincial or other applicable labor and employment laws and regulations of the country where the merchandise is produced, including those laws that prohibit forced or bonded labor and indentured servitude, regulate wage and hour rules, allow employees to associate freely, regulate the use of foreign contract or migrant workers and prohibit discrimination in hiring and employment practices based on race, color, religion, sex, age, physical ability, or national origin.
In addition, the following may be mandated by local laws, requiring full compliance by Vendor and Facilities. If not mandated by local laws, Vendors and Facilities are strongly encouraged to adopt the following as “Above and Beyond Goals” and as part of their management practices:
A. Wages & Benefits: The wage paid by Vendors and Facilities shall be at least the legal minimum wage. Benefits shall include, at a minimum, those mandated by law. The
wage structure, with any employer contributions and legitimate deductions, is to be
itemized clearly in writing for the workers and in accordance with the local law.
Wages are always to be paid at least monthly and in a manner convenient to the
workers.
B. Regular Working Hours & Overtime Hours: Vendors and Facilities shall comply
with applicable laws on regular working hours and overtime hours. No mandatory
excess overtime is allowed unless local law provides otherwise. In such case, legal
overtime waivers, if applicable, are to be obtained in accordance with and as required
by the local law. Workers are to receive overtime pay, which is higher than the regular
wage, and in accordance with the local law. In addition, if legal overtime is necessary, in particular if the industry is seasonal in nature, workers are to be advised prior to the time of hiring.
C. Employment Contracts: At the time of hiring, all workers are to be clearly informed
of the terms of employment as mandated by law and the Facility’s own policies and
regulations. Whenever possible, and if required by the local law, an employer-
employee agreement or contract should be written in a language understood by the
employee, which states all relevant terms of employment and shall be signed by both
parties, along with any required government approval stamp. A copy of this signed
agreement or contract is to be provided to the worker. Vendors and Facilities are not permitted to withhold deposits or any fees as a condition of employment, unless
allowed by law and if so, all withholding must be in accordance with such laws.
D. Foreign Contract or Migrant Workers: If foreign contract or migrant workers are used, they are to be employed in full compliance with the labor and immigration laws of the host country. The contract terms under which foreign contract or migrant workers are employed are to be in writing, in the language of the workers’ home country or in a language the workers understand, and accepted by the workers prior to their departure from their home countries or home provinces. Recruitment fees, if any,
are to be paid by the Vendor or Facility. Under no circumstances are these fees to be deducted later or withheld from the workers’ wages by the Vendor or Facility, or otherwise passed on to the workers.
Passports and other forms of personal identification shall remain in such workers’ personal possession at all times and are never to be withheld by the vendors, Facilities or any third party.
E. Disciplinary Practices: Vendors and Facilities shall not engage in the use of physical, mental, verbal or other abuse. All workers are to be treated with respect and dignity.
F. Employment Agencies: Should Vendors or Facilities use employment agencies in the recruiting and hiring of workers, the Vendors or Facilities are to pay these fees. Under no circumstances are these fees to be deducted later or withheld from the workers’ wages by the Vendor or Facility or otherwise passed on to the workers.

VIII. HEALTH, SAFETY AND HOUSING STANDARDS.
Vendors and Facilities shall comply with all national and local, provincial or applicable laws and regulations of the country where the merchandise is produced that are related to the health and safety of workers.
In addition, the following may be mandated by local laws, requiring full compliance by Vendor and Facilities. If not mandated by local laws, Vendor and Facilities are strongly encouraged to adopt the following as “Above and Beyond Goals” and as part of their management practices:
A. Health and Safety Management Practices: Vendors and Facilities shall appoint a
manager responsible for the health and safety of the workers. This health and safety
manager shall hold periodic reviews with the Vendor and Facility owner(s) to ensure
full compliance with the applicable health and safety laws and the Facility’s policies.
B. Health and Safety Education: Workers are to be educated routinely on the
importance of health and safety, and good sanitation. Vendors and Facilities are to take steps and adopt procedures to prevent accidents, injury and the spread of
communicable diseases. Readily understandable instructions and signs are to be
posted, and/or manuals are to be made accessible for the safe operation and handling
of dangerous equipment and hazardous materials. Workers who use hazardous or
flammable materials or operate dangerous equipment must be properly trained.
C. First Aid and Emergency Care: On-site trained first-aid personnel are to be
available at all times. Well-stocked general first-aid medical supplies are to be located throughout the Facility. In the event of any serious injuries, workers are to be provided with medical treatment at the closest outside medical facility. These services are to be provided at no cost to the workers, unless such workers’ health insurance coverage, if any, provides otherwise.
D. Emergency Exits: Easily accessible exit doors and stairways are required. These exit doors and stairways are to be clearly marked and free of any obstructions. They are not to be locked and are to be available for fire and other emergency escapes during all working hours.
E. Fire Safety and Emergency Evacuation: Fire and other emergency evacuation drills
are to be conducted. Sufficient and accessible fire extinguishers and/or fire hoses in good working condition are to be located throughout the Facility and inspected on a regular basis. Trained supervisors located throughout the Facility are to be designated to monitor the safe and orderly evacuation of all workers.
F. Ventilation and Lighting: Work areas are to be properly ventilated. During periods of hot temperatures, sufficient fans are to be provided for the basic well-being of
workers. During periods of cold temperatures, sufficient heating without any risk to safety is to be provided. Adequate lighting and workspace are to be provided for the safety and well-being of the workers. In all work areas where painting, lacquering, spraying, or sanding is done or where chemicals or solvents are used, adequate and
proper ventilation and air circulation are to be provided.
G. Uniform and Safety Protection Gear: Uniforms, if required, are to be provided at no cost to the workers. Workers performing tasks involving painting, lacquering,
spraying, sanding or application of chemicals or solvents, must be required to wear
face masks and other types of protective clothing, all provided at no cost to the
workers. All such chemicals used must be safe and must not pose any short or long-
term safety risk to the workers. In areas where the work may pose physical dangers,
workers are required to wear eye protection, hard hats, appropriate shoes, and other
types of protective gear and clothing, all provided at no cost to the workers.
H. Sanitation: Adequate and clean toilet and hand-washing facilities with basic hygiene amenities are to be provided.
I. Drinking Water: Safe drinking water is to be provided at all times. There are to be no
restrictions on the normal consumption of drinking water.
J. Freedom of Movement and Association: While reasonable rules, regulations and
curfews may be imposed as necessary for the safety and comfort of dormitory
residents, during non-working hours, workers must be free to go outside the Facility
grounds. They are, however, to be instructed on the importance of safety and, if they
live in Facility dormitories where local law allows curfew hours, they are to be
notified of the curfew. Foreign contract workers are not subject to lock-in/lock-out
policies.
K. Housing: In the event that dormitory housing and meals are provided as a part of the employment agreement, all housing and sanitation conditions must comply with the
applicable laws and regulations. Each worker is to be provided with his or her own bed and clean bedding at no cost. Dormitory quarters are to be segregated by gender.
Sufficient toilet and washing facilities segregated by gender are to be provided.
L. Meals: In the event meals are provided as a part of the employment agreement, a
minimum of three meals that meet or exceed the basic nutritional standards per day are to be provided without cost or at a minimum subsidized cost to all workers.
M. Services: In the event certain services are provided for the workers, such as a commissary for basic hygiene supplies, postage, stationery, etc., these are to be provided at no more than the local market prices for the same or similar products.

IX. ENVIRONMENTAL STANDARDS.
Vendors and Facilities shall comply with all national and local, provincial or other applicable environmental laws and regulations of the country where the merchandise is produced that are applicable to their business practices.
In addition, the following may be mandated by local laws, requiring full compliance by Vendor and Facilities. If not mandated by local laws, Vendor and Facilities are strongly encouraged to adopt the following as “Above and Beyond Goals” and as part of their management practices:
A. Hazardous Materials and Manufacturing Processes: All hazardous materials and
chemicals must be disposed of in accordance with the applicable local laws and must
meet or exceed all wastewater treatment and recycling requirements. In the event
hazardous or polluting materials are discharged improperly, Vendors and Facilities must notify the appropriate authorities and take immediate remedial actions.
B. Air Quality: To improve the air quality in any work using chemicals and solvents,
Vendors and Facilities will not use any ozone-depleting chemicals (ODCs).
X. FACILITY AUDITS.
At any time, with or without advance notice and at Vendor’s expense, Costco reserves the right to audit and/or authorize a third party to audit, without any restrictions, any or all Facilities (including any of its suppliers or subcontractors). Vendor shall require that the Facility’s management provide unfettered access to the Facility and all of its books and records to allow for a comprehensive audit to be conducted, including an opportunity for confidential and private interviews with Facility workers selected by the auditor. No retaliation of any sort shall be taken against any workers or auditors.
Upon review of any unsatisfactory audit results, Costco, in its sole discretion, reserves the right to terminate its relationship with a Vendor or Facility, cancel a purchase order, return or revoke
acceptance of affected goods and/or require corrective action be taken. The Vendor shall be liable for all related damages incurred by Costco, including lost profits.

XI. AUDIT RESULTS AND CONSEQUENCES.
A. Categories. Non-compliance with the Vendor Code of Conduct will be divided into categories: “Zero Tolerance” and “Action Required,” with the resulting consequences below.
B. Zero Tolerance.
1. Definition: Verifiable findings of illegal child labor, compulsory prison or slave
labor or physical abuse.
2. Consequences:
a) The violating Facility used by Vendor will be terminated immediately and will not knowingly be used by Costco or any of its other Vendors for a minimum of three (3) years.
b) In the event the Vendor who used the violating Facility in a) above uses any other facility at which another Zero Tolerance violation occurs, (i) the Vendor will then be terminated for a minimum of three (3) years; and (ii) Costco or any of its other Vendors will not knowingly use any of the terminated Vendor’s facilities for a minimum of three (3) years.
c) After three (3) years from termination, Costco may, at its sole discretion, resume doing business with a Vendor or Facility, if an audit satisfactory to Costco is completed prior to resuming business.
C. Action Required.
1. Definition: Verifiable findings of failure to comply with national, local labor
and/or environmental laws and regulations.
2. Consequences:
a) The Vendor must present an Action Plan (AP) which includes a time frame for each correction. Costco will review and approve the AP and set the target re-audit dates. The time frame for any correction or audit may be extended at Costco’s sole discretion.
b) If continuous improvement and eventual full compliance are not achieved within a reasonable time frame, Costco may, at its sole discretion, terminate the Vendor and/or Facility for a minimum of three (3) years.
c) After three (3) years from termination, Costco may, at its sole discretion,
resume doing business with a Vendor or Facility, if an audit satisfactory to
Costco is completed prior to resuming business.