By Serajul Quadir and Rafiqur Rahman
GAZIPUR, Bangladesh, May 20 (Reuters) - A Bangladesh factory where Wal-Mart Stores Inc and Inditex SA inspectors spotted cracks in the wall this month is still making Wrangler shirts for the world's largest apparel maker, U.S.-based VF Corp.
VF confirmed on Saturday it was still using Liz Apparels to make its clothing following an inspection ordered by the factory owner, Nassa Group, on May 12. VF, whose other clothing brands include North Face, Timberland and Nautica, said its philosophy was to "stay and improve" working conditions.
"We are in daily contact with the facility and VF's leadership is closely monitoring the status in this facility and others in our Bangladesh supply chain," the company said in a statement to Reuters.
VF's continued relationship with Liz Apparels stands in stark contrast to the approach by some of the world's best-known retailers, who immediately severed ties with the same factory.
The differing views show how Western retailers and brands are struggling to assess safety risks at thousands of Bangladesh garment factories after the April 24 collapse of Rana Plaza in another Dhaka suburb, which killed 1,127 people.
Their task is made tougher by a lack of robust safety rules, a severe shortage of trained building inspectors and equipment needed to make proper safety assessments, and widespread concerns about corruption.
Wal-Mart told Reuters on Friday that Liz Apparels in Gazipur, near the capital Dhaka, had previously made clothing for its stores but was now on its "red" list of unapproved suppliers after a safety audit in early May found the cracks.
Wal-Mart has not published the full findings of that audit, conducted by testing and inspection company Bureau Veritas , which also included checks for fire hazards and a review of building plans. It has asked the Bangladesh government to investigate what it called "potentially dangerous conditions" in the building.
Inditex, which owns the Zara clothing chain, said it sent inspectors to the factory on Wednesday after seeing Wal-Mart's report, and they too saw wall cracks, which the company plans to report to the Bangladesh authorities.
But VF said the building was cleared for "normal operations" after the May 12 inspection. VF, headquartered in Greensboro, North Carolina, later said it would pay for its own inspections which had not yet been completed.
"The cracks that developed here are not really dangerous, not dangerous for the structure," said Mohammad Jasim Uddin, an executive director of the Nassa Group. He said he had studied civil engineering and was responsible for looking after structural safety of all the factories owned by the group.
The day before Rana Plaza crumbled, the building's owner dismissed concerns over cracks in the wall and insisted the structure would stand for a century. The 8-storey building had three additional floors added without proper approval. There was no indication that the building housing Liz Apparels deviated from its approved plans.
Reuters Television video taken inside Liz Apparels on Wednesday showed a vertical crack running up one wall, which appeared to have been re-plastered recently. Other cracks were visible near the ceiling. Reuters could not independently assess whether the cracks posed a structural risk, and it was not clear how they compared with those seen at Rana.
Liz Apparels, which is not currently making clothes for Wal-Mart or Inditex, is one of 34 factories owned by Nassa Group, a major player in Bangladesh's fragmented $20 billion garment industry with annual sales volume of $270 million.
Inside the factory on Wednesday, rows of workers stitched denim-coloured fabric into long-sleeved shirts, adding Wrangler labels and price tags. Nassa has about 3,500 employees working in the 7-storey building, which was built in 2003.
Liz Apparels was inspected on behalf of Nassa Group by Shaheedullah and New Associates Ltd, which VF called "one of the top three engineering companies in Bangladesh." The third-party engineering consultant examined all the columns and beams on all floors and found "no significant or impermissible foundation settlement has taken place."
"We also certify that the building can continue to be used for normal operation," Shaheedullah wrote in a letter dated May 14, a copy of which Nassa officials gave Reuters.
Sultan Mahmud, a civil engineer who works for Shaheedullah, said he inspected the building on his own and spent two hours taking measurements, studying soil reports and structural and architectural drawings. He also used a hammer to knock on columns to listen for any void and to gauge the strength.
On Wednesday, VF said based on Shaheedullah's inspection and a review by the Bangladesh Garment Manufacturers & Export Association, "it has been determined that normal operations can continue at this facility."
Two days later, in response to further questions from Reuters, VF said it was paying for additional inspections but provided no details on who would conduct the reviews or when they would take place.
"VF will continue to be diligent about following up on any concerns in relation to structural integrity, fire safety and any issues where we determine there is a concern of worker safety," the company said, adding that it had increased the frequency of unannounced inspections in Bangladesh.
Inditex declined to comment on the inspection done for Nassa. Wal-Mart said its ethical sourcing team had asked to see the entire Shaheedullah report and will review it.
Jamilur Reza Choudhury, a former professor of civil engineering at Bangladesh University of Engineering and Technology, said Shaheedullah's founder was a "very reputed engineer" but that a proper inspection required machines such as Ferro scanners which are used to check for steel reinforcement in concrete. Visual inspections were not enough.
"To complete a proper, thorough and dependable inspection it requires up to two months, not two hours," he said.
Because Bangladesh is prone to earthquakes, groups such as the Asian Disaster Preparedness Center recommend Ferro scans. However, a review of Bangladesh's building code posted on its website found no requirement for these scans.
Wal-Mart has asked Bureau Veritas to examine the 279 Bangladesh factories that make clothing for its stores, part of its response to a series of garment factory disasters including a fire that killed more than 100 people in late November.
Wal-Mart said the review conducted at Liz Apparels included thermal circuit imaging to check for possible electrical faults, a comparison of approved building designs against the actual building construction, and a visual inspection.
It was not clear whether this audit included a Ferro scan. The retailer has so far released only a few details of the inspection, but said it intends to start publishing results from its Bangladesh factory audits on its website starting in June.
Bangladesh has only about 200 trained building inspectors and should have 200,000, said Emdadul Islam, the chief engineer of the state-run City Development Authority. The country's population is above 160 million, making it the world's eighth largest, according to the CIA World Factbook.
"There are 1.25 million buildings in the capital city alone and there are no statistics on how many buildings there are in the country," Islam said.
Jay Jorgensen, Wal-Mart's chief compliance officer, said Veritas sends in a small team of engineers to conduct fire, electrical and structural reviews at the Bangladesh factories. It takes between 8 and 20 days to complete each safety audit at a cost that can exceed $10,000 per factory, he said.
"The audits that we're doing now, with this special focus on safety, I still don't know anybody else who does that level of detail," Jorgensen told Reuters on Thursday.
When a review turns up safety concerns, Wal-Mart notifies the factory owner and the local authorities, and also calls other companies that may use the same supplier.
After Rana Plaza collapsed, Nassa Group voluntarily shut down three of its factories for safety reasons, said Khandaker Mohammed Saiful Alam, managing director of the group.
But it left Liz Apparels operating because "the tiny and hair-like crack lines are only on plaster and not the bricks on the main wall," Alam said. (Additional reporting by Jessica Wohl in Chicago and Sonya Dowsett in Madrid; Writing by Emily Kaiser; Editing by David Greising and Ian Geoghegan)