November 21, 2005

Thank you for your letter and your interest in the rights of workers at the Lajat factory in Gomez Palacio, Mexico.

As you may know, the labor issues at Lajat's Gomez Palacio facility have been ongoing since early this year. As you may also know, Levi Strauss & Co. (LS&CO.) has not had authorized production in the Gomez Palacio facility since November of 2004, although we do source from three other Lajat facilities. Despite the fact that LS&CO. has not sourced from the Gomez Palacio facility since November of last year, we have engaged with management, the Coalition for Justice in the Maquiladoras (CJM) and the Mexican government to address the issues there.

Since we became aware of the issues at the Gomez Palacio facility in March 2005, Levi Strauss & Co. has:

Conducted on-site investigations when CJM provided evidence of violations of our code of conduct (Terms of Engagement or TOE), including freedom of association;

Worked with Lajat management to address violations of our Terms of Engagement, including having workers reinstated after they had been discharged for union activity;

Written to Mexican government officials alerting them of the labor situation at Lajat, urging them to respect workers' right to freedom of association, and requesting coordination between the governor's office and the state labor board to consider the workers' petition for official recognition of their organization; and

Encouraged Lajat management, the CJM and workers to meet to resolve their labor-management issues.

Additionally, recognizing the decline in Lajat's overall business and the closing of two other Lajat plants prior to Gomez Palacio, the Levi Strauss Foundation made a grant to a nonprofit Mexican organization, Funacion E, to provide displaced garment workers with new job placement services, job and self-employment counseling and enterprise development training.

At this point, we understand that the Mexican government has yet to legally recognize the union that the Gomez Palacio workers have been attempting to establish. We are monitoring the status of the union application with Mexican and U.S. government officials and will continue to encourage them to support the workers' right to freedom of association.

Levi Strauss & Co. will continue to work with CJM to investigate alleged violations of our Terms of Engagement and work with Lajat management to address them. We will also continue our efforts to encourage the Mexican government to respect the workers' right to freedom of association. We will not, however, shift production from other Lajat facilities to Gomez Palacio. As a result of recent trends in product demand, we have already reduced our production with Lajat and we do not want to have any additional negative impact on the workers at factories where we currently have production.

Given your interest, we are including some additional information on our work to date with regard to the issues at Lajat's facility in Gomez Palacio. Following is a history of our engagement there beginning with our initial contact with CJM. It chronicles our responses to information and allegations brought to us by the CJM, and the many actions and investigations undertaken by LS&CO. to ensure compliance with our Terms of Engagement and respect for the rights of workers.

Initial Contact and Response

In late March, 2005, CJM brought to our attention allegations that freedom of association was being violated at Lajat's Gomez Palacio factory. The factory had not had authorized Levi Strauss & Co. production since November, 2004.

In response to the allegations, we immediately sent our regional Terms of Engagement manager and assessor to meet with CJM representatives and workers at the factory.

As a result of this investigation, we determined that workers had been discharged due to their organizing efforts. We requested these workers be immediately rehired and paid any wages owed for the time they had been discharged. The workers were rehired and paid. We also requested Lajat management to respect our Terms of Engagement including Freedom of Association in all of their facilities.

We further determined that Lajat had, without authorization, sent Levi Strauss & Co. production to the Gomez Palacio factory in February, 2005. Lajat had placed production there without our consent and in violation of our Terms of Engagement and production finishing requirements. At that time, we followed our policy in such cases and insisted that Lajat immediately stop this practice, which they did.

Subsequent actions

In June 2005, we learned of CJM's concern that video cameras had been installed in the Gomez Palacio factory. We investigated this and learned that the cameras had been installed to ensure compliance with relevant portions of the Custom-Trade Partnership Against Terrorism (C-TPAT), a new program of the U.S. Customs Department that many suppliers are implementing. We requested Lajat to inform workers of the reason for the video cameras. They complied, posting this information on factory notice boards.

During the months of June and July, 2005, when it appeared that the local Conciliation and Arbitration Board would recognize the union, we notified Lajat management that we expected our Freedom of Association and other Terms of Engagement provisions to be observed in all of their facilities. Specifically, we advised that management should remain neutral in all organizing processes, and that elections should be held in a neutral place and by secret ballot. Further, we strongly encouraged Lajat management to work with the CJM to identify neutral observers who could assist in the election process.

Investigation and Corrective Action Plan for incident of October 27

Based on our initial investigation into an incident that occurred on October 27, 2005 where local police were summoned to the facility and arrests were made, and following up on certain other issues that CJM had brought to our attention, we sent a corrective action plan to Lajat management on November 7, 2005, identifying specific violations of LS&CO.'s Terms of Engagement and requiring corrective actions as follows:

Employees of Lajat (and other Bello companies) shall not visit workers at their homes after working hours to ask workers to accept a severance package. This practice is not supported by LS&CO. Lajat should issue a written memo to management and administrative employees advising this practice is not acceptable. The memo shall be signed by each employee to acknowledge their understanding of this principle. (To be done immediately)

Lajat should not involve police in handling disciplinary matters at the factory. Lajat should allow authorities to determine if charges against Fernando Armijo are valid and drop their complaint against him in the interim. Internal regulations regarding disciplinary actions applicable to theft and property damage shall be made clear and specific. These regulations should be communicated to all employees verbally and in writing. (To be done immediately).

Our investigation found that there is not an existing process for addressing workers' grievances. Lajat management should extend an invitation to meet with workers and discuss their grievances with neutral observers present. (To be done immediately)

Lajat should agree to Freedom of Association awareness training for all management, supervisors and workers. LS&CO. will conduct such training. (Plan to be developed within two weeks)

Base salary for Amalia Palomino shall be raised to 950.00 pesos/week, as outlined in the document signed on 05/23/2005 when she was reinstated. (To be done immediately)

Health and safety standards shall be acceptable while employees are on the premises. Restroom areas shall be maintained in good conditions and properly stocked. The gas supply shall always be available and operating under safe conditions. (To be done immediately)

As mentioned above, this corrective action plan is a result of our investigation into the October 27 incident. In conducting the investigation, we obtained information from several sources ---workers, factory records and other documents, management, community groups such as CJM, and our own visual inspection of the facility.

Most recent actions:

In October 2005, two hearings by the local Conciliation and Arbitration Board to recognize the union were postponed. In response, Levi Strauss & Co. wrote to the Governor of the State of Durango on October 25, 2005, urging him to ensure that the conciliation and Arbitration Board support the workers' right to freedom of association. We also shared this letter with other U.S. and Mexican government officials.

Also in October 2005, we wrote formally to Lajat management stressing the importance of the Freedom of Association provisions in our Terms of Engagement and reiterating our expectation that Lajat abide by them.

We continue to monitor the status of the application for the union with Mexican and U.S. government officials.

We remain open to sharing our experience and actions with other brand customers of Lajat who may be interested in addressing the labor issues.

We committed to investigate the laws pertaining to the possible reimbursement of Mr. Fernando Armijo's bail monies of 5,000 pesos (in connection with the October 27 factory incident).

We continue to make every attempt to bring Lajat management and worker representatives to the table to resolve outstanding issues in a way that is respectful of all parties.

At a meeting with representatives of CJM and its partner organizations at LS&CO. headquarters in San Francisco, we heard concerns about improper Infonavit payments and allegations of blacklisting at the Gomez Palacio facility. We asked attendees to forward any available evidence of blacklisting and committed to investigate the matter and take appropriate action upon receipt of such information.

We urged Lajat to consider re-hiring displaced workers from Gomez Palacio as positions for which they are qualified come available at other Lajat factories.

Our position on shifting production from other Lajat facilities:

The CJM would like to see LS&CO. shift our production (or a portion thereof) from Lajat's TOE-approved Torreon facility to Gomez Palacio. We will not shift our production locations as we believe it would negatively impact other Lajat workers. We offer the following as supporting background information:

Our last authorized production at the Gomez Palacio factory was in November 2004. We learned through the CJM of unauthorized production that had been placed at the factory without our consent in February, 2005 and in violation of our Terms of Engagement. Upon discovery, we followed our policy and insisted that Lajat immediately stop this practice. There has been no Levi Strauss & Co. production at the Gomez Palacio factory since February 2005.

Since early 2005, Levi Strauss & Co. has had production in three other Lajat factories where we continue to source. Unfortunately, over the last few months, our production orders with Lajat have declined significantly due to a drop in our overall sourcing requirements globally. Our orders with Lajat have also become more specialized due to consumer preferences. These trends have also affected our other contractors.

We understand that Lajat has lost orders from other customers as well, requiring them to close two of their factories in the region. We have struggled to keep production at levels to avoid further layoffs at the Lajat factories where we do have production.

In response to the closures and employee layoffs, LS&CO. worked to ensure that employees were paid proper legal severance by Lajat. In addition, in October 2005, the Levi Strauss Foundation made a grant to a nonprofit Mexican organization, Fundacion E, to provide displaced garment workers with new job placement services, job and self-employment counseling and enterprise development training.

From what we have learned, there have not been any production orders at the Gomez Palacio facility from any brand customers since the end of August 2005. We also learned that approximately half of the 116 workers who were employed there in March 2005 have been laid off and that the remaining workers are still being paid even though there is no production at the factory. We understand these workers are not receiving any additional payments, such as production bonuses or overtime, because there is no work. This does result in workers being paid less than they were before. It is unfortunate, but is not illegal.

We understand from documents provided by CJM that other brands' production from Lajat factories may be going to another company rather than being sent to the Gomez Palacio factory. We do not know what these other brands' production requirements are, or why they may be sending their production elsewhere.

LS&CO. is not in a position to tell Lajat how to service the production requirements of their other brand customers. We cannot force them to shift another company's production to a different location or to the Gomez Palacio facility. We do not have this kind of authority or influence over another brand's supply chain practices.

LS&CO. will not shift production to the Gomez Palacio factory. We have already reduced our production significantly with Lajat and we do not wish to be responsible for any additional negative impact on the workers at factories where we currently have production.

As you can see, LS&CO. has been significantly involved and responsive with regard to activities at Lajat's Gomez Palacio facility. Whenever presented with credible information that the supplier may be in violation of our Terms of Engagement, we investigate and take appropriate action. Further, we sought the assistance of the Mexican government in supporting the workers' right to freedom of association as stipulated under Mexican law, and through a local nonprofit organization are providing support to workers who have been laid off from Lajat facilities.

We will continue to work to address the labor issues in Lajat's Gomez Palacio facility and to uphold our Terms of Engagement. In the meantime, thank you again for your letter and for sharing your concerns with us.

Sincerely yours,

Michael Kobori
Vice-President
Global Code of Conduct
Levi Strauss & Co.