Behind Everyday Low Prices - Consular Outreach to Wal-Mart

UNCLAS SECTION 01 OF 02 GUANGZHOU 030782

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SENSITIVE
SIPDIS

BEIJING FOR CG
STATE FOR CA/VO, EB, AND EAP/CM
USDOC FOR 4420/ITA/MAC/MCQUEEN
USPACOM FOR FPA

E.O. 12958: N/A
TAGS: CVIS ECON ETRD CH
SUBJECT: Behind Everyday Low Prices - Consular Outreach to Wal-Mart
in Shenzhen. Part 1 of 3.

REF: A) GUANGZHOU 031368 B) GUANGZHOU 018161 C) SHANGHAI 00005609

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1. (SBU) SUMMARY: Employees at Wal-Mart Global Procurement in
Shenzhen China told Conoffs during an orientation trip that the
company is pleased with how staff are treated when they apply for
visas and that that they are interested in working with the
consulate to facilitate and improve the working relationship. The
procurement office said that Wal-Mart is committed to maintaining
high ethical standards in its dealings with suppliers. They also
told Conoffs that 73% of Wal-Mart's global imports (not just those
going to the U.S.) originate in China and of that amount, 73% are
from Guangdong Province. This is the first of three cables about
the Consular outreach to businesses in Shenzhen. END SUMMARY

Purpose - Corporate Outreach and Officer Education
-------------- --------------


2. (U) On August 25, 12 Conoffs and two Locally-Employed Staff (LES)
traveled to Shenzhen to meet with three large companies which have
large numbers of employees who regularly travel to the United
States. This trip continues a tradition of outreach trips organized
by entry-level officers (ELOs) in consular positions; the purpose of
the trips is to better understand the South China business
environment, major corporations' operations in the region and
corporate needs for travel to the United States. The companies
selected for this trip were: FoxConn, a Taiwan-owned contract
manufacturer for many major electronics and computer companies, and
its Mainland-based operation Hongfujin Precision Industries;
Shenzhen Mindray, a Chinese medical technologies company; and
Wal-Mart Global Procurement, the division of U.S. retail giant
Wal-Mart. The companies were selected to give officers a perspective
on three different industries: electronics manufacturing, medical
devices, and retail procurement. In addition, the companies chosen
companies have a large and growing number of visa applicants in
Guangzhou. The trip was timed to include new officers arriving
during the summer transfer season.

Wal-Mart Global Procurement - Stocking Shelves for America
-------------- --------------


3. (U) Conoffs are well familiar with Wal-Mart Global Procurement
(GP),the subsidiary of Wal-Mart responsible for all direct
importing activities not just to the United States, but to all
Wal-Mart retail outlets outside of China. Upon leaving the building
lobby and entering the second floor offices of GP, Conoffs seemed to
have entered a Wal-Mart retail store in any U.S. town. Color
schemes, employee work vests, and signage - including quotes from
deceased founder Sam Walton - were strikingly similar.


4. (SBU) GP began operations in 2002, and works in close conjunction
with corporate buyers in Bentonville, Arkansas. Buyers decide what
goes on the shelf, but GP merchandisers find suppliers, execute
orders, ensure quality and look for the best possible value. In
addition, GP has an ethics and auditing unit that performs factory
inspections to ensure that factories do not employ child labor or
violate local employment laws. Factories are judged on a traffic
light scale of green, yellow, orange, and red with a red violation
or repeated orange violations resulting in Wal-Mart ceasing use of
the factory as a supplier. A growing number of these audit
inspections are unannounced. GP has a strict policy of not allowing
any gifts or meals whatsoever to be given to its employees.


5. (SBU) GP has 31 offices world-wide with 1693 employees; Shenzhen
is its headquarters. This is largely because 73% of Wal-Mart's
imports come from China while an additional 15% come from Southeast
Asia. Furthermore, among imports from China, 73% come from
Guangdong province (where Shenzhen is located). The high figure may
at first sight seem surprising given that Guangdong province
accounted for just 31% of China's exports last year, however,
Guangdong's status as the "manufacturing floor of the world" and
producer of what consumers want makes the high percentage
understandable. Mr. Cui said that the number of suppliers from the
interior and north of China are increasing. GP's purchases of
material from the coastal provinces of Fujian, Zhejiang, Jiangsu,
Shandong, Tianjin, and Liaoning, as well as from companies located
in the interior of China have increased at more than 20% per year,
leading to GP having to shift staff, or hire new staff at satellite

GUANGZHOU 00030782 002 OF 002


offices to perform quality assurance and auditing work on these new
suppliers.


6. (SBU) GP Director of Administration Kenny Chen and Corporate
Travel Supervisor Wendy Zhang told Conoffs that GP merchandising
employees are responsible for sourcing suppliers and order
execution. Most have spent at least two-to-three years as an
assistant merchandiser before promotion, are college educated, and
speak English. Merchandisers travel to the United States primarily
to meet with buyers and gain a better understanding of the U.S.
retail market. While in the United States, the merchandisers also
visit Wal-Mart and other retailers' stores to do comparison pricing.
Most merchandisers will travel to the United States several times
each year. Mr. Chen said that when Wal-Mart suppliers need to travel
to the United States, Wal-Mart headquarters in Bentonville arranges
for their invitation letters and their travel. Wal-Mart China, a
separate division that handles retailing in China, arranges its own
employees' travel needs. GP could not comment on the type and
numbers of employees from Wal-Mart China traveling to the United
States who might require visas. Wal-Mart GP recommended that
Conoffs also meet with Wal-Mart China.


7. (SBU) GP was not prepared to discuss salaries or retention of
employees in detail but did say the company aims to pay a
competitive salary based on local corporate salary surveys in all of
its positions. GP also admitted that while its approach was to hire
from universities and train internally, its employees at the
merchandiser level are highly sought after by other organizations.
To help with retention and inculcate the corporate culture into new
employees, GP said it selects a group of high-performing assistant
merchandisers to attend the Wal-Mart shareholder meeting each year
in Bentonville.


8. (SBU) Wal-Mart Global Procurement is a member of the American
Chamber of Commerce in Guangdong and uses its Visa Appointment
Program for all of its employees who travel to the United States.
GP is pleased with the way the program is working and with the visa
issuance rate for its employees in Guangdong. GP did state that its
employees at the company's smaller satellite offices outside of
Guangzhou's consular district have had much less success obtaining
visas to the United States.

Comment - Better Understanding for All
--------------


9. (SBU) Three factors contribute to the successful relationship
between GP and the Congen staff. The first is the familiarity that
all visa officers have with Wal-Mart and the retail business in
general. The second is that Wal-Mart Global Procurement is one of
the largest U.S. companies in Guangzhou's consular district sending
many employees each year to apply for non-immigrant visas causing
further familiarity with the company. Finally, Wal-Mart Global
Procurement is a member of the American Chamber of Commerce in
Guangdong (AmCham) Visa Appointment Program. The program requires
additional documentation such as an employment verification letter
from a designated signatory with the applicant's company and an
invitation letter on corporate letterhead. Additionally, these
applications are screened before the interview by both the AmCham
and Consulate staff. Applicants who use the program must also
report their return to the AmCham once their trip is completed. As
such, Wal-Mart Global Procurement employees who have been issued
visas through this program in the past have all returned on-time,
giving the line officer increased confidence in future GP
applicants' stated employment, purpose of travel, and likely return.



10. (SBU) To facilitate travel for U.S. companies with headquarters
in one consular district and small offices in another district
within the People's Republic of China, Beijing, Shanghai, and
Guangzhou have recently expanded their respective AmCham visa
programs. Under the new reciprocity agreement, member companies in
any of the three AmCham visa programs can refer their
out-of-district employees to the AmCham in the employee's resident
consular district (REF C). Post has discussed with consulate
colleagues difficulties Wal-Mart Global Procurement has had with
employee visa applications outside of Guangzhou; Wal-Mart Global
Procurement employees in the company's satellite office in Shanghai
may be among the first beneficiaries of this new AmCham reciprocity
agreement in Guangdong.

GOLDBERG