American clothing displaying “Made in China” tags have been spotted at a North Korean garment production factory, photos exclusively obtained by NK News reveal.

At least five dress shirts branded with Lands’ End labels were seen on a rack displaying previous projects at North Korea’s Sonbong Textile Factory in June, raising the possibility that the Dodgeville, Wisconsin-based catalog retail giant has outsourced part of its production line to a country currently under multiple U.S. sanctions.

Unwittingly or not, the outsourcing of any element of clothing production by the U.S. company to North Korea would constitute a likely violation of Executive Order 13570, punishable – in the case of willful violation – by up to a U.S. $1 million fine or 20 years in prison.

Lands’ End is currently investigating whether the photos relate to an “issue with a supplier” or reflect an “instance of counterfeiting,” Michele Casper, a spokesperson for the company, told NK News.

But the shirts displayed in the Sonbong factory were described by one Lands’ End insider as looking “legitimate…to the best of my knowledge”.

Close-up images also show high quality stitching not commonly associated with Chinese counterfeits, further suggesting the samples seen in the North Korean factory are the real article.

“MADE IN CHINA”

The source who provided the above photos to NK News, said, “While the labels said “Made in China” it was clear that the contracts were outsourced to North Korea. The factory director was quite proud of the quality of the garments made for export.”

According to another source, who visited the Sonbong Textile factory in June, a manager at the plant said the plant worked “largely on contract from Chinese companies” taking advantage of “low-cost” North Korean labor.

“Basically we saw material made in China being cut and sewn into finished clothes,” the source said, who wished to remain anonymous, as he makes regular business trips to the area. “All the clothes were labelled as ‘Made in China,’” the source added.

SUBCONTRACTING DILEMMA

Other pictures taken at the factory showed counterfeit NBA replica Utah Jazz and Chicago Bulls basketball jerseys. Unlike the Lands’ End items, substantial design differences on the jerseys point to those being destined for bootleg markets, perhaps sub-subcontracted from still other Chinese factories.

As worker productivity and wages continue to rise in China, low-value textile and clothing production processes are increasingly being subcontracted to countries such as Bangladesh and North Korea, where wages are lower.

If the Lands’ End items seen in North Korea are indeed legitimate, it is possible that the Chinese factory tasked with producing the line may have sub-contracted out the work to the Sonbong factory without the American company’s knowledge.

“I’m aware that such things happen in North Korea–and in many other developing countries–since I have seen it with my own eyes over the years,” Felix Abt, a Swiss national who lived and worked in North Korea for many years, told NK News.

Added Abt, “In a highly globalized world with a more and more sophisticated division of work different actors along the value chain know less and less for whom the finished products are made.”

In fact, it is not uncommon for Chinese companies to subcontract work out to others without first obtaining the consent of the original client, Larry Loucka, a partner at Florida-based supply chain specialists Flow Consulting, told NK News.

“Even when a buyer does visit a supplier, it can be difficult due to language and cultural barriers to really get to know where materials come from, where the product is made,” he said.

“You think you are dealing with a manufacturer, but in reality it is just a broker or distributor. Also, suppliers will at times need to subcontract work when they have more orders than then can handle,” adding that it can be almost impossible for buyers to know if this is happening.

PENALTIES ALL THE SAME

Despite the problems associated in tracking overseas production, Lands’ End, a company sold to Sears in 2002 for $2 billion in cash, should be able to solve this mystery.

“There are a number of service organizations that help international buyers find and vet their supply lines, check on social, labor, environmental compliance, not just financials, capacity and product quality – a whole industry has grown up to provide compliance audit services,” said Louka.

And while one source who has been inside the factory maintained that “this was no sweatshop by any definition,” decades of bilateral trading legislation set forth by the U.S. would nonetheless prohibit Lands’ End–or any American company, for that matter–from doing business there, under Executive Order 13570.

Ms. Casper, the Lands’ End spokesperson, said the company would “address the issue appropriately” if it does find out that one of its “multiple dress shirt suppliers” has been producing clothing in North Korea.

“We do not authorize any production in North Korea,” she said.

Additional reporting by Justin Rohrlich in New York City