The HyperTexts
Mitt Romney's Chinese Sweatshop Factory: a Race to the Bottom
Why did Mitt Romney invest millions of dollars in a Chinese factory that
keeps thousands of girls and young women performing virtual slave labor in a
compound with terrible living conditions that is surrounded by barbed wire and
guard towers?
Preface
by Charles Kermaghan
"It is difficult to get a man to understand something when his salary
depends upon not understanding it."—Upton Sinclair
[In a now-famous secret revelation to rich donors at a fundraiser held in a
private mansion] Willard Mitt Romney remarked excitedly, "When I was back in my private equity days, we went to China to buy a factory
there. It employed about 20,000 people. And they were almost all young women
between the ages of about 18 and 22 or 23 ... And they work in these huge
factories, they made various uh, small appliances. And uh, as we were walking
through this facility, seeing them work, the number of hours they worked per
day, the pittance they earned, living in dormitories with uh, with little
bathrooms at the end of maybe 10, 10 room, rooms. And the rooms they have 12
girls per room. Three bunk beds on top of each other. You’ve seen, you’ve seen
them? ... And, and, and around this factory was a fence, a huge fence with
barbed wire and guard towers. And, and, we said gosh! I can’t believe that you,
you know, keep these girls in! They said, no, no, no. This is to keep other
people from coming in. Because people want so badly to come work in this factory
that we have to keep them out. Or they will just come in here and start working
and, and try and get compensated. So we, this is to keep people out."
— Mitt Romney, Boca Raton, FL, May 17, 2012
Does Mr. Romney seriously believe that young men and women in China are
racing to climb over fortress-like walls topped with barbed wire, just to get a
poorly paid job at Global-Tech?
Or is it possible that the barbed wire and armed guards are meant to lock the
Chinese workers in and strip them of their legal rights?
Mr. Romney and Brookside Invest up to $23 Million in Global-Tech Sweatshop in
China
"When I was back in my private equity days, we went to China to buy a
factory there." [By his own admission] Mr. Romney was a pioneer of outsourcing U.S. jobs and production to
China.
At its peak, for two and a half years from April 1998 through August 2000,
Mr. Romney and his Brookside Capital Partners Fund invested approximately $23
million in the Global-Tech sweatshop in Dongguan, China.
Mr. Romney was there when the Race to the Bottom in the global sweatshop
economy was launched. Mr. Romney noted "the pittance they earned"— just 24 cents
an hour in 1998 and less than $2.00 a day. Wages in Global-Tech were less than 2
percent of U.S. wages.
Despite his investment and power as Bain Capital’s CEO, Mr. Romney apparently
failed to urge Chinese management to even modestly improve Global-Tech’s gross
working and living conditions or the pitifully low wages of its workers.
If Mr. Romney had spoken up, conditions at Global-Tech might be far better
today. Sadly, in 2012, Global-Tech remains a brutal sweatshop, where workers are
paid starvation wages of $1.00 an hour and have no rights.
Today at Global-Tech, every single labor law in China is violated: primitive,
filthy dorm conditions are the norm; routine 15- to 16-hour shifts prevail,
along with grueling 105- to 112-hour, seven-day work weeks.
Eight hundred student interns — many exhausted children, just 16 years old —
are forced to work the grueling 15- to 16-hour shifts with no overtime pay.
In the context of Mr. Romney’s present "get tough on China" stance, it would
be critical for Mr. Romney to clarify exactly what he and Bain Capital did at
the Global-Tech factory in Dongguan, China to push back against the evident
abuses in the factory and to assure respect for human, women’s and workers’
rights.
Mr. Romney was Investing in the Outsourcing of U.S. Jobs and Production
For two and a half years, from April 17, 1998 through the end of August 2000,
at its height Mr. Romney and his Brookside Fund, an affiliate of Bain Capital,
invested an estimated $23 million in the Global-Tech sweatshop in Dongguan,
China, where workers were paid as little as 24 cents an hour and less than $2.00
a day!
In 1998, Mr. John C. K. Sham, Global-Tech's President and CEO said, "...we
still believe that the long term trend toward outsourcing will continue." By
mid-1998, Global-Tech reported fiscal year sales of $118.3 million, which was an
astonishing 89 percent increase over the year before.
Global-Tech factory management was deeply steeped in the manufacture and
export of well-known U.S. electrical appliances such as Sun Beam, Hamilton
Beach, Mr. Coffee, Proctor Silex, Revlon and Vidal Sassoon. Mr. Romney had to be
aware of this.
In its 2001 Annual Report, Global-Tech again focused on outsourcing: "Household appliance companies are focusing on their primary strengths of
marketing and distribution, while increasingly outsourcing product development
and manufacturing ... Our ability and commitment to develop new and innovative
high quality products at a low cost has allowed us to benefit from the increased
outsourcing of product development and manufacturing by our customers."
According to a recent profile produced by Global-Tech: "The company has grown
into the earliest large export-oriented investment business in Qing-Xi Town in
Dongguan City..."
The company's report filed with the U.S. Securities and Exchange Commission
noted on March 31, 2012: "The company’s [Global-Tech's factories] products are
primarily sold to customers located in the United States of America (the
"U.S.A." or the "U.S.") Europe and the PRC [People's Republic of China]."
"Global-Tech and its subsidiaries (hereafter collectively referred to as the
"Company") is primarily a manufacturer of consumer electrical products,
including but not limited to, floor care products and small household
appliances, electronic and optical components, and is also involved in the
assembly of cellular phones."
Global-Tech refers to Motorola, Nokia, Sharp, LG and Lenovo as their
"partners."
Also, on August 30, 2001, right after Mr. Romney's partnership with
Global-Tech management, Global-Tech purchased the U.S. Lite Array company in
Novato, California, which became a subsidiary of Global-Tech Appliances Inc.
Then in 2003, Lite Array's research and development team was moved to
Global-Tech's facilities in Dongguan, China. The Lite Array company was then
incorporated in the British Virgin Islands so as to avoid all corporate, capital
gains and estate taxes.
* Mitt Romney was the CEO of both Bain Capital and its affiliate, Brookside
Capital Partners, of which he was also the sole director, president and
shareholder.
Mitt Romney Is Responsible
"Mr. W. Mitt Romney is the sole shareholder, sole director, President and
Chief Executive Officer of Brookside Inc. and thus is the controlling person of
Brookside Inc. No person other than the respective owner referred to herein of
shares of Common Stock is known to have the right to receive or the power to
direct the receipt of dividends from the proceeds from the sale of such shares
of Common Stock." — Brookside Capital Partners Fund LP, Form SC 13G/A filed with U.S. Securities
and Exchange Commission, August 28, 1998
Despite being a major investor for 2 ½ years in the Global-Tech factory and
despite his power, influence and wealth as Bain’s CEO, Mr. Romney apparently
failed to speak out urging Chinese management to improve the gross working and
living conditions or the pitifully low wages of its workers. Why didn’t Mr.
Romney raise the International Labor Organization’s core, internationally
recognized worker rights standards with Global-Tech management?
If Mr. Romney had spoken up, conditions at Global-Tech might be far better
today. Sadly, in 2012 Global-Tech remains a brutal sweatshop where workers are
paid starvation wages of $1.00 an hour and have no rights whatsoever.
On April 17, 1998, Mr. Romney and Brookside Capital Partners Fund filed a
report with the Securities and Exchange Commission noting that they had
purchased a 6.13 percent stake, or 748,000 shares in the Global-Tech sweatshop
factories in China. At $19 per share, Mr. Romney and Brookside had invested
$14.2 million in one of the earliest outsourcers of U.S. jobs and products.
Just four months later, Mr. Romney and Brookside upped their interest in the
Global-Tech factories to 10.3 percent, which, if the share prices remained the
same, would be approximately $23 million.
Then, on December 21, 1998, Mr. Romney and Brookside appeared to downsize
their Global-Tech holdings to 4.63 percent of their purchased shares. However,
it appears that Mr. Romney was now sharing Brookside’s stake in Global-Tech with
his Sankaty High Yield Asset Investors. According to The Atlantic Wire,
"Sankaty is the Bermuda-based company Romney failed to disclose on financial
statements for a few years, and then transferred to his wife’s name when he
became Governor of Massachusetts." — The Atlantic Wire, July 12, 2012, Connor Simpson
Forbes also confirmed that "by the end of 1998, Brookside was sharing its
piece of Global-Tech with Sankaty High Yield Asset Investors, the mysterious
Romney-owned Bermuda corporation ..." — Forbes , July 12, 2012,
Frederick E. Allen
By March 25, 1999, Romney, Brookside and Sankaty owned 9.11 percent of
Global-Tech’s stock.
It was not until August 2000, after 2 ½ years of investing in Global-Tech
sweatshop factories in China, that Mr. Romney, Brookside and Sankaty sold their
remaining shares.
Even after Mr. Romney left for the Salt Lake City Olympics in Utah,
Securities and Exchange Commission filings "showed Romney remained Bain’s CEO,
President and primary shareholder through 2002." — Mint Press, July 17, 2012,
Trisha Marczak
Mr. Romney’s Brookside Inc. includes: Brookside Capital Partners Fund L.P.,
Brookside Fund, Brookside Capital Investors L.P., and Brookside Investors.
Brutal and Illegal Sweatshop Conditions Persist at Global-Tech
Imagine if Mr. Romney had spoken up regarding the deplorable and inhuman
factory conditions he saw in China. But instead, he came and went with no
impact, other than growing his investments and wealth.
As of August 2012, workers at Global-Tech were still toiling grueling 15 to
16-hour shifts, from 7:30 a.m. to 10:30 or 11:30 p.m. seven days a week. Workers
were routinely at the factory 105 to 112 hours a week! And all overtime is
mandatory.
Work Hours
—Grueling and Illegal—
7:30 a.m.—11:30 a.m. Work, 4 hours
11:30 a.m.—12:30 p.m. Lunch, 1 hour
12:30 p.m.—4:30 p.m. Work, 4 hours
4:30 p.m.—5:30 p.m. Dinner, 1 hour
5:30 p.m.—10:30 or 11:30 p.m. Overtime, 5 to 6 hours
Not including the two one-hour meal breaks each shift, the workers were
toiling 91 to 98 hours a week, including the regular 40 hours of work each week,
plus the added 51 to 58 hours of obligatory overtime — which exceeded China’s
legal limit on permissible overtime by 514 to 587 percent!
It was only in September 2012 that the standard work shifts were cut back by
half an hour, from 8:00 a.m. to 10:30 or 11:30 p.m., meaning the workers are now
toiling daily 14 ½ to 15 ½ hour shifts. They are now at the factory 101 ½ to 108
½ hours a week.
Current Working Hours
87.5 to 94.5 Hour Work Week
(as of September 2012)
8:00 a.m. – 11:30 a.m. Work, 3 ½ hours
11:30 a.m. – 12:30 p.m. Lunch, 1 hour
12:30 p.m. – 4:30 p.m. Work, 4 hours
4:30 p.m. – 5:30 p.m. Dinner, 1 hour
5:30 p.m. – 10:30 or 11:30 p.m. Work ½ regular hour, Overtime 4 ½ to 5 ½ hours
The current obligatory working hours still exceed China’s legal limit on
permissible overtime by 472 to 556 percent.
Global-Tech also routinely violates China’s law on the "Regulation of Wages."
In Guangdong Province it is mandatory that workers’ pay stubs clearly document
all regular and overtime hours — including weekend hours worked during the
month, which Global-Tech management blatantly fails to do.
Déjà Vu All Over Again
—September 2012—
Due to excessive work load, several departments are especially busy. In these
departments the lunch break has been cut back to just a half hour. This means
the workers are back to working 15 to 16-hour shifts, seven days a week.
Workers have again confirmed that it is common, year round for the workers to
be forced to toil on both Saturdays and Sundays. Unlike other factories in
China, Global-Tech does not experience slow and peak seasons. It is peak season
year round.
It’s Forced Overtime, No Matter How You Look at It
We can imagine Global-Tech management saying: "Oh no. All overtime work is
voluntary and in strict accordance with the law."
Of course, workers can opt out of working overtime any time they want. But we
hope they are independently wealthy. No matter what the emergency, workers who
cannot stay to work overtime hours are punished with a "major demerit point" and
fined 90 RMB, or $14.26, which is the equivalent of losing 14.3 hours regular
wages. No worker can possibly afford such crippling fines.
Global-Tech management can pretend all they want that overtime is voluntary.
Every worker knows that if they start skipping overtime, their wages and
"rewards" will be slashed.
Below Subsistence Wages
China’s workers earn just $1.00 U.S. an hour, less than six percent of U.S.
wages.
Source: Bureau of Labor Statistics , Electrical Equipment, Appliance, and
Component Manufacturing: NAICS 335
As of 2012, U.S. wages for the manufacturing of electrical equipment and
appliances are $17.93 an hour, while wages in China for similar work are just
$1.00 an hour, which means that wages in China are just 6 percent of U.S. wages.
Workers at Global-Tech are also nickel and dimed and cheated of their legal
overtime pay.
According to China’s law, all overtime hours worked on weekdays must be paid
at a premium of 9.48 RMB per hour, which amounts to $1.50. On weekends, all
working hours are classified as overtime and must be paid at a premium of 12.64
RMB, which is the equivalent of $1.99 per hour.
But Global-Tech management still finds a way to nickel and dime the workers,
cheating them of eight cents an hour on weekday overtime and ten cents on
weekend overtime.
At a minimum, workers must toil at least three hours of overtime each weekday
after their regular eight-hour shift. So for their three hours of overtime, five
days a week, the workers are cheated of $1.20 each week. (3 hours x 5 days = 15
hours OT; 15 x 8 cents = $1.20.)
On weekends, the workers are required to toil the same standard 13 hours of
work on both Saturday and Sunday, which adds up to 26 overtime hours. As the
workers are cheated of 10 cents per hour of their legal overtime pay, they are
losing another $2.60 per weekend.
So, routinely each week, working a grueling seven-day work week, the workers
are rewarded by being cheated of $3.80 a week, which amounts to taking blood
money from some of the hardest working and poorest workers in China.
The overtime wage that was paid on weekdays at Global-Tech was set at 9 RMB
($1.42) an hour, in violation of China’s Labor Contract Law, which stipulates
that all weekday overtime must be paid at 9.48 RMB ($1.50) and hour. It was not
until mid-September 2012 that Global-Tech began paying the legal overtime
premiums.
Child Labor Persists
There are approximately 800 high school student "interns" — aged 16 to 18
years old — working at Global-Tech during the summer months. The "student
interns" are typically at Global-Tech for two to three months, and work right
alongside the regular workers. The only difference is that the student workers —
no matter how many hours they work at night or on weekends — always get paid the
same standard hourly wage. There is no holiday or overtime premium wage for
them.
By law, student interns are strictly prohibited from working more than a
regular eight-hour shift, Monday through Friday. But this does not stop
management from forcing the exhausted young students to toil 14 ½ to 15 1/2
–hour shifts, from 8:00 a.m. to 10:30 or 11:30 p.m., seven days a week. The
students are routinely in the factory over 100 hours a week, while toiling 87 ½
to 90 hours.
Many students curse their teachers and call them "liars." They say their
schools and teachers "tricked us to come to this place." Their teachers told
them they would "learn important skills here" and "easily make enough money to
pay for [their] upcoming school tuition. All of it was a lie."
The students must solder a circuit board onto a monitor every 13 seconds.
First they clean the monitor using ethanol. Then they place it onto a mold.
Pressing down using both hands, they operate the machine that solders the
circuit board onto the monitor. Then using a microscope they inspect the monitor
for quality and place it back on the assembly line. They do the same operations
over and over again, one every 13 seconds, 280 monitors an hour, 3,920 in 14
hours of work.
Student Interns Denounce the Gross Violations at Global-Tech
"Now we know this place is hell. We can't leave. Otherwise we'll have trouble
getting our high school diplomas. And we won't get paid for our work. The
schools and teachers get money from the factories. The schools, teachers and
factories are together drinking our blood." (Student Intern A)
"With the help of our teachers, they [Global-Tech management] are even more
ruthless with us than with regular workers. Because we are young, we don't have
any job experiences."
"We get so tired every day that we just want to die. We never get enough sleep.
Every day we go to work without getting rid of the tiredness in our bodies. And
we start a new tiring day. We are tired and sleepy every day. Sometimes we
really want to doze off on the assembly lines. But the supervisors walk around
the assembly lines all the time. Nobody gets a chance to take a nap. I really
want them to get a stroke and pass out so that I can take a nap on the assembly
line. Even just a minute would be great!"
"We dare not tell our parents about this. My parents love me so much. If they
knew I suffered like this here ever day, they would be heartbroken."
"Sometimes I think to myself: Doesn't our boss have kids? If he has kids, are
his kids forced to live such a poor and difficult life as we do?" (Student
Intern B)
Primitive and Filthy Dorms at Global-Tech
Twelve workers share each primitive dorm room, sleeping on narrow,
double-level bunk beds, most without even the thinnest of mattresses. The dorms
are filthy, and it is common for workers to find dead rats in their rooms and
hallways.
Two 40-watt bulbs dimly light the room. Each dorm room has a "bathroom," and
a squat toilet which is right next to the "shower." To bathe, the workers must
queue up with their small plastic buckets and wait their turn to fetch hot water
at the spigot in the hallway. It takes more than an hour for all 12 workers to
bathe, which they do by splashing water on themselves right next to the squat
toilet. Frequently the hot water runs out and the workers near the end of the
line must wash with cold water. After everyone has washed, the workers spend
another hour washing their clothes by hand.
This means that if the workers are lucky enough to get out of work at 10:30
p.m., it still takes another two and a half hours or so for everyone to bathe
and wash their clothing. They can finally stumble to their bunk beds to sleep at
12:30 or 1:00 a.m.
The dorms do not have air conditioning. There are just two small ceiling fans
in each room, which provide little relief. So during the long, humid summers,
workers are drenched in their own sweat, making it very difficult to sleep.
The Workers' Cafeteria Is Beyond Filthy; Barely Edible and Frequently Rotten
Food
All the workers complain that management cheats them of sufficient cooking
oil, leaving their food with little taste. But what is far worse is that they
often find bugs, sand and leftover "juice" from rotten vegetables in their food.
The cafeteria is filthy, and rarely if ever properly cleaned. Flies are
everywhere.
More often than not, the food is inedible. No matter how hungry they are, the
workers cannot stomach it. So workers protest nearly every day by dumping
uneaten food on the cafeteria tables.
Management does not bat an eye, and has no intention of improving the food.
Workers complain that the food at the cafeteria is awful. It has little
taste, and is often contaminated with bugs, sand and "juice" from rotten
vegetables. On days when the food is especially bad, the workers protest by
dumping it on the cafeteria tables.
Workers wake up to a water breakfast of noodle soup. Lunch consists of
cabbage, stir fried pickles, regular and pickled vegetables and green beans.
Dinner is comprised of noodles, vegetables and seaweed. The only serving in the
cafeteria which is not limited is the rice. Other than rice, workers are limited
to a single serving of all the other food dishes, and the portions are quite
small, as one can see in the clandestine photos.
The cafeteria is filthy and rarely properly cleaned.
Global-Tech Workers Have No Hope for Their Future and See No Possibility of
Change
Our researchers asked two workers: "Do you think life will be this hard in
the future? Are you going to live like this for the rest of your life?"
One worker responded, "We can’t think about it. Because if we do, we might
not have the courage to live to see tomorrow’s sunrise."
The other worker responded, "Maybe we don’t make as much back home, but we
don’t work so hard and life isn’t so difficult. We wouldn’t be ordered around by
others as if we are livestock and slaves. At the very least we would have family
that care and console us. Here we do not know other people well. We are not
respected. We work so hard around the clock to live a pitiful life. My parents
worked so hard for most of their lives to raise me and let me go to high school,
hoping I would have a better life. Turns out my life isn’t much better than my
parents’!"
Workers Can Easily Join the Global-Tech Factory, But Getting Out is Another
Story
This is how the system operates: Wages are withheld. For example, after
working through the month of August, the workers are not paid at the end of the
month, on August 31, but rather must wait another three and a half weeks to be
paid their August wages on September 25. Similarly, after working through the
month of September, the workers are not paid until October 25, and so on.
Workers can quit, but management will do everything it can to keep the workers
waiting for weeks to receive their last month’s wages including all forced
overtime — and they may never see their final three and a half weeks’ wages. Few
workers can afford to walk away and forfeit so much of their time, grueling
workloads and wages.
One worker told us that of eight workers who were hired together at
Global-Tech, six fled within a month, and the remaining two are only waiting to
get August’s salary before quitting. The workers may escape, but they will still
have to forfeit 25 days’ wages for September.
Global-Tech Workers Also Cheated of Healthcare and Other Benefits
China’s labor laws are very clear. It is mandatory for the Global-Tech
management to inscribe its workers in the social insurance programs within 30
days of a worker’s employment. The mandatory insurances cover: pension,
unemployment, occupational injury, maternity, medical insurance and a housing
stipend.
It is a flat-out lie for Global-Tech management to say that it is "legal" to
delay a worker’s inscription in these mandatory insurances until they complete
at least one full year of work.
As a cover, Global-Tech management does inscribe its workers in an extremely
limited and cheap private social insurance scheme which costs 6.7 RMB, or a
whopping $1.06 a month.
"Bathroom Democracy"
As in most factories across China, the workers have no voice or legal rights.
However, when they are alone in the bathroom, they can use magic markers to vent
their rage and sorrow.
Gross Violation of Guandong Province’s Regulations on Payment of Wages
Global-Tech management intentionally and illegally fails to list all regular
and overtime hours worked each month. Nor are the regular and overtime wage
rates clearly stated.
We estimate the workers toiled 173.33 regular hours in June, and 205.8
overtime hours, for a total of 379.13 hours.
This worker earned $271.68 in take-home pay in June and approximately $62.70
for the week, including the excessive forced overtime.
Management deducted 150 RMB ($23.68) from the worker’s wages each month,
despite the fact that the food management served was often inedible and
frequently rotten.
Management’s blatant failure to note all regular and overtime hours worked
each month or the wage rates applied is illegal, meaning that Global-Tech
management must have powerful friends in local government who take care of them.
Social Insurance System in China
The Social Insurance system in China is controlled at the municipal or
provincial level.
Here too, sweatshop factories like Global-Tech's in Dongguan can routinely
violate the regulations, which exist on paper but not in reality.
The Global-Tech company is 100% responsible for:
Work-related injury insurance, —Violated
Maternity insurance, —Violated
Mandatory insurances for which management and employees are jointly responsible:
Personal insurance —Violated
Medical insurance —Violated
Unemployment insurance —Violated
Would You Like Your Son or Daughter to Work at Global-Tech?
Global-Tech management: "Our manufacturing personnel are paid a monthly
salary and periodic incentive bonuses and are provided with housing, medical
care and subsidized meals in our dormitory complex adjacent to each factory. We
have not experienced any significant labor stoppages and we believe that
relations with our employees are satisfactory." — Global-Tech, Form 20-F filed with United States Securities and Exchange
Commission for fiscal year ended March 31, 2012
Global-Tech in China: "One of the Strictest Labor Laws in the
World!"
This is certainly a "Tale of Two Cities" where Global-Tech management states
that the Chinese government’s Labor Contract Law is "considered one of the
strictest labor laws in the world!" But this would come as a shock to
Global-Tech’s over 4,000 workers, who are forced to toil grueling hours, seven
days a week, under brutal sweatshop conditions, where every single labor right
on paper is grossly violated.
China’s Labor Contract Law went into effect on January 1, 2008, and was meant
to "regulate the hours employees may work on a daily and weekly basis; regulate
working conditions such as safety and hygiene; and provide for various social
welfare and employment benefits," all of which is a complete fantasy given the
brutal sweatshop conditions the Global-Tech workers endure.
Global-Tech's Hong Kong Headquarters:
Global-Tech Advanced Innovations Inc.
12/F., Kin Teck Industrial Building
26 Wong Chuk Hang Road
Aberdeen, Hong Kong
Tel.: (852) 2814-0601
Fax: (852) 2873-0591
www.global-webpage.com
About the Institute for Global Labour and Human Rights
The Institute for Global Labour and Human Rights is a non-profit 501(c)(3)
human rights organization dedicated to the promotion and defense of
internationally recognized worker rights in the global economy. Founded in 1981
as the National Labor Committee, the Institute’s research, in-depth reports,
high profile public campaigns and widespread media coverage have been
instrumental in creating the anti-sweatshop movement in the United States and
internationally. The Institute is headquartered in Pittsburgh with regional
offices in Dhaka and San Salvador and research/advocacy partnerships in China,
Bangladesh, India, Jordan, Central America, Mexico and many other countries.
The Institute’s director, Charles Kernaghan, testified before the U.S.
Congressional-Executive Commission on China on July 31, 2012 regarding human and
worker rights abuses in Chinese factories producing for the U.S. and European
market.
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