Gildan Activewear (asi/56842) is suing Haitian contractors Palm Apparel S.A. and Sewing International S.A. after nearly 20 years of working together.

The Counselor Top 40 supplier and publicly traded company alleges that worsening conditions in Haiti have prevented the contractors from fulfilling previously agreed-upon obligations with the activewear supplier. Gildan said the contractors didn’t meet quality standards and failed to comply with Gildan’s supplier Code of Conduct. They also did not comply with Haitian labor laws, deducted employee contributions without remittance and failed to make timely payments to suppliers.

For nearly two decades, Gildan employed Palm Apparel and Sewing International to sew and assemble Gildan’s products at their plants in Haiti, then ship them to Gildan’s manufacturing and distribution facility in Eden, NC. The goods were then sent to Gildan’s customers throughout the United States.

According to the complaint, which Gildan filed in July in North Carolina, repeated factory closures, work stoppages and security-related disruptions caused the contractors to fail to meet their obligations.

In addition to alleging breach of contract, Gildan’s claim also includes declaratory judgment. The company says it suffered over $1 million in damages and is seeking actual damages, attorneys’ fees, interest and more.

Gildan said it terminated the parties’ agreements around May 27, 2025, claiming it did so legally as a result of the alleged breaches. According to the Montreal-based supplier, the contractors have demanded damages due to the termination. Gildan, therefore, is asking the court to rule that its termination of the contract was lawful and that it doesn’t owe the two contractors any damages.

Under the Haitian Hemispheric Opportunity through Partnership Encouragement Act and the Economic Lift Program Extension Act, Haiti has nonreciprocal, duty-free access to U.S. goods for textiles and apparel produced in the Caribbean nation. Congress just extended the deal for an additional two years, along with the African Growth and Opportunity Act, a similar preferential trade agreement that applies to 32 sub-Saharan African countries. It was set to expire last year.

Gildan ranks third on Counselor’s most recent list of top suppliers in the industry, based on estimated 2025 North American promotional products revenue of $901.6 million. As of Aug. 18, Gildan Activewear Inc. (NYSE: GIL) is trading at approximately $55.57.