On January 1, 2012, the California Transparency in Supply Chains Act of 2010 (SB 657) will go into effect in the State of California. As a result, many companies manufacturing or selling products in California will be required to disclose their efforts (if any) to address the issues of human trafficking and slavery, thereby allowing consumers to make better, more informed choices regarding the products they buy and the companies they choose to support.

Harbor Freight Tools USA, Inc. and its subsidiaries (collectively, "Harbor Freight") strive to achieve and maintain high standards of corporate integrity and ethical behavior. Harbor Freight expects that its suppliers will conduct their businesses not only in a lawful manner but also in compliance with the same high standards of integrity and ethics. In order to establish guidelines for such standards, Harbor Freight has established a Supplier Code of Conduct and Compliance Manual (“Code of Conduct”). See Supplier Code of Conduct Manual. The Code of Conduct sets forth and highlights important legal, ethical, behavioral and other requirements for parties who wish to be Harbor Freight suppliers. Specifically, the Code of Conduct states that suppliers must not support, promote or engage in the practice of slavery or human trafficking, and it requires suppliers to comply with the laws regarding slavery and human trafficking of the country or countries in which they are doing business. Harbor Freight suppliers are further expected to take reasonable and necessary steps to help ensure that their sub-contractors and sub-suppliers conduct business in compliance with the Code of Conduct. In 2012, Harbor Freight will require its suppliers to certify that products comply with the laws regarding slavery and human trafficking of the country or countries in which they are doing business. Suppliers are expected to promptly take corrective action to address any deficiencies identified with respect to compliance with Harbor Freight's Code of Conduct. If a supplier is found to be in violation of the Code of Conduct, Harbor Freight has notified its suppliers that it reserves the right to terminate its relationship with any supplier for failure to comply with this Code of Conduct. In the Code of Conduct, Slavery, Human Trafficking and Child Labor are specifically called out as activities for which Harbor Freight has a zero tolerance policy. In addition, Harbor Freight intends to utilize both internal and independent external resources to inspect its suppliers’ places of business to further ensure compliance with the Code of Conduct.

Harbor Freight also has established internal policies that apply to all Harbor Freight personnel, including employees, officers and directors (collectively, "Employees"). Harbor Freight expects its business partners and contractors to share the general principles applied to its own Employees. Harbor Freight has communicated to its Employees whose duties involve the Harbor Freight Supply Chain that they must comply with all applicable laws and regulations and that our suppliers must comply with this Code of Conduct, including those provisions relating to human trafficking and slavery. If an Employee needs guidance on a legal or ethical question or has witnessed or has knowledge of an illegal or unethical activity, he or she has been instructed to consult with or report the matter to his or her supervisor, senior management, Harbor Freight legal counsel, the Import Compliance Department, the Human Resources Department, the Chief Operating Office, the Chief Financial Officer and/or the Chief Executive Officer, depending on the specific circumstances. All reports of alleged violations will be investigated by Harbor Freight. If the results of an investigation indicate that corrective action is required, the Company will decide the appropriate steps to take, including discipline, dismissal, and possible legal proceedings. If appropriate, the investigation may be turned over to the applicable outside authorities, and outside investigators may assist in the inquiry. Disregard or deliberate ignorance of the law is not tolerated and may lead to disciplinary action.

Harbor Freight takes the issues of slavery and human trafficking very seriously and will continue doing its part by responsibly managing its supply chains in an effort to eradicate human trafficking and slavery.