Scots firm faces ruin over 'tainted' cashmere

First it was Microsoft, now it is Scottish jumpers. One of Scotland's largest exporters of cashmere was facing a financial disaster on Thursday after falling foul of America's hard-hitting consumer protection agency.

The American Federal Trade Commission (FTC), which is better known for pursuing Bill Gates's software giant, has turned its attention to Clan Douglas, purveyor of luxury knitwear items.

Rummaging through Clan Douglas's $200 (£140) garments in a US department store, the FTC has discovered a "100 per cent cashmere" jumper which was tainted with "foreign fibres". This could mean a costly recall programme for a company which exports 140,000 jumpers a year to the US.

The FTC, which gained a reputation for tough enforcement after teaming up with the US Department of Justice to seek the break-up of Microsoft, found the rogue garment contained 4 per cent ordinary wool.

Under US trading rules, clothing advertised as "All Cashmere" or "100 per cent Cashmere" like the Clan Douglas range must undergo periodic testing to ensure it consists entirely of the luxury fabric.

An FTC spokesman said: "We have carried out testing of garments available across the US and have found several to carry foreign fibres. It is up to the retailers to put things right."

Clan Douglas has launched a damage-limitation exercise to persuade its retailers it is a victim of circumstances beyond its control. The company, which employs 210 people at its Scottish Borders factory in Hawick, imports its raw yarn – painstakingly combed from the belly of the Cashmere goat – from producers in China.

A spokesman said: "It is, of course, a serious embarrassment. We believe the impurity originated via our suppliers in China after a rogue bale of wool became mixed with the cashmere. We are approaching our retailers in America to explain the situation and will be working with them to resolve the matter."

Clan Douglas, and its sister company Murray Allan, sell about 85 per cent of their output to America in a trade worth about $40m (£28.5m) a year.

The Scottish manufacturer, which is relabelling its remaining US stock to say "95 per cent cashmere, 5 per cent wool" until it can eradicate the problem, is also considering suing its Far East suppliers.