Date: Thursday, May 20, 2021
Source: Sourcing Journal
A shipment of Uniqlo-branded shirts was blocked at the American border by U.S. Customs and Border Protection (CBP) in January over suspicions that they flouted a ban on cotton products produced using forced labor by a state-run paramilitary organization based in the Xinjiang Uyghur Autonomous Region of northwestern China.
An Office of Trade letter dated March 10 said the Port of Los Angeles/Long Beach detained a shipment of men’s shirts imported by the Japanese brand for violating a Withhold Release Order (WRO) on cotton produced by the Xinjiang Production and Construction Corps (XPCC), its subordinates and affiliates, as well as any products made in whole or in part from that cotton, such as textiles and apparel.
CBP had issued the order in December based on information that “reasonably indicates that XPCC and its subordinate and affiliated entities use forced labor, including convict labor, to produce cotton and cotton products,” CBP acting commissioner Mark A. Morgan said at the time. The ban was later rolled into a more sweeping regional sanction on all cotton and cotton products from Xinjiang, though the specific order itself remains in force. The XPCC produces one-third of China’s cotton, employs 12 percent of Xinjiang’s population and generates 17 percent of the region’s gross domestic product.
Uniqlo, the customs document noted, had filed a protest, arguing that because the raw cotton used to produce shirts did not originate from the XPCC or from China, they were not subject to the WRO and should be released.
Though Uniqlo submitted evidence establishing that the raw cotton used to produce the shirts were sourced from suppliers in Australia, Brazil and the United States, the brand failed to provide “substantial evidence” to establish that the entities within the XPCC that processed the cotton into garments “did so without the use of forced labor.” The customs letter pointed out “substantial deficiencies” in the documentation provided, including timecards, wage payment receipts, daily process reports and other records that demonstrated fair and at-will labor. Invoices submitted, it said, did not reflect fabric composition percentages. A code of conduct letter, dated 2016, was also “not current.”
“Although Uniqlo has provided evidence relating to the sale, acquisition, source location, transportation and delivery of the raw cotton used to produce the subject cotton garments, it has not provided any probative evidence to establish that their imported cotton garments were not produced in part by forced labor by the XPCC,” the Office of Trade wrote. “The protestant has not established that the detained cotton garments were not produced in part by forced labor. Accordingly, the subject goods are inadmissible.”
Fast Retailing, Uniqlo’s parent company, did not immediately respond to a request for comment.
Uniqlo was one of the brands embroiled in a social-media maelstrom in March after Chinese netizens dredged up months-old statements by labels such as Adidas, H&M and Nike expressing their concern over reports of forced labor in Xinjiang. Last August, Fast Retailing, which also owns Helmut Lang, J Brand, Princess Tam Tam and Theory, published a statement citing its “zero-tolerance” policy for any human-rights violation, including all forms of forced labor.
The declaration followed a report by the Australian Strategic Policy Institute, a think tank, naming Uniqlo as one in a slew of companies that had benefited, directly or indirectly, from the forced labor of Uyghurs, both within and outside Xinjiang.
“We are aware of reports raising serious concerns on the situation for Uighurs in Xinjiang, China,” the company said. “No Uniqlo product is manufactured in the Xinjiang region. In addition, no Uniqlo production partners subcontract to fabric mills or spinning mills in the region.”
In April, Fast Retailing chairman and CEO Tadashi Yanai said the retailer was keeping an eye on its cotton supply chain to ensure none of its products are made with forced labor in Xinjiang and that it would immediately sever ties with suppliers “if such a problem is found.”
Still, he declined to discuss the ruling Communist Party’s treatment of Uyghurs, Kazakhs and other Turkic Muslim minorities, which a growing number of governments and organizations are dubbing genocide, insisting that he wanted to remain “politically neutral” in operating his business.
China is one of Fast Retailing’s biggest markets. It operates 800 Uniqlo stores in mainland China, or around the same number as in Japan. Its next-largest is South Korea, which has 143 outlets. The United States boasts fewer than 50.
Compared with Adidas, Nike and H&M, which have been battered by the consumer-led boycott, Uniqlo has emerged less bruised, according to Morningstar. Sales data for the brand at Alibaba-owned Tmall, China’s largest business-to-consumer e-commerce platform, showed a 21 percent tumble in revenues in April compared to the same period last year, versus 78 percent for Adidas and 59 percent for Nike.
When asked about Uniqlo at a press briefing in Beijing Wednesday, Foreign Ministry spokesperson Zhao Lijian denied that there was forced labor in Xinjiang, only “voluntary employment and free choice in the labor market.”
“Certain Western politicians and anti-China forces spread lies to suppress certain companies and industries in China under the pretext of human rights, as part of their sinister conspiracy of containing China’s development by disrupting Xinjiang,” he said.
Uniqlo’s case is illustrative of how many companies still lack sufficient responsible sourcing programs for human-rights due diligence at all levels of their supply chains, said Kate Larsen, founder and CEO of SupplyESChange, a sustainability and labor consultancy. “Whether cotton picking, trading and processing or cut and sew, leaders in consumer goods, tech and other sectors [must] monitor risks at raw materials to manufacturing and across all countries,” she told Sourcing Journal.
Businesses, she added, need to better understand the hot spots in their supply chains, as well as invest in the “proper investigation, engagement and verification” of any remediation efforts regarding forced labor and other non-compliance exploitation, in order to deliver on human rights, worker well-being and the United Nations Sustainable Development Goals.