On 5th January 2021 the US Customs and Border Protection (CBP) agency seized a shipment of cotton shirts destined for Uniqlo, the global fashion brand. CBP impounded the shipment on the basis that the cotton was suspected of being grown or processed by Xinjiang Production and Construction Corps (XPCC) and was therefore subject to a Withhold Release Order (WRO).
The import of goods made, farmed or mined by forced labour into the US is prohibited and goods that contravene this rule may be seized and the importers fined. All goods imported in the US are subject to this rule, but the CBP typically implements it by issuing WROs about specific goods.
Suspected forced labour
The CBP’s reasoning in denying Uniqlo’s request to release the shirts is informative. The CBP acknowledged that the cotton used to make the shirts was grown outside China but determined that Uniqlo had failed to adequately demonstrate that the cotton was not processed by forced labourers at XPCC facilities. Specifically, the CBP noted that:
· Uniqlo failed to provide production records of the spinning, weaving, dyeing and sewing stages of the manufacturing process.
· The “cutting and laying up” fabric records and the Garment Inspection Daily Report “fails to provide adequate information to substantiate that the production process of the finished garments was completed by the manufacturer or their employees.”
· The Code of Conduct (CoC) Letter was not current(while no further information was provided, we presume that this refers to a letter from the supplier(s) confirming that they adhere to Fast Retailing’s(the owner of Uniqlo) CoC for Production Partners which, among other human rights requirements, prohibits the use of forced labour).
Lessons for companies
CBP’s reasoning contains three key takeaways for all companies importing to the US:
· The CBP will seize even the largest of brand’s imports if it believes they may have been produced in whole or part by forced labour.
· Consistent with its previous communications, it is evident that the CBP expects importers to conduct comprehensive due diligence of supply chains to check for the risk of forced labour. This includes maintaining records throughout the manufacturing process.
· That brands must actively ensure suppliers maintain their commitment to CoCs, a ‘passive’ approach -where suppliers are merely informed of the CoC but not proactively and regularly required to commit to it-is insufficient.
Uniqlo, a major international brand with revenue of £10.7 billion in 2020, is the largest company to date we know of which has had its imports impounded for alleged forced labour links. We expect the trend to continue: Eight days after Uniqlo’s goods were impounded the CBP released a new WRO which prohibits the import of cotton and downstream products from Xinjiang, where 20% of the world’s cotton is grown.
Fast Retailing’s share price fell 4.5% the day the CBP released its findings.
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 The US Government estimates that China grows 23% of the world’s cotton crop and Xinjiang produces some 85% of the national total.