Disney Is Okay With Xinjiang, But Fashion Retail May Soon Be Banned From Buying Forced Labor Products

September 10, 2020

By Kenneth Rapoza, CPA Industry Analyst

From H&M to Heinz, companies are now on notice if they are sourcing from Xinjiang, home of the Uyghur Muslim detention facilities Beijing refers to as re-education centers. 

Disney might be okay with filming Mulan in Xinjiang, home to hundreds of thousands of Uyghur Muslims held in detention facilities Beijing calls “re-education camps”, but a group of human rights organizations that includes the AFL-CIO convinced Customs and Border Protection (CBP) that doing some business with Xinjiang must be banned. The CBP has not yet acted on the group’s petition, filed on August 28.

“The Coalition for a Prosperous America is very pleased that the Trump administration is planning to block unlawful cotton, tomato and textile imports from western China,” said Michael Stumo, CEO of CPA. “US law clearly prohibits forced labor products from entering the US market. CBP needs to increasingly focus its resources upon accurately identifying and barring imports that violate human rights and freedoms.”

The Uyghur Human Rights Project petitioned the CBP, warning of forced labor in Xinjiang making products or selling raw materials to companies making everything from bed sheets to ketchup.

“Greedy for profit, major brands have put dollars over human rights. The Tariff Act was designed for cases like this to block goods -- in this case brand name clothes—  from being sold to U.S. consumers making them complicit in gross abuses against the Uyghur people," said Jennifer Rosenbaum, Executive Director of Global Labor Justice- International Labor Rights Forum and a member of the Uyghur Human Rights Project. "Corporate Social Responsibility efforts have again failed.  A regional WRO creates the necessary market consequences for the fast fashion brands who are profiting from forced labor."

Immediately after the news broke regarding the WRO, at least one major fashion retailer, H&M, issued a statement that their Made in China clothing is not made from cotton in Xinjiang, suggesting the industry is now getting nervous.

A WRO is a Withhold Release Order issued by the CBP. If a product is subject to a WRO, it is blocked at the port of entry from going to the buyer. Under US law, it is illegal to import goods into the US that are made wholly or in part by forced labor, which includes convict labor and any form of indentured servitude. When sufficient information is available, CBP may detain goods believed to have been produced with forced labor by issuing a WRO against a company. Importers can either return the detained shipments at any time or submit information to CBP demonstrating that the goods are not in violation of those labor rules.

Petitioners did not single out any particular company for targeting in the WRO and instead recommended a regional ban on Xinjiang, saying it would be “by far the most economically significant action that could be taken.”

Such a move might also influence other countries to do the same.

CBP official Brenda Smith told Reuters the effective import bans would cover the entire supply chains for cotton, from yarn to textiles and apparel, as well as tomatoes, tomato paste and other regional exports. 

But, CBP does not target states, it targets companies and the petitioners were calling on a regional ban. CBP has not yet made their decision.

Xinjiang produces more than 80% of China’s cotton and the US imports around 30% of its apparel from China, which is often made from that cotton, says a report published last October by the Center for Strategic and International Studies.

China exports less than one percent of its cotton, so most of it is used to make clothes and other textiles sold in American fabric stores.  Cotton from Xinjiang is also used to make yarn. Xinjiang is home to one of China’s largest yarn producers and that factory supposedly has hired Uyghurs who have been let out of the detention centers. Xinhua newswire referred to these workers as “re-educated” workers. 

The petitioners said in their letter to CBP Acting Commissioner Mark Morgan that they have “reason  to believe” the prison labor is being used to harvest and process cotton in Xinjiang province, home to millions of Uyghur Muslims and other ethnic minorities, many of whom are in detention camps.

They argued, based on both government and open source reporting from the press, that Xinjiang cotton has been and is  being produced “wholly or in part” with prison labor. This cotton is used to make clothes. Some of those clothes are exported to the United States.

“We note that these actions have also not yet convinced many US apparel brands of the need to extricate their supply chains from Xinjiang (whether direct or indirect) as a matter of urgency,” wrote Josh Zinner, CEO of the Interfaith Center on Corporate Responsibility and a member of the Human Rights Project, along with 10 other groups that signed onto that petition.

In July, the US Departments of State, Commerce, Treasury and Homeland Security warned apparel importers of the dangers of sourcing materials from Xinjiang. There report can be seen here.

Summit Resource International, the wholesaler of Caterpillar-branded clothing, imported jackets and trousers was pointed out in an Axios article in June that showed their gear was coming from Xinjiang Ainuoxin Garment Co. and Jinan Ainuoxin Garment Co.  

Apple was reported to have imported staff uniforms from Esquel Textiles, a company that was put on the Commerce Department’s Entity List in July. 

The CBP has also already issued WROs concerning apparel made in the Uyghur Region with forced labor -- Hetian Taida Apparel Co and HeroVast Group. While these are not household names like Disney filming Mulan in Xinjiang, or H&M saving face for not using cotton sourced by forced labor, the latest move shows the legal risks are mounting for retailers selling clothes made in China.