“Laundering Cotton”: New Report Exposes Hidden Supply-chain Links to Xinjiang Forced Labor

Posted by | Nov 29, 2021

The next phase is currently underway in the global quest for justice for Uyghurs and other ethnic minorities in Xinjiang subjected to forced labor, one of many alleged human rights abuses in the region. Following mounting evidence of forced labor and factories linked to nearby detention centers, Western government sanctions against Chinese companies and officials complicit in the alleged abuses, and a flurry of public relations statements from companies pledging to cut ties with Xinjiang, researchers are now working to determine whether Xinjiang products made via forced labor have truly been severed from international supply chains, or if governments and companies have deluded themselves and misled consumers by pursuing only partial remedies. 

Thus far, it appears to be the latter. In a groundbreaking report titled “Laundering Cotton: How Xinjiang Cotton is Obscured in International Supply Chains,” Laura Murphy and other researchers from the Helena Kennedy Centre for International Justice at Sheffield Hallam University investigated the ways in which forced-labor-produced cotton and cotton goods from Xinjiang are obfuscated in the global supply chains of over one hundred major international brands and end up on the shelves of American and other retailers, effectively bypassing Western import bans on Xinjiang cotton. An introduction to the report summarized its methodology and main findings: 

The Uyghur Region produces approximately 85% of all of China’s cotton, and in the last several years, China has encouraged the rapid growth of cotton goods manufacturing in the Uyghur Region. 52% of China’s export of raw cotton, yarn, and fabric goes to Bangladesh, Vietnam, Philippines, Hong Kong, Indonesia and Cambodia. Manufacturers in these countries serve as intermediaries in finishing cotton-based apparel, thus obscuring the provenance of the cotton.

To better understand how Xinjiang cotton might be entering into transnational supply chains, we used publicly accessible customs data to investigate five leading textile companies (Huafu Fashion, Lianfa Textiles, Luthai Textiles, Texhong Textiles, and Weiqiao Textiles) to identify some of the routes by which Xinjiang cotton may be reaching international consumers, including through some of China’s top cotton textile export partner countries. A review of state media and corporate disclosures reveal that these five companies have all sourced cotton from the Uyghur Region (at least through the fall of 2020), and most of them have subsidiaries there that have employed state-sponsored labor transfers. Through an analysis of the bills of lading, shipping records, and corporate disclosures of these five companies alone, we identified

  • 53 intermediary manufacturers (from Indonesia, Sri Lanka, Bangladesh, Vietnam, India, Pakistan, Kenya, Ethiopia, China, and Mexico) that purchase unfinished cotton goods from five leading Chinese manufacturers that have sourced Xinjiang cotton, and
  • 103 well-known international brands that are supplied by those intermediaries and are thus at high risk of having Xinjiang cotton in their supply chains.

Our research further identified several individual items of apparel that are currently being sold by international brands that run a high risk of being made of Xinjiang cotton due to the relationships between international intermediary manufacturers and Chinese companies sourcing cotton from the Uyghur Region. [Source]

The Chinese government has made it difficult for companies to scrutinize supply chains and for foreign governments to enforce import bans on Xinjiang cotton. Beyond attempting to counter allegations of forced labor with claims of poverty alleviation and mechanized cotton-picking (the Sheffield Hallam University report debunks these counter-claims in its first section), the CCP has orchestrated state-backed boycotts of Western companies that expressed concern over reports of forced labor in Xinjiang, and has also launched a global social media propaganda campaign to “dispel” those reports. Throughout the past year, the Chinese government has pressured the Better Cotton Initiative, a reputedly independent cotton auditor working with hundreds of major brands, into walking back much of its criticism of forced labor in Xinjiang, and has accelerated plans for a watered-down, competing supply chain initiative based on its own national standards.

Just this week, Eleanor Olcott, Harry Dempsey and Steven Bernard from the Financial Times announced that China has blocked public access to shipping location data, further obscuring exports of forced-labor-produced goods from Xinjiang:

China has blocked public access to shipping location data, citing national security concerns, in another sign of its determination to control sources of sensitive information.

The number of Automatic Identification System (AIS) signals from ships in Chinese waters dropped dramatically from a peak of more than 15m per day in October to just over 1m per day in early November.

The AIS was initially developed to help avoid collisions between vessels and support rescue efforts in the event of a disaster. But it [has] also become a valuable tool to enhance supply chain visibility and for governments to track activity in overseas ports.

[…] The drop-off in AIS data from the first week of November has impacted the ability of shipping companies to track the activity at Chinese ports accurately, said Charlotte Cook, head trade analyst at VesselsValue, a maritime data provider.

[…] AIS data give analysts insights into port activity globally, but China is unique in describing this data as a national security problem. Touros noted that even the stringent European General Data Protection Regulation does not restrict providers from using AIS. [Source]

Spooked by threats of Chinese nationalist boycotts, few international apparel brands have dared to publicly address their use of Xinjiang cotton. Companies such as Fila, Hugo Boss, H&M, Zara, Calvin Klein, and Victoria’s Secret have flip-flopped their stances under pressure, first condemning forced labor in Xinjiang and then scrubbing those statements from their websites. Others, such as Nike and Apple, even lobbied to water down a U.S. Congressional bill that would block all imports from Xinjiang unless companies could prove that their supply chains did not employ forced labor. 

The analysis of the collected corporate responses in the Sheffield Hallam University report demonstrates the inadequacy of existing actions by the private sector. The spectrum of corporate due-diligence is roughly as follows: some companies outright deny or ignore reports of forced labor in Xinjiang; some are content to give lip service to human rights concerns without clarifying their supply chains; some claim to have no factories in Xinjiang; some claim to have no direct suppliers working in or directly sourcing from Xinjiang; and almost none genuinely address the indirect relations they have to forced-labor-produced cotton through their supply chains. The report is adamant that companies no longer have an excuse to ignore or downplay the risks of their involvement in forced labor from Xinjiang:

International brands may be unaware of the Chinese manufacturers their suppliers are sourcing from. This research indicates that they can no longer afford not to know and that desk-based due diligence can serve as an effective route in identifying supply chain risks. Companies interested in identifying intermediary processing of Xinjiang cotton would be wise to begin by scrutinizing the sourcing of any suppliers located in the top export countries for raw cotton and semi-finished cotton goods from China. Companies should be wary of those suppliers that source (directly or indirectly) from the Uyghur Region but claim not to use those materials in the manufacture of particular goods, as it is often exceedingly difficult to prove. 

Both governments and corporations—regardless of their size—can and should identify these export channels and ensure that forced-labor-made goods do not reach consumers.

[…] Traceability: All companies should be required to identify suppliers at every tier of their supply chains down to the raw materials, without exception. Companies should understand the working conditions at all tiers. They should also be required to identify and assess the impact of supplier and sub-supplier business models and strategies, including trading, procurement, and pricing practices. Requesting such information from Tier 1 or Tier 2 suppliers through self-answered questionnaires is insufficient and cannot be trusted on its own to ensure compliance. As these assessments cannot be effectively undertaken in regions with state-sponsored forced-labor regimes, all relationships with sub-suppliers identified as engaging in state-sponsored forced-labor programs should be unconditionally severed. [Source]

Every positive statement adds momentum to the global effort to bring attention to the injustice of forced labor in Xinjiang. While Japan’s Muji has still not cut ties with Xinjiang cotton, several other Japanese apparel makers recently announced they would cease using cotton from the region, in a rare win for business ethics, as Nikkei Asia reported:

Japanese clothing makers, including Sanyo Shokai and TSI Holdings, have decided to stop using Xinjiang cotton, following in the footsteps of Mizuno, a major sports equipment and sportswear company, and others. The moves of Japanese clothing names with clout within the industry could create a ripple effect for the entire textile supply chain.

Sanyo Shokai, which sells clothing under the Paul Stuart, Epoca and Mackintosh Philosophy brands, will stop using Xinjiang cotton, starting in the 2022 spring-summer season. Sanyo Shokai President Shinji Oe has told Nikkei that the company has gathered information on human rights issues in Xinjiang, but has been unable to pin down the facts. “As long as there is doubt, we have no choice but to stop” using Xinjiang cotton, Oe said.

[…] Some big industry players are opting to take no action. Muji brand operator Ryohin Keikaku has decided to continue using Xinjiang cotton in the same volumes as before. “We have been unable to confirm the problem [of forced labor], as far as our investigation is concerned,” the company says. It also pointed to concerns about the likely impact of halting the use of Xinjiang cotton on the local economy. Yamato International, an Osaka-based apparel maker, has decided to continue using only Xinjiang cotton that is “properly managed.” [Source]

Western governments have gradually begun responding to reports of forced labor in Xinjiang. In December 2020, U.S. Customs and Border Protection (CBP) issued a ”Withhold Release Order” on cotton and cotton-based products produced by the Xinjiang Production and Construction Corps (XPCC), the paramilitary-style economic organization that dominates much of Xinjiang. In January 2021, the Trump administration enhanced the order by issuing a total ban on all cotton produced in Xinjiang. That same month, CBP seized a shipment of UNIQLO shirts on the suspicion that they were manufactured in Xinjiang. In July, the U.S. Senate passed a bill to ban the import of all products from Xinjiang on grounds of forced labor; the bill has yet to pass the House of Representatives. In September, European Commission President Ursula von der Leyen announced that the E.U. also had plans to adopt a forced-labor import ban, making implicit reference to Xinjiang. Steven Chase from the Globe and Mail reported that just this month, Canada seized a shipment of Chinese goods deemed to have been made by forced labor, the first such seizure since Canada updated its ban in January:

In March, the Canada Border Services Agency told The Globe and Mail that, since the new rules came into force, it had not seized any imports from China that were made with forced labour.

But on Nov. 12, when The Globe asked again whether the CBSA had seized any Chinese shipments since the mid-2020 prohibition, the agency acknowledged one interception.

CBSA spokesperson Rebecca Purdy told The Globe customs officials had seized a shipment of women’s and children’s clothing that arrived in Quebec from China, on the belief that it was “manufactured or produced wholly or in part by forced labour.” The agency did not disclose the date of the seizure and said confidentiality rules prevented it from identifying the importer. It also said information was only available on interceptions up to Nov. 3.

[…] In 2018, Canada signed the United States-Mexico-Canada Agreement, the successor to the North American Free Trade Agreement. As part of the new trade treaty, Canada vowed to stop the importation of products made with forced labour. It enacted the prohibition in mid-2020 and in early 2021 announced it would be cracking down on such goods from China. [Source]

Many NGOs and activists argue that government actions thus far have been insufficient. NGOs have called for more robust regulation on imports to address the complex ways apparel brands and retailers contribute to forced labor, and dispatched a “Call to Action” urging companies to take responsibility themselves. “All governments around the world should recognise this report as a wake-up call that emphasises the urgency to introduce strong laws to address Uyghur forced labour,” said Chloe Cranston, Business and Human Rights Manager at Anti-Slavery International. The Sheffield Hallam University report highlighted a need for greater government enforcement against companies complicit in forced labor:

Enforceability: Governments must have the tools and staffing adequate for investigating forced labor in all tiers of international supply chains. Investigations should establish both the existence of forced labor and the companies within their jurisdiction that are downstream of those supply chains, without necessitating a victim from that jurisdiction to testify to the crimes. The burden of proof should be on the company instead of a victim. A company need neither intend to exploit laborers nor directly financially benefit from the exploitation to be held responsible. There should be proportionate penalties in addition to remediation—including fines, sanctions, and criminal sentences—for any company found to be directly or indirectly, passively or actively involved in forced labor. International bodies should create clear penalties for both organizations and countries engaging in state-sponsored forced labor. [Source]

Complicating supply chain due-diligence is the fact that Xinjiang-related forced labor taints more than just cotton products. Tomatoes were included in early U.S. bans on Xinjiang products, because 35 percent of global tomato production comes from China, and most of that originates from Xinjiang. Polysilicon, a crucial ingredient in solar panels that is frequently sourced from China, is also strongly linked with forced labor in Xinjiang. 

Moreover, state-backed labor transfer programs that send Uyguhrs and other ethnic minorities from Xinjiang to other Chinese provinces ultimately corrupt the broader supply chain with forced labor. The Sheffield Hallam University report compiled testimonies from 525 victims of these programs who described how they were compelled to work in factories all across China for little to no pay, both in place of and after detention in re-education camps. Shohret Hoshur from Radio Free Asia reported on a recently-revealed labor transfer scheme involving thousands of Uyghurs sent from Xinjiang to Nanjing:

A Chinese job-placement company transferred more than 3,000 Uyghur workers, including girls as young as 16, from the Xinjiang region to factories in other parts of China this year and plans to send thousands more in early 2022, an RFA investigation has shown.

RFA’s Uyghur Service began investigating after a Chinese-language advertisement circulated on Weibo and WeChat said that more than 2,000 Uyghurs — aged 16 to 30, with good Mandarin Chinese skills, and vocational school degrees, the ad said — would be available to work for two years at sites throughout the country. [Source]

It seems highly likely that forced labor will continue to plague international supply chains, given the range of products (both imports and exports) and provinces involved, the fact that many companies are unwilling to seriously address their hidden complicity, and the slow pace at which governments are moving to plug policy loopholes. Many are left wondering what it will take to achieve justice for Uyghurs and other ethnic minorities subjected to these abuses.

 

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