China said it would investigate US apparel maker PVH Corp for suspected boycotting of cotton sourced from Xinjiang, a probe that could lead to punishment for the parent company of Tommy Hilfiger and Calvin Klein.
The Chinese Ministry of Commerce asked PVH to submit a written response in 30 days on whether it had adopted “discriminative measures” against Xinjiang-related products in the past three years, according to a statement posted on the ministry’s Web site on Tuesday.
If found at fault, PVH could be added to an “unreliable entity list” that prevents offending foreign companies from trading with China, subjects them to fines or revokes their staff’s work permits, according to a 2020 order.
Photo: Reuters
In a separate statement, the ministry said the company is suspected of “boycotting Xinjiang cotton and other products for no reason,” accusing it of damaging Chinese companies’ rights and interests as well as China’s sovereignty, security and development interests.
PVH said in an e-mail that it is in contact with the ministry and “will respond in accordance with the relevant regulations.”
The company said it strictly complies with laws in all countries where it operates and declined to comment further.
A 2022 supply chain report from PVH said that it did not source from Xinjiang either directly or indirectly.
Tommy Hilfiger and Calvin Klein have a presence in China, and PVH still sees the country as “an important growth engine,” executives said on a recent earnings call.
However, its sales growth has suffered “a trajectory change” in China, falling to the high-single digits in the May quarter after a more than 20 percent rise during the fiscal year ending just a few months before, as weakening consumer sentiment persisted. In the most recent quarter, sales turned to a 1 percent decline.
Tommy Hilfiger’s official store on e-commerce platform Tmall posted annual sales of about 310 million yuan (US$44 million) for the 12 months ended last month — a drop of 12 percent year-on-year — according to data provider Hangzhou Zhiyi Technology Co (杭州知衣科技). Calvin Klein posted annual sales of 578 million yuan on its Tmall store for the same period, up 12 percent from a year earlier, according to the data. Tmall is owned by Alibaba Group Holding Ltd (阿里巴巴).
US and European companies have been under pressure to pull away from factories that make clothes and other products in Xinjiang, where labor groups have documented alleged forced labor camps and other poor working conditions. China disputes these claims.
The US enacted the Uyghur Forced Labor Prevention Act in 2021, which bars imported goods partly or wholly made in Xinjiang unless companies can prove the products have no ties to forced labor. Last month, the US expanded the list of Xinjiang-linked entities to 73 as worries over forced labor in China hang over the apparel industry.
China has so far publicly sanctioned five US companies using the entity list, including Lockheed Martin and Raytheon Technologies over their arms sales to Taiwan. However, such moves are largely symbolic as these firms do not do business in the country.
PVH, on the other hand, owns brands that have a large retail presence in the world’s second-largest economy.
“This investigation may target the textile sector, but now this door has been opened, companies in every sector are looking at this case and doing risk assessments of their own,” said Sean Stein, chair of the American Chamber of Commerce in China and the cochair of Covington and Burling’s China public policy practice.
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