US Blocks Imports From Malaysian Palm Oil Giant Over Alleged Forced Labor

By Shailaja Neelakantan, Noah Lee and Hadi Azmi

The United States announced an immediate block on imports of palm oil and related products from Malaysian company Sime Darby on Wednesday, saying a months-long investigation had uncovered signs of forced labor in its production process.

Sime Darby, Malaysia’s largest palm oil firm, is the second palm oil producer in the country and third Malaysian corporation to have its products barred by the U.S. Customs and Border Protection (CBP) over the alleged use of forced labor.

“Effective December 30, 2020, the CBP is announcing a Withhold Release Order on palm oil and palm oil products made in Malaysia by Sime Darby Plantation Berhad [SDP],” Ana Hinojosa, the executive director of the customs agency’s Trade Remedy Law Enforcement Directorate, said at a press conference in Washington.

“CBP issued this order after months and months of long investigation into SDP’s production process. The investigation reasonably indicated the presence of all 11 forced labor indicators.”

Hinojosa was referring to an International Labor Organization (ILO) list, which says the use of physical and sexual violence, as well as intimidation and threats, are among practices indicative of forced labor.

A U.S. federal statute prohibits the import of goods manufactured by forced and indentured labor, including child labor. Hinojosa said forced labor was a “form of modern day slavery” and “unfair to consumers who may unknowingly purchase such goods.”

For instance, palm oil is a common ingredient in products that American consumers can easily shop for at grocery and convenience stores. Palm oil can be found in processed foods, cosmetics, pharmaceuticals, soap and biodiesel, according to reports by the U.S. Department of Agriculture.

“This Withhold Release Order demonstrates how essential it is for Americans to research the origins of the everyday products that they purchase,” CBP Acting Commissioner Mark A. Morgan said in a statement Wednesday.

“American consumers can help end modern slavery by choosing to buy products they know are ethically and humanely sourced.”

Malaysia and neighboring Indonesia produce about 85 percent of the world’s palm oil, as part of a U.S. $65 billion global industry.

The United States imported $410 million of crude palm oil products in fiscal 2020 from Malaysia, CBP said. That comprises 30 percent of crude palm oil imports into the U.S.

Sime Darby is Malaysia’s biggest palm oil producer based on plantation area. In November, the company was among those named in an investigative report by the Associated Press news agency that detailed allegations of rape and other abuses against workers at palm oil plantations.

The CBP said it began investigating Sime Darby’s labor practices after it received information from several sources who alleged forced labor.

The CBP generally does not contact companies being investigated, Hinojosa said.

“Generally we receive information that there may be forced labor and we conduct an investigation. Those investigations are law enforcement sensitive and we do not engage subjects of the investigation,” she said.

BenarNews contacted Sime Darby officials on Wednesday for comment on the CBP’s order, but they declined to comment immediately, saying the firm may issue a statement later.

‘Not just a problem for palm oil and glove industries’

The CBP blocked imports of products from Malaysian palm oil producer FGV Holdings Berhad and the world’s largest rubber glove manufacturer Top Glove, in September and July, respectively, saying those firms used forced labor on their plantations.

The labor-intensive plantation industry in Malaysia relies heavily on migrant workers, mainly from Bangladesh, India, Indonesia, Myanmar and Nepal. The palm oil industry in Malaysia employs more than 300,000 migrant workers, according to the Reuters news agency.

The CBP found that there was a higher chance of forced labor in industries and countries with large numbers of migrant workers, Hinojosa said.

“We certainly have found issues of higher risk of forced labor in areas and countries where there is a high reliance on migrant workforces. The CBP asks that those governments pay attention to whether these workers’ rights are being protected. They are a high-risk group,” she said.

Meanwhile, the ban on products from FGV Holdings and Top Glove still stands. The CBP said that since it blocked the companies’ products it has had conversations with both companies on the labor issues.

“But the Withhold Release Order stays in effect until the entity takes proactive steps to remediate all identified force labor indicators. In order for an order to be modified, any company named in it needs to have satisfactorily remediated all forced labor indicators,” Hinojosa said.

In October, FGV Holdings told BenarNews that the labor irregularities cited by the U.S. agency were from 2015 and had been remedied.

The company said that among several measures, it had invested approximately 350 million ringgit (U.S. $84.3 million) during the past three years to upgrade housing facilities and construct new residences on its plantations nationwide.

After the U.S. block on FGV Berhad’s products, Malaysia’s government said in October that it would act against companies that violate labor laws. It also said it would send a comprehensive report on the situation in the Malaysian palm oil sector to the United States to avoid more American restrictions on the commodities.

Human Resources Minister M. Saravanan had said then he would ask his officers to look into the situation at FGV Holdings that led to CPB blocking the firm’s palm oil products.

“It [action] is long overdue, action will be taken,” Saravanan had said, adding that the ban on FGV was of great concern to the government.

“At the moment the country relies very much on the export [of goods], especially palm oil, for our revenue and it [the ban] is not a good sign for the country.”

In August, Top Glove, said that it had begun compensating migrant workers in response to the U.S. import ban on its products.

 The compensation was for the fees migrant workers are forced to pay to recruiters to find jobs. Because of these high fees, workers often become beholden to their employers, and in extreme cases workers are held in debt bondage.

 U.S. customs officials had said they had evidence of debt bondage, excessive overtime, retention of identification documents and abusive working and living conditions at Top Glove.

 The glove maker said it had paid 4.4 million ringgit (U.S. $1 million dollars) of 53 million ringgit ($12.6 million) in “remediation fees,” as part of efforts to resolve the issue.

 Andy Hall, a noted labor rights activist, said the CBP would expect recruitment fees to be reimbursed to migrant workers in palm oil and rubber industries, because debt bondage is a major factor in the agency’s decision making.

“There has not been any commitment by the Malaysian palm oil industry and its major actors like FGV/SDP as far as I am aware to remediate migrant worker’s exorbitant recruitment fees. Unfortunately, the industry didn’t take seriously the sanctions against the gloves industry, nor the sanctions against FGV,” Hall told BenarNews.

The Malaysian Palm Oil Association, for its part, had said in the past that western countries discriminate against palm oil manufacturers.

In a statement in September, the association blamed palm oil’s competitors such as canola and rapeseed manufacturers and their “financial might” for “incessant attacks on the industry, despite the fact that palm oil plantations are far more sustainably managed today.”

When asked to comment on this charge, the CBP’s Hinojosa denied any discrimination toward palm oil producers.

“We investigate allegations of forced labor in a wide variety of products as evidenced by the 13 Withhold Release Orders we issued in the last fiscal year in a wide variety of products such as garments, hair products and cotton products,” Hinojosa said.