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U.S. bans second Malaysian palm oil giant over forced labor

UPDATED: Thu., Dec. 31, 2020

This photo from Nov. 11, 2020, shows the hands of women who have worked on a palm oil plantation for five generations in Malaysia. U.S. officials said they will ban all shipments of palm oil there after finding indicators of forced labor.  (Associated Press)
This photo from Nov. 11, 2020, shows the hands of women who have worked on a palm oil plantation for five generations in Malaysia. U.S. officials said they will ban all shipments of palm oil there after finding indicators of forced labor. (Associated Press)
By Margie Mason and Robin McDowell Associated Press

U.S. officials said they will ban all shipments of palm oil from one of the world’s biggest producers after finding indicators of forced labor and other abuses on plantations that feed into the supply chains of some of America’s most famous food and cosmetic companies.

The order against Malaysian-owned Sime Darby Plantation Berhad and its local subsidiaries, joint ventures and affiliates followed an intensive months-long investigation by the U.S. Customs and Border Protection’s Office of Trade, said Ana Hinojosa, one of the agency’s executive directors.

Hinojosa said the investigation “reasonably indicates” abuses against workers that included physical and sexual violence, restriction of movement, intimidation and threats, debt bondage, withholding of wages and excessive overtime. Some of the problems appeared to be systemic, occurring on numerous plantations, which stretch across wide swaths of the country, she said.

“Importers should know that there are reputational, financial and legal risks associated with importing goods made by forced labor into the United States,” Hinojosa said in a telephone press briefing.

The order was announced just three months after the federal government slapped the same ban on another Malaysian palm oil giant, FGV Holdings Berhad — the first palm oil company ever targeted by Customs over concerns about forced labor. The U.S. imported $410 million of crude palm oil from Malaysia in fiscal year 2020, representing a third of the total value shipped in.

The bans, triggered by petitions filed by non-profit groups and a law firm, came in the wake of an in-depth investigation by The Associated Press into labor abuses on plantations in Malaysia and neighboring Indonesia, which together produce about 85% of the $65 billion supply of the world’s most consumed vegetable oil. The AP interviewed more than 130 current and former workers from two dozen palm oil companies, including Sime Darby, for its investigation. Reporters found everything from rape and child labor to trafficking and outright slavery on plantations in both countries.

Sime Darby has palm oil plantations covering nearly 1.5 million acres, making it one of Malaysia’s largest producers. It supplies to some of the biggest names in the business, from Cargill to Nestle, Unilever and L’Óreal, according to the companies’ most recently published supplier and palm oil mill lists.

The company issued a press release Thursday saying it has not yet received sufficient information about the allegations that triggered the ban, but was ready to work with the U.S. government and others to address their concerns. It said it is committed to combating forced labor and has implemented robust policies to protect worker’s rights.

“It would be in the interest of all parties, especially our foreign workforce and women employees, if these matters are addressed expeditiously,” the company said.

Palm oil can be found in roughly half the products on supermarket shelves and in most cosmetic brands.

Earlier this month, 25 Democratic lawmakers from the U.S. House Ways and Means Committee cited AP’s investigation in a letter calling for the government to come down harder on the industry in Malaysia and Indonesia, asking Customs and Border Protection if it had considered a blanket ban on imports from those countries.

“In our view, these odious labor practices and their pervasive impact across supply chains highlight the need for an aggressive and effective enforcement strategy,” the letter said.

Hinojosa said the agency’s decision to issue the ban should send an “unambiguous” message to the trade community.

“Consumers have a right to know where the palm oil is coming from and the conditions under which that palm oil is produced and what products that particular palm oil is going into,” she said.

Meanwhile, Duncan Jepson of the anti-trafficking group Liberty Shared, which submitted the petition leading to the Sime Darby ban, filed two additional complaints Wednesday — one to the UK’s Home Office, questioning the company’s disclosure about its protection of human rights under the country’s Modern Slavery Act, and the other to the Malaysian stock exchange, regarding the company’s stated commitments to sustainability. Both complaints questioned the accuracy of Sime Darby’s disclosures in light of the CPB’s findings.

Jepson said the U.S. ban also should be a red flag for Asian and Western financial institutions that have helped support the industry, saying ties to forced labor could have serious consequences for banks and lenders.

Under Wednesday’s order, palm oil products or derivatives traceable to Sime Darby will be detained at U.S. ports. Shipments can be exported if the company is unable to prove that the goods were not produced with forced labor.

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