A string of multinational companies – including German car giant Volkswagen, Spanish clothier Zara and China-based online retailer Temu – have come under renewed scrutiny this month for allegedly inadequate efforts to determine whether Uyghur forced labor is used in their supply chains.

In Europe, a prominent human rights organization and two other organizations filed a complaint on June 21 with German authorities alleging that Volkswagen, Mercedes-Benz and BMW haven’t taken appropriate measures to prevent or eliminate forced labor in the making of their automobiles.

In the United States, a report from the U.S. House Select Committee on China said that Temu has failed “to maintain even the façade of a meaningful compliance program.”

And Uniqlo parent Fast Retailing and the owner of the Zara clothing chain, Inditex, are the subjects of a lawsuit filed this month by The European Uyghur Institute in Paris and several other nongovernment organizations.

The complaint at the Tribunal Court of Paris alleges that the brands continue to ignore human rights abuses in Xinjiang and have profited from forced labor.

“It’s up to the economic players to show that their products are not sullied by forced labor,” institute’s president, Dilnur Reyhan, told Nikkei Asia.

China has come under harsh international criticism in recent years for its severe rights abuses of the predominantly Muslim Uyghurs, including forced labor.

The U.S. government and several Western parliaments, including the German Bundestag, have declared that the abuses in the Xinjiang Uyghur Autonomous Region in the far western part of China amount to genocide or crimes against humanity.

Clamping down

In response, more Western governments are clamping down on companies whose products and supply chains involve Uyghur forced labor.

Both the German complaint and the U.S. House report cited recent laws passed in their countries aimed at halting Uyghur forced labor.

The June 21 complaint from the Berlin-based organization European Center for Constitutional and Human Rights, or ECCHR, was the first filed regarding the Uyghur issue since the implementation of a new law in January that requires German companies to take appropriate measures to prevent or eliminate forced labor.

The ECCHR, as well as the World Uyghur Congress and the Association of Ethical Shareholders Germany, cited a report from Sheffield Hallam University in the United Kingdom last year that documents the presence of forced labor throughout the entire automobile supply chain in the Uyghur region.

“While companies like Volkswagen may deny their direct use of forced labor, our inquiry focuses on whether they can guarantee that their suppliers refrain from employing Uyghur forced labor,” said Yalqun Ulughyol, a researcher at Sheffield Hallam University.

Volkswagen has a joint venture factory with its Chinese partner SAIC Motor Corp. in Urumqi, the capital of Xinjiang Uyghur Autonomous Region.

BMW and Mercedes-Benz are also connected to forced labor as well through their supply chain, the complaint said.

VW has defended its plant, where workers now perform quality checks on assembled vehicles, saying that it is a typical joint venture operation in China and that there have been no signs of mistreated laborers.

The companies have stated that they strictly enforce human rights standards in their supply chains, but ECCHR said “multiple reports have consistently confirmed that independent factory audits are impossible. Therefore, companies cannot rely on audits to fulfill their human rights due diligence.”

Prompts VW audit

Still, in response to the university’s report, Volkswagen Group CEO Oliver Blum stated on June 21 that the company intends to carry out an independent audit of the Urumqi factory later this year.

Nicolai Laude, the head of Integrity and Sustainability Communication at Volkswagen, told RFA’s Uyghur service that he was unaware of the complaint and couldn’t comment on its specific details.

But he said that Volkswagen rejects “all forms of modern slavery, including forced labor and human trafficking.”

“In cases of severe violations, such as the use of forced labor, if suppliers fail to rectify their actions, contracts with them would be terminated,” he said.

The German Supply Chain Act empowers the country’s Federal Office of Economic and Export Control, or BAFA, to investigate companies that fail to fulfill their obligations in prohibiting forced labor. It allows for the imposition of fines if necessary and even the suspension of government contracts for up to three years.

“The companies have not presented supporting documents proving that they are adequately responding to the risk of forced labor in supplier factories in the Xinjiang Uyghur Autonomous Region,” the ECCHR said in the complaint to BAFA.

Tilman Massa of the Association of Ethical Shareholders, told RFA that there has been “a lack of transparency in the actions of the three German car companies.”

“Even the shareholders in their annual general meetings, they don’t answer our questions about what exactly they are doing in China,” he said. “Officially, they tell us that they fulfill all the human rights due diligence obligations but without saying how exactly.

“So what we hope with the complaint is that the corresponding state authority can use their new powers in the supply chain due diligence law to really investigate what exactly the German car companies are really doing to make sure they don’t have forced labor in their supply chain in China.”

‘Contaminated with forced labor’

Meanwhile, the U.S. House report – “Fast Fashion and the Uyghur Genocide” – said that Temu doesn’t have any system to ensure compliance with the the December 2021 Uyghur Forced Labor Prevention Act, or UFLPA, which blocks the importing of goods produced by forced labor in Xinjiang.

Temu, launched in the United States last September by a Shanghai-based company, offers heavily discounted products on its online platform that are mostly shipped to consumers directly from China.

“American consumers should know that there is an extremely high risk that Temu’s supply chains are contaminated with forced labor,” the June 22 report said.

The report was a follow-up to an initial May report that called for changes to the “de minimis” threshold for customs inspections.

The threshold allows foreign fast-fashion websites like Temu and Shein – a China-backed global fashion e-tailer that’s based in Singapore – to ship their goods direct-to-consumer without being subject to the UFLPA if the package is worth less than $800.

Temu and Shein are likely responsible for more than 30% of all packages shipped to the United States, last week’s report said.

“Despite facilitating millions of purchases by Americans each year, when asked, Temu did not report any compliance or auditing system to independently verify that the tens of thousands of sellers who list on Temu are not selling products produced with Uyghur forced labor,” it said.

“Temu’s current compliance plan relies almost entirely on its China-based third-party sellers that send shipments to the United States with insufficient data to facilitate appropriate customs scrutiny,” it said.

‘Xinjiang cotton’

Temu does require its 80,000 sellers to agree with a “Third Party Code of Conduct” that includes boilerplate language saying that the company has “a zero-tolerance policy” for the use of forced labor. But the language doesn’t mention Xinjiang or the UFLPA, the report said.

The report included a screenshot of an item listed for sale on Temu described as a pendant with “Xinjiang cotton.”

“In response to our inquiry, Temu acknowledged that it does not have a policy in place to prohibit the sale of goods from Xinjiang,” the report said.

The committee said it would continue its efforts to scrutinize the supply chains out of China, as well as “the relevant business practices of Nike, Adidas, Shein, and Temu.”

On Tuesday, Temu posted a position on LinkedIn for a U.S.-based compliance officer who would develop policies and procedures for anti-money laundering, licensing requirements and reporting obligations.

Another posting showed that Temu is also searching for a lawyer to help the company create a protocol for screening merchandise. The job postings were first reported by Reuters.

–RFA report June, 28, 2023
https://www.rfa.org/english/news/uyghur/uyghur-supply-chain-06282023142300.html