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U.S. Bans Malaysian Palm Oil Imports Over Forced Labor Allegations

Posted December 31, 2020


The United States yesterday banned all imports of palm oil from one of the world’s biggest producers after finding indicators of forced labor and other human rights abuses on plantations that feed into the supply chains of many U.S. companies.  
CBP Office of Trade Seal, Sime Darby Logo, Palm Tree Plantation
The Withhold Release Order issued on December 30 against Malaysian palm oil giant Sime Darby Plantation Berhad follows an intensive months-long investigation by the U.S. Customs and Border Protection’s Office of Trade.

CBP stated that its investigation into the company “reasonably indicates” systemic abuses against migrant workers that included physical and sexual violence, restriction of movement, intimidation and threats, debt bondage, withholding of wages and excessive overtime.

Federal statute 19 U.S.C. 1307 prohibits the importation of merchandise mined, manufactured, or produced, wholly or in part, by convict labor, forced labor, and/or indentured labor, including forced or indentured child labor.

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Detainment of Shipments


Effective December 30, 2020, CBP will detain at all U.S. ports of entry palm oil and products containing palm oil produced by Sime Darby Plantation Berhad (including its subsidiaries, joint ventures, and affiliated entities in Malaysia).

Note: CBP provides importers of detained shipments with the opportunity to export their goods or demonstrate that the merchandise was not produced with forced labor.

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Background


According to CBP, palm oil is “a common ingredient in products that U.S. consumers encounter every day in grocery and convenience stores,” that is used in a wide range of goods including processed food, pharmaceuticals, cosmetics, and even biodiesel.

Palm oil originates mainly in Malaysia and Indonesia, which together produce about 85% of the $65 billion supply of the world’s most consumed vegetable oil. In recent years, producers in both countries have faced mounting allegations of labor and human rights abuses, in addition to being responsible for wide-scale deforestation and habitat destruction.

In September 2020, CBP issued a separate Withhold Release Order against another Malaysian palm oil producer, FGV Holdings Berhad concerning similar allegations of worker abuse.

In July, Hong Kong-based anti-trafficking group Liberty Shared petitioned the CBP to ban Sime Darby products, citing evidence of labor abuse.

The U.S. imported about $410 million worth of crude palm oil from Malaysia in the fiscal year that ended in September 2020, accounting for just over 30% of total U.S. palm oil imports. Sime Darby says its annual exports to the U.S. total about $5 million and supplies some of the biggest names in the business, from Cargill to Nestle, Unilever and L’Óreal, according to company reports. 

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Sime Darby’s Response


Sime Darby Plantation said it’s currently reviewing CBP’s WRO, which it complained “does not provide sufficient information to allow it to meaningfully address the allegations.” In a statement released today, the company said it was nevertheless looking forward “to receiving pertinent information and working with CBP in order to address their concerns and quickly resolve this matter.”

The company also vowed to continue engaging with Liberty Shared and similar organizations, stating it “is committed to combatting forced labour and has implemented robust policies to protect worker’s rights.” Human rights groups understandably now view these claims as highly suspect in light of the CBP’s findings. 

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Forced Labor Risk Mitigation


A spokesperson for the CBP told the Associated Press that the agency’s latest decision to issue the ban on palm oil should send an “unambiguous” message to the trade community.

Importers need to exercise due diligence to avoid running the risk of their supply chains inadvertently sourcing products (or their derivatives) that may be connected to companies involved with illegal forced labor practices or other human rights abuses.

Tools such as the Department of Labor’s Comply Chain app can help businesses in figuring out how to avoid goods that could be higher in risk. Downstream purchasers should likewise inform themselves regarding where the products they are looking to buy come from.

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Need More Information?


Should you have any questions about this detention order in particular, or more general concerns about mitigating this kind of risk exposure in your supply chain, don’t hesitate to contact one of our knowledgeable trade experts.

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