Having faced down trade war tariffs, a pandemic that closed factories for months and now a global recession, the Asian apparel industry can breathe a sigh of relief after the United States decided to temporarily shelve a sweeping ban on products containing cotton from China’s Xinjiang province over allegations of widespread forced labour. Instead, the US Customs and Border Protection (CBP) agency imposed restrictions through five separate Withhold Release Orders (WROs) covering cotton, computer parts and hair products made by a group of Xinjiang entities, ending a week of anxiety for the industry during which many feared the entire supply chain would be upended. But with CBP commissioner Mark Morgan saying he was “absolutely confident” the WROs will not be the last issued on Chinese goods, there is every chance that manufacturers will need to remain vigilant. Kenneth Cuccinelli, acting deputy secretary of the Department of Homeland Security, told reporters that the US was still studying a wider ban on Xinjiang goods, including cotton and tomato-based products. “We want to make sure that when we do get challenged – and we assume that we will be challenged, legally – that we will prevail and none of the goods we would ultimately seize under such a WRO would be shaken loose and released into the United States,” Cuccinelli was quoted as saying by Reuters. At a press conference in Beijing on Tuesday, Chinese Foreign Ministry spokesman Wang Wenbin said the US was “sabotaging global supply chains”. Even a couple of months ago, after Xinjiang became more prominent in the US election campaign, and textiles companies in the region began to be sanctioned and added to the US entity list that bans them from buying American goods, clothing companies started to take action in anticipation of complications. For instance, Ranjan Mahtani, CEO of Hong Kong-based EPIC Group, sent letters to suppliers saying the firm would no longer accept Xinjiang cotton. His garment factories in Vietnam, Bangladesh, Ethiopia and Jordan source 25 per cent of their textiles from China. Even though the company uses only fabric endorsed by the Better Cotton Initiative, which early this year stopped issuing licences for Xinjiang products over human rights concerns, the mills sometimes “mix good yarn with bad yarn”, he said. This ban would have been a real game changer. Then if China responded with a ban on American cotton, that’s another problem Ranjan Mahtani “This ban would have been a real game changer. Then if China responded with a ban on American cotton, that’s another problem,” he said, adding some of his Chinese suppliers rely on raw American cotton. “If we’re given an ultimatum or if the ban comes in, we might have to push the button to move – to push out of China.” A widespread ban would have had countless firms looking over their shoulders given Xinjiang’s central role in the complex Asian garment supply chain. “Brands want the government to name and shame the bad guys,” said David Spooner, partner at Washington law firm Barnes & Thornburg and former chief textile and apparel negotiator at the Office of the United States Trade Representative. “After all, they want to avoid suppliers that use forced labour. So, it helps when the government issues an order that actually identifies specific bad actors, as the government did today, instead of issuing a some vague mandate.” But even the partial ban is viewed by some industry experts as a shift in US tactics, emblematic of a deepening in trade tensions. The WROs “mark a move from tariffs on finished products to now include raw materials; we are looking at disruption of the entire supply chain,” said Sally Peng, managing director for export controls at FTI Consulting. Xinjiang has been put under the spotlight in recent months, as the US has pushed for stricter punishments against China for its alleged persecution of Uygurs and Muslim minorities in the region. The US Commerce Department has placed close to 50 Chinese entities on its black list for involvement in alleged abuses, effectively banning American companies from doing business with them without a special licence. On July 31, the US Treasury Department added to its list the Xinjiang Production and Construction Corps (XPCC), which runs entire cities in the region and dominates the cotton industry, setting off a wave of anxiety in the global textiles sector. In an August 9 letter, which has been reviewed by the South China Morning Post , PVH – one of the world’s largest apparel groups home to brands such as Calvin Klein and Tommy Hilfiger – gave suppliers 10 days to audit their supply chains to ensure no links with XPCC. This was no mean feat given the complexity of supply chains and the fact fabric converters and spinning mills are often loath to disclose the sources of their fabric, lest the buyer bypass them. Our manufacturers might not buy directly from Xinjiang, they go through an agent – but beyond asking for them to say they are not using Xinjiang cotton, what are we supposed to do? Felix Chung Kwok-pan “This is a box-ticking exercise, and it is unrealistic,” said one industry executive, speaking anonymously due to the sensitivity of the issue. “It will take three months at least to rid your supply chain of this fabric, and even if you were trying to, it is impossible to trace whether Xinjiang cotton is used in a garment.” Felix Chung Kwok-pan, the member of the Legislative Council of Hong Kong for the Textiles and Garment constituency, said uncertainty over the past week had created headaches among manufacturers. “When we produce cotton products, we certainly buy the raw materials from China,” he said. “Our manufacturers might not buy directly from Xinjiang, they go through an agent – but beyond asking for them to say they are not using Xinjiang cotton, what are we supposed to do?” Patricia Jurewicz, the founder of the Responsible Sourcing Network, said the recent sanctioning of XPCC “created a lot of angst” and left companies scrambling to review their supply chains. “Spinning mills could have cotton from 10 different countries spun together into one yarn. This is a big challenge, the cotton industry is a black hole in this regard,” she said. But companies with linkages to Xinjiang are likely to face more pressure from governments, investors, consumers and civil society to act responsibly, said Surya Deva, an associate professor at City University of Hong Kong and member of the UN Working Group on Business and Human Rights. Some firms might even be forced to withdraw from Xinjiang, though “should be considered as the last option, as this in itself will not improve Uygurs’ human rights”, he said “Despite denials by China, it is clear that most of the companies operating in Xinjiang, or having suppliers there, face serious risks of being implicated in human rights abuses against Uygurs,” Deva said. “The recent WROs are just part of the broader range of push and pull factors at play.” US farm brand John Deere at forefront of surging cotton machinery sales to Xinjiang, as human rights sanctions loom That the US issued only five company-specific WROs suggested a broad, industry-wide ban on Xinjiang cotton was watered down through intergovernmental wrangling. Washington sources said the Office of the US Trade Representative was worried that China would retaliate by banning American cotton, therefore damaging the phase one trade deal, while the US Department of Agriculture and CBP were said to also have pushed-back against a broad, industry-wide WRO. WROs are ordinarily limited to products made by certain companies, but broader orders have been placed on Malian tobacco, cotton from Turkmenistan and gold from the Democratic Republic of Congo. Still, none of these would have covered an industry as significant as Xinjiang cotton, which makes up 80 per cent of China’s output and 20 per cent of the world’s supply. Sheng Lu, an associate professor in the department of fashion and apparel studies at the University of Delaware, said that 24 per cent of America’s textile and apparel imports in 2019 were from China, suggesting around US$11.1 billion worth would be tainted by connection to Xinjiang and therefore affected by the WRO. “However, this is not the end of the story. China exports around US$15 billion cotton and cotton textile products to the world each year. Among these exports, around 65 per cent go to other apparel exporting countries in Asia, such as Bangladesh, Vietnam, the Philippines, and Cambodia,” Lu said, citing data from the United Nations. Therefore a broader ban would have rippled through the downstream supply chain, but been difficult to enforce; once cotton makes its way into a garment, it is nigh on impossible to trace without heavy investment in technology. “Once it goes to auction, one bale of cotton is the same as any other,” said Edwin Keh, the CEO of the Hong Kong Research Institute of Textiles and Apparel.