US to seize gloves from Malaysia’s Top Glove over forced labour

The company’s shares slumped after the Customs and Border Protection ordered personnel at American ports of entry to seize its goods made in Malaysia
North America accounts for 22 per cent of Top Glove’s total sales volume

Malaysia

Bloomberg

Published: 2:51pm, 30 Mar, 2021

Why you can trust SCMP

Top Glove Corp.’s stock sank after the US Customs and Border Protection ordered personnel at American ports of entry to seize its gloves made in Malaysia, putting pressure on the world’s biggest gloves maker to improve its labour practices.

The company’s shares tumbled as much as 5 per cent to the lowest level since March 3 on Tuesday in a second day of losses. It’s down 21 per cent this year, the among the biggest decliners on the main equities gauge.

The move is a blow to Top Glove and comes as Malaysia’s main industries – palm oil and gloves – come under intense scrutiny for poor labour practices. The CBP banned imports of Sime Darby Plantation, the world’s largest palm planter in December, citing allegations of forced labour. It took similar action on planter rival FGV Holdings.

The CBP Office of Trade, in consultation with the Treasury Department, said on Monday that it imposed the penalties against the Malaysian firm after having found “sufficient information to believe that Top Glove uses forced labour in the production of disposable gloves.” The order expands a directive last year banning imports from two units of the company.

Top Glove put profits before people, say migrant workers

The Withhold Release Order that CBP issued in July 2020 was based on reasonable but not conclusive information that multiple forced labour indicators exist in Top Glove’s production process, it said.

“Today’s forced labour finding is the result of a months-long CBP investigation aimed at preventing goods made by modern slavery from entering US commerce,” Troy Miller, senior official performing the duties of the CBP Commissioner, said in a statement.

North America accounts for 22 per cent of Top Glove’s total sales volume, Kenanga Investment Bank said in a report dated March 30.

Factories belonging to Top Glove were found to be a major source of Covid-19 infections in Malaysia last year. The government in November ordered the company to shut 28 of its factories in phases after discovering thousands of new cases there, and carried out raids on its dormitories. Its workers hail from countries like Bangladesh and Nepal.

Top Glove said in a statement on Tuesday its US counsels are liaising with CBP representatives to get more clarity and information. It’s unable to ascertain the quantum on financial and operational impacts arising from the order, it added.

01:12

Malaysian rubber glove makers see stocks rally on coronavirus pandemic sales

The company also said a report prepared by an independent international consultant to CBP earlier this month viewed that “further progress” has been made and considering Top Glove’s ongoing actions, the findings did not amount to systemic forced labour.

In October, Top Glove said it had resolved issues highlighted by the US Department of Labor and was seeking an expeditious resolution and revocation of the ban on exporting its products to the country.

The news is an “unfortunate negative” and results in “cloudier earnings certainty and negative investor sentiment,” Gan Huan Wen, an analyst at Hong Leong Investment Bank, said in a report dated Monday. He cut his stock price target to 7 ringgit (US$1.69) from 8.14 (US$1.96) ringgit.

Monday’s finding is the second forced labour finding the CBP has issued in the current financial year. US Customs and Border Protection has ensured the enforcement action against Top Glove “will not have a significant impact on total US imports of disposable gloves,” John Leonard, CBP Acting Executive Assistant Commissioner for Trade, said in the statement.