U.S. Announces Withhold Release Order on Chinese Cotton Products

By Brendan Menapace

The Trump Administration officially announced action against Chinese imports of certain apparel, technology and hair products, citing human rights abuses in China’s Xinjiang region.

As we reported previously when this was speculation, the measure will allow U.S. Customs and Border Protection agents to detain and “partially destroy” products produced by flagged companies.

The announcement differs slightly from the rumors last week, however. Originally, reports claimed that the U.S. could more strictly limit cotton products made in Xinjiang, which likely would trigger retaliation from Beijing and throw a major monkey wrench into the U.S. apparel sector as well.

BREAKING: U.S. bans cotton, hair products, computer components, and some textiles from China's Xinjiang province over forced labor issues. pic.twitter.com/nUaW3WshEW

— CNBC Now (@CNBCnow) September 14, 2020

A Department of Homeland Security official told the New York Times that the cotton measures are still “undergoing further legal analysis,” and that more news will come out soon.

Sources close to the matter told Reuters that Trump Administration officials, such as Treasury Secretary Steven Mnuchin, U.S. Trade Representative Robert Lighthizer and Agriculture Secretary Sonny Purdue voiced their concerns over the more sweeping cotton bans and the potential fallout on the U.S. economy.

For now, the “withhold release order” pertains to products produced at the Lop County No. 4 Vocational Skills Education and Training Center in Xinjiang, which CBP said provides prison labor to nearby manufacturing facilities. It also puts a stop to products produced by Hefei Bitland Information Technology Co Ltd., which in the past has reportedly made computer components for companies as large as HP.

Most notably, this is a problem for the region’s Uighur Muslim minority group, many of whom have been subject to displacement, forced labor, imprisonment and “re-education” practices.

“The system of forced labor is so extensive that there is reason to believe that most cotton-based products linked to the Uighur Region are a product wholly or in part of forced labor,” a petition to CBP from AFL-CIO and Uighur Human Rights Project said.

“These extraordinary human rights violations demand and extraordinary response,” Kenneth T. Cuccinelli II, acting deputy secretary of Homeland Security,” told the Times. “This is modern-day slavery.”

As predicted, the move did incite a response from Beijing, which had historically never taken any trade attack from the U.S. sitting down. A spokesperson for China’s foreign ministry said that the U.S.’s decision would negatively impact global supply chains, and also denied the use of forced labor in Xinjiang facilities.

“This fully exposes the hypocritical faces and sinister intentions of those in the U.S. hoping to curb Xinjiang’s development and progress, and sow Chinese ethnic dissension,” the spokesperson said.

Xinjiang is the epicenter of China’s cotton industry, and companies like Uniqlo, Lacoste, Ralph Lauren, Tommy Hilfiger and Hugo Boss have all used Xinjiang cotton. There was also speculation that Apple had sourced employee uniforms from facilities engaging in human rights-violating manufacturing practices.

Again, this is not an outright ban on Chinese products. Under the withhold release order, Chinese companies importing cotton and other products need to provide proof to U.S. officials that their products were not made with forced labor. This can be done through an audit of manufacturing facilities. If they can’t prove that the products were made ethically, the product is either sent back or seized by CBP.

Given Xinjiang’s place in Chinese cotton exports, however, this will no doubt make a difference. If China does retaliate, too, it could impact U.S. exports. But, for the time being, it’s not as sweeping as once believed.

Though, as we saw with the tariffs and ongoing trade war, economic spats with China can ratchet up quickly.