What does the US ban on Chinese cotton mean for procurement?

15 September 2020

Finding alternative suppliers following the US ban on cotton from Xinjiang province in China may be “difficult to achieve” due to the country’s dominance in cotton processing, an analyst has warned.

Ryan Aherin, senior commodities analyst at Verisk Maplecroft, told SM India was the most likely alternative to China for the world’s cotton supply as it produced a similar amount of cotton each year, but “typically exports much less”. 

However, Aherin said: “The bigger question is who is going to process it? China is by far the largest destination in the world for cotton exports to be processed.”

This week, the US Customs and Border Protection (CBP) issued five Withhold Release Orders (WRO) for products that it claimed are “produced with state-sponsored forced labour” in the Xinjiang Uighur Autonomous Region.

The WROs included a range of products made in Xinjiang such as apparel and hair products, as well as cotton that is produced and processed in the region.

Aherin said: “Companies impacted by the US restrictions on Xinjiang would need to set up arrangements with suppliers from other countries to avoid sourcing from Xinjiang, which may be difficult to achieve.”

He added: “The trade war has already offset US exports of raw cotton, with Vietnam taking a greater share of US exports. It’s unlikely that any single country would replace China as a major processor of cotton for the fashion industry, but we’ll probably see countries like Vietnam, Bangladesh, India and Turkey start to take on a greater share of processing.”

He said many alternative processors to China also sourced a lot of cotton from the country.

The US Department of Homeland Security (DHS) announced the bans, claiming the Chinese government was “engaged in systemic human rights abuses” against the Uighur people and other ethnic and religious minorities.

Ken Cuccinelli, acting deputy secretary at the DHS, said: “By taking this action, DHS is combating illegal and inhumane forced labour, a type of modern slavery, used to make goods that the Chinese government then tries to import into the United States. When China attempts to import these goods into our supply chains, it also disadvantages American workers and businesses.”

Brenda Smith, executive assistant commissioner of CBP’s Office of Trade, said: “The series of actions CBP has taken against imports from China demonstrates the pervasive use of unethical and inhumane labour conditions in China, and CBP will not turn a blind eye.

“Allowing goods produced using forced labor into the US supply chain undermines the integrity of our imports. American consumers deserve and demand better.”

Earlier this year, the US government warned firms against doing business with suppliers that rely on the forced labour of Uighur Muslims.

Separately, a coalition of over 180 Uighur rights and civil society groups has urged global apparel brands to end all sourcing from the Uighur region in China within 12 months, after brands such as Adidas, Amazon, H&M, Nike and Uniqlo were linked to Uighur forced labour.

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