China Investigates PVH for ‘Discriminatory Measures’ Over Xinjiang
China has opened an investigation into whether PVH Corp., the parent company of brands such as Calvin Klein and Tommy Hilfiger, has taken “discriminatory measures” against products from its highly controversial Xinjiang Uyghur Autonomous Region.
The country’s Ministry of Commerce said Tuesday that the probe will fall under its Unreliable Entity List mechanism, which it developed in 2019 after the U.S. Department of Commerce placed tech giant Huawei on its Entity List for posing an espionage threat. Similar to the sanctions imbued by its American counterpart, the Unreliable Entity List prevents those named to it from making import and export transactions with China.
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As part of the investigation, PVH must provide documentation and evidence within 30 days that it hasn’t targeted Xinjiang suppliers in violation of the “principles of normal market transactions,” the ministry said in a statement. It also accused PVH of “unjustly boycotting” Xinjiang cotton without proper cause.
“As a matter of company policy, PVH maintains strict compliance with all relevant laws and regulations in all countries and regions in which we operate,” a spokesperson said. “We are in communication with the Chinese Ministry of Commerce and will respond in accordance with the relevant regulations. We have no further comment at this time.”
Like many companies, PVH sought to distance itself from Xinjiang when reports of the internment and forced labor of more than a million Uyghurs and other Turkic Muslims began emerging from the region, which at the time supplied 80 percent of China’s cotton. (It’s since ticked up to 90 percent today.)
In a now-archived statement from 2021—one year before the Uyghur Forced Labor Prevention Act (UFLPA) took effect—the New York-headquartered firm said that it had added Xinjiang to the jurisdictions subjected to its restricted jurisdictions policy in 2019, meaning that licensees are prohibited from producing finished goods in the province. PVH had also by then severed business relationships with any factories and mills that produced garments or fabric in Xinjiang or used cotton grown in the area, it said.
The UFLPA would have made all of this necessary anyway, since the law prevents any products made in whole or in part in Xinjiang from entering the United States unless the importer can prove that forced labor wasn’t involved. An “XUAR global compliance statement” on PVH’s website now says that it follows the laws and regulations that are applicable wherever it does business, including with respect to U.S. policy.
That China would ramp up its counter-attack on the backlash to Xinjiang-made goods in such a forceful yet surgical manner, is “symbolic but deeply concerning,” said Sheng Lu, professor of fashion and apparel studies at the University of Delaware.
Brands such as Adidas, H&M and Nike were slammed with calls for boycotts on China’s social media in 2021 after netizens highlighted their declarations of concern over reports of forced labor in Xinjiang. Some, including PVH, even altered or scrubbed those statements from the Internet for fear that en masse shunning by one of their biggest markets would damage their bottom lines—which they weren’t wrong about. But the movement, though ostensibly state-sanctioned through the role of state media in stoking the flames, was not obviously state-driven.
“The new investigation marks the first time the Chinese government has taken direct action against a fashion company regarding the Xinjiang cotton ban by invoking national laws,” Lu said. “This represents a clear escalation.”
PVH is also an arbitrary choice for retaliation. While it owns two well-known brands—the aforementioned Calvin Klein and Tommy Hilfiger—it’s not among the largest Western fashion purveyors operating in China, Lu said. H&M, Nike, Levi Strauss & Co., The North Face parent VF Corp. and Zara owner Inditex all achieved higher sales in China in 2023, according to Euromonitor, yet their sourcing policies regarding Xinjiang are not significantly different from those of PVH.
Adrian Zenz, a senior fellow in China studies at the Victims of Communism Memorial Foundation, is similarly troubled by the turn of events, calling it a “tit-for-tat move designed to force companies to choose.” He, too, used the word “concerning.”
“This is a concerning development indicating that Beijing is recognizing Western measures over Uyghur forced labor as a long-term challenge that it is moving to tackle,” he added.
Where China expects this to lead amid increasingly fraying Sino-American tensions is anyone’s guess. The regulatory net over forced labor is only getting tighter, with the European Union poised for a more wide-ranging ban of its own next. What this means for PVH’s business in China is another question mark. The company described a “challenging consumer environment in Asia Pacific, particularly in China and Australia,” for the quarter ended Aug. 4, which saw sales fall by 4.3 percent year over year to $1.4 billion.
“Regardless of the investigation’s outcome or any follow-up actions taken by the Chinese government, it is unlikely to change U.S. fashion companies’ practices regarding Xinjiang cotton due to the UFLPA,” Lu said. “Instead, it may prompt U.S. fashion companies to further ‘de-risk’ their sourcing and operations in China, casting an additional shadow on the outlook for the bilateral trade relationship.”
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