Amid virus crisis, U.S. bars imports of Malaysia's Top Glove over labour issues

By Liz Lee

KUALA LUMPUR (Reuters) - U.S. Customs placed a detention order on imports of products made by subsidiaries of the world's largest medical glove maker, Malaysia's Top Glove Corp Bhd <TPGC.KL>, an action taken against firms suspected of using forced labour.

The bar on Top Glove products comes at a time when demand for medical gloves and protective gear has skyrocketed due to the coronavirus pandemic, which has hit the United States harder than any other country.

The U.S. Customs and Border Protection (CBP) website showed Top Glove Sdn Bhd and TG Medical Sdn Bhd were placed on its list on Wednesday. Its "withhold release orders" (WRO), detaining imported goods, are specific to forced labour issues.

In an emailed statement, CBP said that through extensive inter-agency consultations it had found evidence of forced labour practices, including debt bondage among other practices in Top Glove's units.

"This WRO sends a clear and direct message to U.S. importers that the illicit, inhumane and exploitative practices of modern day slavery will not be tolerated in U.S. supply chains."

CBP, however, said it was aware of the current critical need for disposable rubber gloves and would continue to allow entry of gloves produced by all other manufacturers. It estimated that the order against Top Glove entities in Malaysia would have no significant impact on total U.S. imports of that type of glove.

Top Glove, which also has factories in China and Thailand, had earlier flagged that the U.S. move might be related specifically to recruitment fees paid by migrant workers to employment agents.

"We are reaching out to the CBP through our office in U.S., customers and consultants, to understand the issue better and work towards a speedy resolution of the matter, within an estimated 2 weeks," it said in a bourse filing.

In an evening conference call, Top Glove bosses told reporters and analysts that shipments from its two units represent half of its U.S. sales, and 12.5% of its group sales. However, the group said other subsidiaries could still sell to the United States and that other countries would easily absorb any returned shipments.

"We continue to ship because we can ship. Worst comes to worst, other countries will take up as well because the order book is more than 100%," Executive Chairman Lim Wee Chai said.

ONE MORE LABOUR ISSUE

Top Glove said it had been bearing all recruitment fees since the start of last year, but still had to resolve an issue regarding retrospective payment of recruitment fees paid, without its knowledge, by workers to agents before January 2019.

"Over the past few months we have been working on this issue, which involves extensive tracing, to establish the correct amount to be paid back to our workers, on behalf of the previous agents," the company said.

Top Glove's share price slipped 2.57% before it temporarily halted trading, a minor blip after a rise of over 350% this year.

Last year, U.S. Customs took similar action against another Malaysian glove maker, WRP Asia Pacific Sdn Bhd. The detention order on imports of WRP's goods was lifted in March after remedial action was taken.

Independent migrant worker rights specialist Andy Hall said in a note to reporters on Thursday that forced foreign labour in Malaysia's gloves industry could only be addressed and reduced when past recruitment fees and related costs, which hold such workers in debt bondage, are fully repaid.

"In order to ensure no future debt bondage of these workers, ethical recruitment practices or zero cost recruitment policies should be put in place in practice, if the industry moves ahead to recruit more foreign workers in the future," he said.

World consumption of protective gloves is expected to jump more than 11% to 330 billion pieces this year, two-thirds of which are likely to be supplied by Malaysia, according to the Southeast Asian country's rubber glove manufacturers group.

(Reporting by Liz Lee; Editing by Simon Cameron-Moore and Mark Heinrich)