China issues potential penalties against the proprietor of Calvin Klein due to the boycott of Xinjiang cotton.
Yesterday's declaration from the Commerce Department came right after the Biden administration suggested a potential prohibition on the sale or acquisition of smart vehicles in the USA utilizing particular Chinese or Russian technology due to security concerns at a national level.
In a statement, the department indicated that New York-based PVH (PVH) might be breaking usual market transaction rules by opting out of cotton sourced from China's far western region of Xinjiang. The possibility exists for the entity to be blacklisted, which would result in it being unable to conduct business in China.
At present, five American companies are listed on this list, which was first announced in 2019. Notably, these corporations are primarily defense manufacturers, and their inclusion on the list signifies that they are prohibited from trading, importing, and investing in China.
In a statement addressed to CNN on Wednesday, PVH asserted, "We consistently adhere to all relevant laws and regulations in every nation and region in which we operate. We are in communication with the Chinese Ministry of Commerce and will comply with the necessary regulations."
According to PVH's supplier code of conduct, it prohibits direct or indirect sourcing from Xinjiang. The USA implemented a ban on all products originating from the region in June 2022, following the enactment of a compulsory labor law signed by President Joe Biden the previous year.
A 2018 International Religious Freedom Report by the State Department pointed out that as many as 2 million Uyghurs and members of other Muslim-majority ethnic groups have been apprehended since 2017 in "specially built or transformed detention facilities in Xinjiang." These individuals have been subjected to "forced disappearance, torture, physical abuse, and prolonged detention without trial" as a consequence of their religious beliefs and ethnic background.
China has characterized these facilities as "vocational training centers," and in 2019, claimed they had been dismantled. Officially, China has continuously denied all allegations of human rights violations in Xinjiang.
If blacklisted, PVH, like other prominent international fashion firms, would face significant consequences, as its operations heavily rely on China. Calvin Klein also maintains a physical presence across most Chinese provinces.
In its 2023 annual report, PVH noted, "China is an essential growth driver, recording over 20% growth in local currency for the year."
"We remain committed to increasing overall brand visibility, particularly in China, where both Calvin Klein and Tommy Hilfiger have relatively low market penetration," PVH added.
Western clothing brands have experienced pressure in China over their stance on Xinjiang cotton before. In March 2021, Swedish conglomerate H&M faced delisting from major Chinese e-commerce platforms and was barred by several significant navigation, review, and rating apps. However, the backlash subsided approximately a year later, and their products were restored online.
Joyce Jiang of CNN contributed to this report.
If PVH is blacklisted, it would be unable to conduct business in China due to potential rule violations related to sourcing cotton from Xinjiang. Despite facing potential consequences, China remains a significant growth driver for PVH, as evidenced in their 2023 annual report, where they noted over 20% growth in local currency for the year.
