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The Chain: FGV Banned from Selling Products to the United States Due to Ongoing Labor Issues, Increasing Reputation Risk

October 6, 2020

On September 30, 2020, the U.S. Customs and Border Protection (CBP) issued a Withhold Release Order (WRO) on palm oil products produced by Malaysian Felda Global Ventures (FGV) over concerns of alleged forced labor issues. FGV is a Bursa Malaysia-listed palm oil company with plantations, milling, and refining facilities. The WRO also covers its joint ventures and subsidiaries, including with IFFCO and P&G.

On November 24, 2019, Grant & Eisenhofer ESG Institute submitted a petition to the CBP that called for a ban on imports of FGV products. As CRR highlighted at that time, the move followed several years of coverage of FGV’s alleged workers’ rights abuses and the suspension of one of its mills and four plantations by the Roundtable on Sustainable Palm Oil (RSPO) in 2018. In response, FGV began taking corrective action, such as making legal recruitments of migrant workers, eliminating passport-detaining policies, and adding the provision of adequate housing and healthcare benefits. However, the Rainforest Action Network pointed out that FGV has a history of faulty reporting. The company said in November 2018 and June 2019 that labor issues had been resolved, but months later the RSPO found contradictory evidence.

In its official statement, the CBP says that its investigations indicate forced labor is still occurring in FGV’s day-to-day operations. After a year-long investigation, the CBP found “abuse of vulnerability, deception, restriction of movement, isolation, physical and sexual violence, intimidation and threats, retention of identity documents, withholding of wages, debt bondage, abusive working and living conditions, and excessive overtime,” along with possible child labor.

The WRO means FGV cannot sell products to the United States. Although the United States accounts for less than five percent of FGV’s sales, the move could cause a ripple effect, leading to other countries reassessing their purchasing agreements with FGV. The decision to ban FGV is a signal to the entire palm oil industry. If stricter sustainability measures are required for access to major markets, some companies could be cut off and will have to look elsewhere for new buyers. There are already concerns in Malaysia that Sime Darby may also be added to the CBP list. On April 20, 2020, Liberty Shared submitted a similar petition to the CBP, also over labor issues. The CBP previously suspended two Malaysian rubber companies, WRP in October 2019 and Top Glove in July 2020. The ban on WRP was lifted in March 2020.

Despite the long history of social and environmental issues, FGV remains in the supply chain of several traders and consumer goods companies with NDPE policies, including AAKADMBunge Loders CroklaanCargill,  Fuji OilIOI, IFFCO,  Itochu CorporationKLKLouis Dreyfus CompanyMusim MasOlamAvonColgate-Palmolive,  DanoneFriesland Campina,  General MillsJohnson & JohnsonKellogg’sL’OréalMarsNestlé, P&GPZ CussonsReckitt BenckiserHersheyUpfield, Unilever, and Vandemoortele. It is unclear whether these buyers will continue to purchase from FGV or whether the reputation risk stemming from this WRO will lead to FGV being increasingly excluded from the NDPE market.

One Response to The Chain: FGV Banned from Selling Products to the United States Due to Ongoing Labor Issues, Increasing Reputation Risk

  1. […] banning FGV’s palm oil products from entering the United States over alleged forced labor issues, the U.S. […]

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