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The Chain: Malaysia’s Sime Darby Plantation Banned From U.S. Markets Over Alleged Forced Labor Issues

January 7, 2021

After banning FGV’s palm oil products from entering the United States over alleged forced labor issues, the U.S. Customs and Border Protection (CBP) agency once again issued a Withhold Release Order (WRO) on palm oil produced by a Malaysian company. This time, the subject is the palm oil plantation owner and trader/refiner Sime Darby. The WRO, which became effective on December 30, 2020, bans palm oil from Sime Darby entering U.S. ports. It covers Sime Darby’s subsidiaries, joint ventures, and affiliates.

The WRO was initiated by an April 2020 petition from legal advocacy organization Liberty Shared to the CBP calling for a ban on palm oil products produced by Sime Darby. In its summary of the petition, the organization highlighted labor abuse issues in Sime Darby’s holdings, ranging from passport retention, unpaid overtime, issues with salary payments, sexual harassment, and unethical employment practices.

In response to the petition, the CBP conducted an investigation into the Sime Darby’s daily operational activities, as well as its subsidiaries, joint ventures, and affiliated companies. The investigation found “strong indications of workers abuse” in the company’s day-to-day operations. Prior to the WRO announcement, Sime Darby issued three separate press releases responding to the petition submitted by Liberty Shared. The first statement, although not directly denying the allegations, implied that the company has made progressive changes toward creating a better working environment for its plantation workers over the years. In the latest press release, Sime Darby claimed it had yet to receive a complete overview of the petition despite its continued efforts to engage with Liberty Shared. According to Sime Darby, the lack of engagement meant it was unable to follow up with appropriate actions.

The prospect of  Sime Darby being banned by the CBP was first floated in October, when media reports identified a Malaysian palm oil company as the possible next subject of a WRO. However, the Roundtable on Sustainable Palm Oil (RSPO), on announcing a new investigation into Sime Darby, claimed it did not find any “red flags” in a previous audit.

The United States is not a significant buyer of Sime Darby’s palm oil, but, as with FGV, the largest threat may be the ripple effect and the possibility of other countries or companies evaluating their purchases from Sime Darby. This could have significant ramifications since Sime Darby is the world’s largest producer of RSPO-certified sustainable palm oil and manages 240 plantation estates and 69 palm oil mills located in Malaysia, Indonesia, PNG, and the Solomon Islands. This decision also increases reputational risk for Malaysia in general after having two palm oil companies banned by CBP (in addition to two rubber companies).

Sime Darby has a No Deforestation, No Peat, No Exploitation (NDPE) policy. Its products appear in the supply chains of many companies with their own NDPE policies, including AAKADMBunge Loders Croklaan, CargillFuji OilIOIIFFCO, Itochu CorporationKLKLouis Dreyfus CompanyOlamAvon, Colgate-Palmolive, DanoneFriesland Campina,  General MillsJohnson &  JohnsonKellogg’sL’Oréal, MarsNestlé, P&GPZ CussonsReckitt BenckiserHersheyUpfield, Unilever, and Vandemoortele.

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