An apparel manufacturer that’s produced for Michael Kors and Banana Republic is clapping back at the American government after the former Trump administration blacklisted it last year over “odious” and “unsubstantiated” forced-labor allegations.
The case, filed in a federal court for the District of Columbia, calls into question the extent to which U.S. officials and agencies may have overreached in their haste to chasten China and its businesses over Xinjiang, where experts widely believe—and mounting evidence indicates—that more than 500,000 Uyghurs, Kazakhs and other Turkic Muslim minorities toil under the pretext of “poverty alleviation” in the cotton fields of Xinjiang. The region supplies 85 percent of China’s cotton, which in turn produces one-fifth of the world’s supply of the fiber.
Several nations, including the U.S., have branded China’s Xinjiang scheme as tantamount to “genocide” and U.S. Customs and Border Protection has instituted Withhold Release Orders on goods it believes were made with forced labor.
Esquel Group claims it had little choice but to shutter its twin Mauritius factories in November and “severely” curb operations in both China and Sri Lanka, casting thousands into unemployment in the wake of the “stigma” it suffered when the U.S. Department of Commerce’s Bureau of Industry and Security (BIS), named as a defendant in Tuesday’s lawsuit, placed the Hong Kong garment maker on its “Entity List” in July last year, subjecting the firm to crippling export trade sanctions. The action came just months after the coronavirus pandemic annihilated consumer demand, prompting fashion brands and retailers to freeze or cancel orders and casting garment production and global supply chains into unfettered chaos.
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Last summer, Esquel immediately and forcefully denied it “has ever engaged in the practice of forced labor in Xinjiang or anywhere else in the world,” according to court documents, which said the Trump Administration summarily added the company and its affiliates to the Entity List “without prior notice, without evidence, and without any opportunity” for the producer to defend itself against the Uyghur-centric claims.
What’s more, the lawsuit states, “Esquel has a thoroughly documented, independently audited, and longstanding track record of adherence to ethical labor practices that absolutely bar any use of forced labor.” The apparel manufacturer pointed to its continuous Global Organic Textile Standard certification as evidence of its upstanding labor practices, as well as a May 2019 audit by Hong Kong business risk assessor Elevate that uncovered “no evidence of forced, bonded or prison labor and no evidence of coercion or exploitation” after an “on-site visit and confidential interviews with randomly selected workers, including Uyghur and other ethnic-minority employees.”
Esquel, which also operates in Vietnam and has produced for Ralph Lauren, Tommy Hilfiger and Hugo Boss, further claims its mill’s “highly sophisticated spinning equipment” leaves “no place” for “cheap or forced labor.” Its “reputation as a global leader in sustainable textile manufacturing, built up over many years,” it added, “has been deeply tarnished by the Trump Administration’s reckless labeling.”
And the fallout has been swift and severe, the suit stated, citing “devastating economic consequences.” Gap Inc.’s Banana Republic, Michael Kors, Nike and PVH, which owns Tommy Hilfiger and Calvin Klein (none of which responded to requests for comment), quickly moved to “either pause or terminate” their ties with Esquel when the news broke last summer, documents claimed, while a bank yanked a “previously approved loan” and global suppliers similarly distanced themselves.
Litigation was a last—but necessary—resort.
“Despite engaging with the Department of Commerce’s End-User-Review Committee since September 2020, Esquel has received no meaningful response to its queries or evidence that could explain its inclusion on the Entity List,” said James Tysse, a partner in the Supreme Court and appellate practice at Akin Gump Strauss Hauer & Feld LLP, legal counsel for the Esquel group of companies, namely Changji Esquel Textile Co. Ltd., Esquel Enterprises Limited and Esquel Apparel Inc.
“Esquel could no longer suffer devastating daily reputational and commercial damage and therefore has taken this legal action,” Tysse added in response to a query regarding the timing of the lawsuit, which names Secretary of Commerce Gina Raimondo, BIS Acting Under Secretary Jeremy Pelter, BIS Deputy Assistant Secretary for Export Administration Matthew Borman, BIS End-User Review Committee Chair Joseph Cristofaro, along with the BIS itself, as defendants.
Indeed, the suit cited Esquel’s “good faith” efforts to clarify why the defendants added the employer of 36,000 to the Entity List. “Esquel has also made clear from the outset that it will gladly take action to assure the U.S. government that it is not engaging in any activity targeted by the Entity List,” according to court documents, noting the company’s offer to “submit to further independent audits and unannounced site visits by U.S. government officials to interview Uyghur and other ethnic minority employees privately.”
Esquel alleges that the defendants “acted beyond their authority” when placing the company on the Entity List, which aims to “to prevent certain enumerated harms to U.S. national security and foreign policy, including ‘the proliferation of weapons of mass destruction or of conventional weapons,’ ‘the acquisition of destabilizing numbers or types of conventional weapons,’ and even ‘acts of terrorism,’” documents state.
Esquel, which is petitioning the court for a judicial order vacating the Commerce Department’s actions and preventing it from enforcing the Entity List designation, could not immediately be reached for comment.