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New China Auditor Drama: Authorities Shut Down Shenzhen Verité After Raid

Chinese authorities have shuttered a U.S. labor auditor’s China arm in the latest salvo amid intensifying tensions between Beijing and the West over forced-labor allegations in the Xinjiang Uyghur Autonomous Region, the Wall Street Journal reported Thursday.

The move to close Shenzhen Verité, an affiliate of the Massachusetts-based Verité, following a raid on its offices in April, could complicate—even impede—efforts by multinational brands to assess and certify their supply chains in the superpower nation, the outlet said. The loss of the Shenzhen company means Verité can no longer conduct its research and assessments in China, which will likely prevent clients such as Asos, Gap and Patagonia from achieving a clear-eyed view of a large segment of their operations in an era where transparency is a growing expectation. Eileen Fisher was also listed on Verité’s website, but a spokesperson for the women’s wear label said the firm isn’t involved with auditing its Chinese supply chain and so the Shenzhen partner’s closure will have “no effect on our work going forward.” Gap and Patagonia declined to comment, and Asos did not immediately respond to an emailed request.

There are signs this is another pointed act of retaliation on the part of Beijing, which previously stoked nationalist fervor to trigger a wave of consumer boycotts against Western brands such as Adidas, Nike and H&M for cutting business relationships in Xinjiang over forced-labor concerns. All of them suffered hits to their bottom lines.

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State-controlled media has also directed its ire at organizations such as the Better Cotton Initiative (BCI), which works with the world’s biggest retailers to source so-called “better” cotton grown with less water, fewer pesticides and higher yields for farmers. The Global Times, a subsidiary of the Chinese Communist Party-run People’s Daily newspaper, has attacked BCI for exiting Xinjiang and furthering the “Xinjiang forced labor narrative.”

In March, the tabloid accused Verité, which it said BCI hired to help it look into the forced-labor claims, of employing only information from “anti-China forces” to allege abuses were taking place. A few months later, the Global Times named Shenzhen Verité as the driving force behind the investigation, which it said it learned of “ exclusively from [the] national security department.” It also quoted alleged Shenzhen Verité whistleblowers who claimed that the organization’s conclusions were flawed and agenda-driven.

A spokesperson for BCI declined to comment on the matter.

The Wall Street Journal said that Chinese security forces took action not long the Global Times mentioned Verité in the March article. Officers ransacked the offices on Shenzhen Verité in the southern city of Shenzhen and froze its bank account. Eight Chinese staffers also endured weeks of interrogation at law-enforcement offices, where they were compelled to remain from 9 a.m. to 5 p.m.

The company’s closure could mark a turning point for human-rights due diligence in China, the reliability of which was already being called into question in parts of the country due to government surveillance and hampered access to factories.

“It certainly represents an escalation, a new front,” Allison Gill, forced labor program director at the Global Labor Justice-International Labor Rights Forum, a Washington, D.C.-based think tank, told Sourcing Journal. “I think and what we’ve seen is an increasing move against supply-chain transparency and accountability, and it does, I think, sharpen the focus on what companies have to do to be sure that they are not implicated in profiting from forced labor.”

This includes mapping out and disengaging with suppliers and sub-suppliers that have production facilities located in Xinjiang, have accepted Chinese government subsidies or have employed workers provided by the government. “If [companies] can’t rely on third-party audits, they have to be prepared to take action,” Gill said.

Last year, several companies that previously performed or participated in labor audits in Xinjiang, including Bureau Veritas in France, TÜV SÜD of Germany and Worldwide Responsible Accredited Production in the United States, announced they would be withdrawing from the region, citing their inability to do a proper job.

“Normal social compliance audits cannot be conducted in the XUAR due to restrictions on the movement of third-party auditors, including restrictions that prevent the necessary amount of access to factories required for auditors to conduct a satisfactory review,” Seth Lennon, communications manager at WRAP, told Sourcing Journal at the time. “As a result, WRAP is not presently performing audits in the XUAR.”

Scrutiny over Xinjiang has reached its peak over the past several years. Human-rights groups say up to 1.8 million Uyghurs, Kazakhs and other Muslim ethnic minorities are being held in detention centers, where they’re tortured and brainwashed as part of a broader campaign of indoctrination and genocide. They note that “graduates” of these camps go on to work within and outside Xinjiang, where they toil under conditions of forced labor as part of a state-sponsored “poverty alleviation” scheme meant to further alienate them from their culture, language and religion.

Last month, the U.S. Senate passed the Uyghur Forced Labor Prevention Act which, if enacted into law, would ban all products—not just cotton, tomatoes and some polysilicon products—from Xinjiang unless importers can prove they weren’t made with forced labor.

“The message to Beijing and any international company that profits from forced labor in Xinjiang is clear: no more,” Senator Marco Rubio, the Florida Republican who introduced the legislation with Democratic Senator Jeff Merkley of Ohio, said at the time. “We will not turn a blind eye to the [Chinese Communist Party’s] ongoing crimes against humanity, and we will not allow corporations a free pass to profit from those horrific abuses.”