Boohoo’s share price slid 5 percent after reports emerged Tuesday that the fast-fashion e-tailer could face an import ban by U.S. authorities over its alleged use of slave labor in its supply chain.
Sky News said U.S. Customs and Border Protection (CBP) has “seen enough evidence” to launch an investigation after receiving a set of petitions lobbying for the exclusion of apparel and apparel-related products “produced wholly or in part by forced labor” by factories operating in the area of Leicester East in England and sold by Boohoo and its owned and affiliated companies.
“It is estimated by a number of sources that Boohoo draws more than 50 percent of its supply chain from a single area of the city in Leicester in the U.K., Leicester East,” campaign group Liberty Shared wrote in the petitions. “Apparel businesses in Leicester East have a long and well-researched history of worker abuse which has come under close scrutiny by investigative journalists, civil society, academics, law enforcement and the U.K. government more broadly during the past decade, as fast fashion sold through online platforms has achieved rapid success.”
Boohoo, which also owns the PrettyLittleThing, Nasty Gal, Karen Millen and Oasis brands, relies on the U.S. market for more than one-fifth of its revenue. In 2020, the company raked in 263.6 million pounds ($368.3 million) from American shoppers, a 59 percent increase from the year before.
Federal statute 19 U.S.C. 1307 prohibits the importation of merchandise mined, manufactured or produced, wholly or in part, by forced labor, including convict labor, forced child labor and indentured labor. Such merchandise is subject to exclusion and/or seizure, as has been the case with goods coming from Xinjiang, and could lead to criminal charges against the importer.
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CBP did not immediately respond to a request for comment.
Boohoo says it hasn’t received notice of any investigation by CBP. “We are confident in the actions that we are taking to ensure that all of the group’s products meet and exceed the CBP criteria on preventing the product of forced labor entering the U.S.,” it said in a statement. “We will work with any competent authority to assure them that products from our supply chain meet the required standard.”
“Over the past eight months the group has been working closely with U.K. enforcement bodies,” Boohoo added. “If the group were to discover any suggestion of modern-day slavery it would immediately disclose this to the relevant authorities.”
Boohoo came under scrutiny last June after a series of exposés revealed unsafe and exploitative conditions at its supplier factories in Leicester, which experienced a localized spike in the number of Covid-19 cases amid Britain’s first wave of lockdowns. A third-party audit commissioned by the company later that year concluded that these reports were “substantially true” and that the company’s own monitoring of the “many failings in the Leicester supply chain” proved “inadequate” because of “weak corporate governance.” While there was no evidence that the group committed any criminal offenses, the report noted, “Boohoo has not felt any real sense of responsibility for the factory workers in Leicester and the reason is a very human one: it is because they are largely invisible to them.”
In November, Boohoo tapped retired judge Brian Leveson and accounting giant KPMG to oversee its “Agenda for Change” initiative to implement the recommendations from the independent review, such as improved supplier audit and compliance procedures. Shortly after his appointment, Leveson called Boohoo’s efforts to conduct greater due diligence a “work in progress.”