U.S. halts products of glove company

Malaysian firm’s labor issues cited

Top Glove Corp.’s stock sank 4% Tuesday after U.S. Customs and Border Protection ordered personnel at U.S. ports of entry to seize the company’s gloves made in Malaysia, putting pressure on the world’s biggest glove-maker to improve its labor practices.

The move comes as Malaysia’s main industries — palm oil and gloves — face intense scrutiny over poor labor practices. The customs agency in December banned imports of Sime Darby Plantation, the world’s largest palm planter, citing allegations of forced labor. It took similar action on planter rival FGV Holdings.

Top Glove, which is seeking a listing in Hong Kong to bolster its profile with overseas investors, was one of the biggest winners of the global pandemic for much of 2020 until vaccine rollouts sapped its appeal. The customs agency’s order hasn’t derailed the proposed listing, the company said in a Tuesday evening reply to an emailed query.

The Customs and Border Protection Office of Trade, in consultation with the Treasury Department, said Monday that it imposed the penalty against the Malaysian firm after

having found “sufficient information to believe that Top Glove uses forced labor in the production of disposable gloves.” The order expands a directive last year to ban imports from two units of the company.

The Withhold Release Order that the customs agency issued in July was based on reasonable but not conclusive information that multiple forced-labor indicators exist in Top Glove’s production process, Customs and Border Protection said.

“Today’s forced labor finding is the result of a monthslong CBP investigation aimed at preventing goods made by modern slavery from entering U.S. commerce,” Troy Miller, senior official performing the duties of the agency commissioner, said in a statement.

North America accounts for 22% of Top Glove’s sales volume, Kenanga Investment Bank said in a report.

Factories belonging to Top Glove were found to be a major source of covid-19 infections in Malaysia last year. The government in November ordered the company to shut 28 of its factories in phases after discovering thousands of new cases there, and raids were carried out on its dormitories. Its workers hail from countries such as Bangladesh and Nepal.

Top Glove said in a statement Tuesday that its U.S. counsels are working with Customs and Border Protection representatives to get more clarity and information. The company added that it’s unable to ascertain the financial and operational effects arising from the order.

The company also said a report prepared by an independent international consultant to Customs and Border Protection earlier this month said that “further progress” has been made and that, considering Top Glove’s ongoing actions, the findings didn’t amount to systemic forced labor.

In October, Top Glove said it had resolved issues highlighted by the U.S. Department of Labor and was seeking an expeditious resolution and revocation of the ban on exporting its products to the country.

This week’s news is an “unfortunate negative” and results in “cloudier earnings certainty and negative investor sentiment,” Gan Huan Wen, an analyst at Hong Leong Investment Bank Bhd., said in a report dated Monday.

Monday’s move marked the second forced-labor finding the customs agency has issued in the current fiscal year. The agency has ensured that the enforcement action against Top Glove “will not have a significant impact on total U.S. imports of disposable gloves,” John Leonard, the agency’s acting executive assistant commissioner for trade, said in the statement.