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Many Chinese fashion suppliers are still unaware of the US ban on Xinjiang cotton, marking a significant risk to American brands just over two weeks after a new law was implemented.
The onus is on American brands to ensure their supply chains are clear of Xinjiang cotton, with risk a $250,000 fine for non-compliance following the Uyghur Forced Labor Prevention Act (UFLPA), which came into effect on 21 June. But of the ten major Chinese fashion suppliers contacted by the Vogue Business team, only two were aware of the ban. In the fashion manufacturing hub of Guangzhou, one manufacturer told Vogue Business that none of its seven major American clients had mentioned the ban and that they had been shipping orders to the US within the past week which included Chinese cotton. Only one manufacturer said it was making changes to its business operations so that American clients can prepare their documents. The manufacturers asked for anonymity to discuss clients.
“In a lot of cases, regulations and policies just don’t get enforced,” says Adam Knight, co-founder of China-focused brand consultancy Tong. “There also may well be some kind of wilful ignorance — suppliers and businesses crossing their fingers that they can get [Xinjiang cotton] out before more stringent checks come in.”
Local suppliers and consumers are less aware of international restrictions on Xinjiang cotton and the consequences for failing to comply partly because of the tensions between the American and Chinese governments over the Xinjiang ban. China denies the forced labour accusation in Xinjiang, as do many local consumers, suppliers and brands, but US authorities seized over 900 shipments from Xinjiang in the last quarter of 2021 under earlier trade restrictions. Before the new law came into force, Chinese Foreign Ministry spokesperson Zhao Lijian urged the US against it, warning it would "seriously disrupt normal cooperation between Chinese and American businesses [and] undermine the stability of global supply chains”.
Still, US brands must reckon with the new law that assumes that any product partly or wholly produced in Xinjiang is linked to the region’s labour camps, where over a million Uyghurs — a predominantly Muslim Turkic-speaking ethnic minority group — have reportedly been detained and forced into work. Under the new law, US border authorities have powers to block or seize goods linked to Xinjiang. Companies will need to maintain documents to ensure that imported products do not have a connection to the region, while those whose products are connected to Xinjiang will need to provide clear evidence to rebut the assumption of forced labour. British and EU brands that export to the US will also need to comply by providing certifications or supply chain details.
Xinjiang cotton accounts for 20 per cent of the global production of cotton and 85 per cent of the cotton that is produced in China, according to the Center for Global Policy. Fashion brands accused of using Xinjiang cotton have firmly denied the claims, but experts are sceptical, pointing out that it is pervasive and hard to trace. Some Xinjiang cotton is even exported to a third country then re-exported to the US or the EU to evade sanctions, according to a report on cotton laundering published in November 2021 by the UK’s Helena Kennedy Centre for International Justice.
Can brands trust their suppliers to know for a fact that their cotton is not sourced from Xinjiang? “It’s going to be very tough for businesses to take [assurances from suppliers] at face value,” says Knight. Some brands are using solutions that offer a molecular breakdown of physical raw materials to trace their origin — similar to a DNA ancestry test — while others are using supply chain traceability platforms to to digitally track suppliers.
However, the incentive for brands and suppliers is still unclear. “It’s all just additional costs at the end of the day. How serious are brands going to be about complying with these regulations when, at the moment, it’s unclear how the US government can actually regulate or how strictly they’re going to enforce it?” says Knight.
For US brands, tracing their supply chains means building trust with suppliers, and incentivising them to share information, says Shameek Ghosh, CEO and co-founder of supply chain traceability platform TrusTrace. “Brands have to start treating suppliers as partners – they cannot think that they’ll just dictate the terms they want to improve their performance. They have to invest in factories to incentivise them.”
The complexities of the supply chain create even more barriers for brands. “We live in an age of globalisation and the fashion supply chain is extremely fragmented. Several intermediaries in Asia use cotton harvested in Xinjiang and brands are sometimes unaware of the provenance of their suppliers’ raw materials,” says Antonello Germano, business analyst at China market research firm Daxue Consulting. “Enhancing supply chain traceability will be essential in order to comply with the US ban and avoid customs blocks.”
However, this is a lengthy process. “In an ideal world, every brand would know which farm their cotton comes from but this is likely to take a few years,” says Ghosh. But, it is worth investing in this now: “Assuming such laws are going to come more and more, brands should make those investments [in gathering data to trace their supply chains] now so that by 2025 or 2026 they’re ready.” Ghosh recommends that brands start by mapping their supply chain and understanding who their supplier for tier one (manufacturers who cut, make and trim the garment), tier two (fabric) and tier three (yarn) before creating a blacklist of any vendors that do not comply with regulations. Ghosh says brands should aim to have traceability to at least tier three within the next two years.
Experts say we’re likely to see brands divesting from Chinese cotton completely to safeguard themselves. “If brands are serious about [avoiding Xinjiang cotton completely] then they need to enter into some kind of transition phase where they seek to buy cotton from elsewhere in the world,” says Knight. “But, I think it’s going to be very tough for brands that are truly committed to complying to still buy Chinese cotton, because it’s going to be really tough to separate the Xinjiang cotton from wider China.”
There is a risk of alienating Chinese suppliers and consumers. “The tightrope being walked for a lot of these brands is that by complying with international norms and signalling that they’re not sourcing from Xinjiang, that puts them on a direct collision course with Chinese consumers,” explains Knight. Brands that have weaker ties to the Chinese consumer population, don’t offer a localised experience, and haven’t invested in relationships with local manufacturers and authorities are likely to face more scrutiny, he adds.
A consumer backlash in China last year over brands like Adidas and Nike who said they no longer use Xinjiang cotton, highlighted the risk. “A lot of domestic Chinese brands apply banners to their e-commerce stores explicitly saying ‘we continue to use Xinjiang cotton.’ It’s become somewhat of a nationalist badge of honour and I don’t see that going away anytime soon,” says Knight.
Experts warn that other countries are likely to follow in the footsteps of the US and develop similar laws. Last month, the European Parliament asked for a legislative proposal on an effective traceability mechanism for goods linked to forced and child labour, which could lead to an import ban on such goods coming into the EU.
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