US Bans Palm Oil Imports From Malaysia’s FGV Berhad, Citing Forced Labor

Shailaja Neelakantan and Noah Lee
Washington and Kuala Lumpur
200930-MY-Palm-harvest1000 A Malaysian worker harvests palm fruits from a plantation in peninsular Malaysia, March 6, 2019.

Updated at 4:33 p.m. ET on 2020-09-30

The United States on Wednesday announced an immediate ban on imports of palm oil and related products from a Malaysian company, saying a year-long investigation had uncovered indications of forced labor in the production process.

The U.S. Customs and Border Protection (CBP) said it would issue an order requiring shipments of palm oil and palm oil products from FGV Holdings Berhad to be detained at ports of entry under a federal law that prohibits the import of goods produced by forced labor.

“We are issuing a Withhold Release Order on all palm oil and palm oil products manufactured by FGV Holdings Berhad,” Brenda Smith, executive assistant commissioner of CBP’s Office of Trade, told a virtual press briefing on Wednesday, referring to one of the world’s largest palm oil companies, in which a Malaysian government agency has a 12.4 percent stake.

She said the order was being issued “due to information we have that forced labor was in their production process.”

Smith said the action came after a year-long investigation of allegations from a variety of sources, including labor rights groups. This is the first time CBP has taken action against a palm oil producer, she added.

“The investigation revealed a number of forced labor indicators, including abuse of vulnerability, deception, restriction of movement, isolation, physical and sexual violence, intimidation and threats, retention of identity documents, withholding of wages, debt bondage, abusive working and living conditions, and excessive overtime. We also have indications that forced child labor is potentially being used in the FGV palm oil production process,” Smith said.

The use of forced labor is not acceptable to the U.S., Smith said.

Palm oil is a common ingredient in products that U.S. consumers encounter every day in grocery and convenience stores. According to U.S. Department of Agriculture reports, palm oil is increasingly found in processed foods, cosmetics, pharmaceuticals, soap and biodiesel.

Malaysia and Indonesia produce about 85 percent of the world’s palm oil, as part of a $65 billion global industry. One of the world’s largest producers, FGV Holdings employs around 30,000 foreign workers and managing about 1 million acres. It reported 13.26 billion ringgit (U.S. $3.1 billion) in revenue in 2019, according to an earnings statement.

U.S. officials did not cite Indonesian palm oil producers on Thursday, although an investigative report published by the Associated Press last week alleged industry abuses “from debt bondage to outright slavery” in producers in both Malaysia and Indonesia.

“We have received allegations around the broader palm oil industry so will continue to pull the thread on any other companies in this industry that we have concerns about,” Smith said.

“We would urge the U.S. importing community to do their due diligence and to ensure that supply chains are clear of forced labor, and we encourage U.S. consumers to ask questions about where their products come from.”

Company response

Following the CBP announcement, FGV Holdings Berhad told BenarNews in Kuala Lumpur that the labor irregularities cited by the U.S. agency were from 2015 and had been remedied.

“FGV has made clear the chain of events which involved FGV contractors that basically happened in 2015 which have since been resolved,” said Azhar Abdul Hamid, the chairman of FGV Holdings Berhad.

”If they [the U.S.] basically wish to prolong this matter that now is no longer relevant, it is their prerogative.”

Hamid was referring to a 2015 Wall Street Journal investigation on labor practices at the company, which was then called Felda Global Ventures. At the time, WSJ reported alleged abuses at the company’s palm oil plantations including forced labor, denial of wages, debt bondage, dangerous working conditions and zero medical care or compensation.

CPB’s Smith said that as far as the agency was concerned, FGV Holdings and Felda Global Ventures were one and the same entity in terms of the scope of the investigation, despite the name change.

In 2018, after conducting its own investigation prompted by the WSJ article, the Roundtable on Sustainable Palm Oil (RSPO) sanctioned the company and suspended its membership. Sanctions were re-imposed on some of the company’s plantations this year, according to reports.

Based in Zurich, the RSPO is a multinational entity that monitors the industry’s ecological impact and labor practices, but is regularly criticized as ineffectual by environmental groups.

New allegations

Meanwhile, an AP investigation published on Sept. 24 alleged “widespread exploitation in the palm oil industry, from debt bondage to outright slavery.”

Reporters interviewed more than 130 current and former workers from two dozen companies across Malaysia and Indonesia, including from FGV Holdings, the news agency said.

“They described various forms of exploitation, with the most serious abuses including child labor, outright slavery and allegations of rape,” it said in a follow-up report.

In response, FGV Holdings issued a statement on Sept. 26 saying it was committed to respecting human rights and upholding labor standards.

“FGV’s sustainability and human rights agenda remain a top priority as we continue to dedicate our energy to enhance our labour practices,” the company’s statement said.

It said it was implementing a long-term plan” to further strengthen various aspects of our labour practices such as our recruitment process, human rights training programmes, working and living conditions, as well as grievance mechanisms, among others.”

Activists blame lax controls

Malaysian and Indonesian activists told BenarNews that workers in the palm oil industry in their countries labor under abysmal conditions, adding the workers are paid poorly, lack health care and live and work in unsafe and unsanitary environments.

The activists blamed the governments of Malaysia and Indonesia, saying they don’t do enough to ensure proper safeguards and standards are in place on palm oil plantations.

Nor are punishments handed out for violations, they said.

Alex Ong, a coordinator at Migrant Care Malaysia, said the governments of both countries need to be serious when investigating allegations of poor labor practices by palm oil companies.

“Identify policy gaps, introduce transparent policy and implementation of standard operating procedures with a carrot-and-stick approach, set aside politics for good governance practices,” Ong told BenarNews.

FGV Holdings “must be transparent and open to public scrutiny,” he said.

Indonesia’s Minister of Manpower, Ida Fauziyah, acknowledged that violations occur in palm oil plantations.

Such breaches “include employers’ failure to comply with regulations on social security, work contracts, wages and the relationship status” of workers’ families,” Ida told BenarNews.

“Social security that has not been implemented, wages that do not comply with regulations, inadequate safety aspects and companies employing children,” are the top violations, she said.

Ida said the Indonesian government, through labor inspectors, “on many occasions” met with and talked to trade unions, laborers and employers “to ensure that rules are followed."

The Indonesian Palm Oil Association, called GAPKI, told BenarNews that it denies allegations of exploitation and labor rights violations, saying its members conduct business activities in accordance with Indonesian law.

“The allegations of labor exploitation and child labor are completely absurd,” said Sumarjono Saragih, director for manpower affairs at GAPKI, in a statement.

Malaysian government officials did not respond to BenarNews requests for comments.

Responding to the AP story, the Malaysian Palm Oil Association said in a statement that the report made serious allegations, which if true, “represent [a] serious violation” of Malaysian employment and immigration law.

The authors of the AP article should offer evidence to the relevant authorities so they can investigate, the association said.

It then blamed palm oil’s competitors such as canola and rapeseed manufacturers and their “financial might” for “incessant attacks on the industry, despite the fact that palm oil plantations are far more sustainably managed today.”

These competitors, the statement said, have a “very real concern that palm can supplant all other edible oils, allowing millions of hectares of agricultural lands in colder climates to return to forest cover.”

Palm oil companies blaming others for “attacks” on them is a familiar and wearisome excuse, according to Hotler Parsaoran, a labor specialist at Sawit Watch which advocates for ecological justice in Indonesia.

“Even if there are findings by labor unions or NGOs, the government always responds by calling them smear campaigns against the palm oil industry and they refuse to follow up or verify to see the real conditions,” Hotler told BenarNews.

Nisha David in Kuala Lumpur and Ronna Nirmala and Ahmad Syamsudin in Jakarta contributed to this report.


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