US ban of FGV's palm oil imports: What's it about

The United States has banned imports of palm oil from Malaysia’s FGV Holdings following an investigation into allegations that it uses forced labour.

What happened?

The U.S. Customs and Border Protection’s (CBP) Office of Trade issued the ban order on Wednesday.

The ban was based on a year-long investigation that revealed forced labour indicators which includes abuse of vulnerability, deception, restriction of movement, isolation, intimidation and physical and sexual violence.

The agency also raised concerns on the use of forced child labour in FGV’s palm oil production

Effective 9/30 at all U.S. ports of entry, @CBP will detain palm oil and palm oil products produced by FGV Holdings Berhad and its subsidiaries and joint ventures due to reasonable indications of #ForcedLabor: https://t.co/Btio4vywwu pic.twitter.com/c33LY38F1b
— CBP Office of Trade (@CBPTradeGov) September 30, 2020

FGV responded by vowing to clear its name and ensured its commitment in upholding labour standards.

The company claimed that it has taken concrete steps over the past several years to improve labour practices and has been in communication with U.S. customs since August 2019.

Following the detention order, the company’s shares tumbled as much as 7.8 per cent on Thursday to the lowest since July.

Why it matters?

Malaysia is the world’s second largest producer of palm oil, next to Indonesia, both producing over 85 per cent of the $65 billion supply.

FGV is the world’s top crude palm oil producer, responsible for over 15 per cent of Malaysia's annual production.

Our nation is also the second biggest shipper of palm oil to the U.S with the country’s use of palm oil increasingly found in processed foods, cosmetics, pharmaceuticals, soap and biodiesel.

The ban came at a time when the palm oil industry suffers a major blow due the COVID-19 pandemic which had caused labour shortages as well as low demand due to restaurants halting their services during the Movement Control Order (MCO).

A worker arranges palm oil fruit bunches on a truck at a factory in Tanjung Karang, Malaysia August 14, 2020 - REUTERS/Lim Huey Teng

The U.S has taken seriously labour rights violations with companies such as Malaysia’s Top Glove, the world’s largest manufacturer of medical gloves, facing similar detention order over abuse of foreign workers since July 15.

While the Malaysian government has yet to act, the issue served as reminder for Malaysian companies to comply with international rules to participate in the global market and to further improve themselves.