In November 2021, Sheffield Hallem University in the United Kingdom released a report entitled, “Laundering Cotton: How Xinjiang Cotton Is Obscured in International Supply Chains” (hereinafter referred to as the “Report”).1 As the title suggests, the Report attempts to illustrate the means by which cotton produced in the Xinjiang Uyghur Autonomous Region (XUAR) of China allegedly finds its way into the international market and ultimately to consumers despite policies and orders in the consuming countries, most notably the United States, prohibiting the importation of cotton products originating in XUAR on the grounds that such products presumably were made with forced labor.2
The Report utilizes “case studies” of five major Chinese textile companies based on information from media reports and shipping records to illustrate how these companies allegedly “obscure” the origin of XUAR cotton, implying that the companies are engaged in a deliberate scheme to evade policies prohibiting the importation of XUAR cotton products. One of the Report’s case studies is of the Texhong Textile Group (“Texhong”). Texhong vehemently and categorically denies the Report’s insinuation that it is in any way involved in “laundering” XUAR cotton products. Texhong submits this statement to set the record straight. 3
Introduction to Texhong
Texhong is one of the world’s largest producers of cotton yarn, cotton/man-made fiber (MMF) yarn, and fabric made from such yarns. Nearly 80% of Texhong’s operations involve spinning cotton yarn or cotton/MMF yarn. Texhong and its subsidiaries and affiliates own and operate textile plants in Vietnam, Turkey, Mexico and Central America, as well as in China. More than 70% of the cotton utilized in these operations comes from the international market, not from China. Indeed, almost 60% of the cotton used by Texhong and its affiliates comes from the United States. Texhong and its affiliates together are the largest consumer of U.S. cotton in the world, purchasing 10% of total U.S. cotton production.4 The Report nowhere mentions the fact that Texhong is so heavily reliant upon international cotton and U.S. cotton in particular.
Texhong Has Never Been Involved in Forced Labor
We wish to reiterate and clarify the incorrect assertion in the Report in relation to Texhong’s factory in XUAR, Tianmian, participated in forced labor programs. Neither Tianmian nor Texhong has utilized and never will utilize forced labor in any of its operations. Texhong recruits and trains employees independently without interference from other parties. Recruitment is purely based on individual merit and past experience or skill set, regardless of race, gender, age or creed. Moreover, Texhong has never knowingly sourced cotton from others that was produced with forced labor.
Texhong has no need to utilize forced labor. On the contrary, its operations are highly mechanized and largely automated. Its employees are mostly highly-trained technicians who operate and maintain automated spinning and weaving machinery. Months of training are required to produce a technically competent employee. There simply is no need for large numbers of low-skill manual laborers in Texhong’s operations.
The Report asserts that Texhong has purchased cotton from the Xinjiang Production and Construction Corporation (XPCC), which has been identified as being involved in forced labor in the production of cotton in XUAR. On July 31, 2020, the U.S. Treasury Department’s Office of Foreign Assets (OFAC) added XPCC to its Specially Designated Nationals (SDN) list. On November 30, 2020, U.S. Customs and Border Protection issued a WRO, banning the importation of cotton and cotton products from XPCC.
Texhong’s customers, especially those exporting to the United States, informed Texhong that XPCC had been added to the SDN list in 2020, and instructed Texhong to cease providing cotton sourced from XPCC in orders supplied to them. Texhong immediately reviewed its operations, undertook due diligence and ensured it had no business dealings with XPCC. In fact, Texhong already had terminated all dealings with XPCC by mid-2019.
Texhong Has Divested Its Only XUAR Factory
In 2016, Texhong invested in the development of a cotton spinning plant in northern XUAR to be closer to the main cotton-growing region. The factory in XUAR was called Tianmian. As concern increased during 2020-21 over cotton products from XUAR, Texhong decided to divest its Tianmian factory. Texhong signed a contract to sell the Tianmian factory on September 27, 2021, to an unaffiliated company. The sale closed on November 5, 2021. Texhong no longer has any production in XUAR.
Prior to the sale of the Tianmian factory, the vast majority of the cotton used in that plant was sourced in northern Xinjiang, which is where the Tianmian factory is located. According to the Report, cotton production in northern Xinjiang is highly mechanized and does not involve forced labor. The small amount of cotton used in Tianmian that originated in southern Xinjiang was sourced from private companies without forced labor issues.
But even before the sale of the Tianmian factory, the vast majority of the yarn produced by Tianmian was sold to companies in China. Even more importantly, Texhong has always strictly abided by the sourcing instructions of its customers. Apparel companies sourcing yarn or fabric from Texhong to be made into garments for export to the United States have specified that no cotton produced in XUAR be included. Texhong has scrupulously followed such instructions.
Texhong Does Not Supply Products Made with Chinese Cotton to Winnitex
The Report’s case study of Texhong is based on a false premise: i.e., that Texhong uses its “subsidiary” Winnitex to launder XUAR-origin cotton products to the international market. This unsubstantiated assumption is wrong on all counts.5
Winnitex has always been independently managed and operated. Winnitex’s operations are not controlled by Texhong. In particular, Winnitex makes its own independent sourcing decisions. Texhong is advised by Winnitex that all the cotton it uses is from the international market, including the United States, in particular.
In short, the Report’s insinuation that Texhong uses Winnitex to camouflage the origin of XUAR cotton sold into the international market is categorically false.
Conclusions
Texhong has used its best efforts to comply with both its customers’ specifications and with U.S. Government policies concerning forced labor. As concern has grown over the risk that cotton from XUAR may be produced with forced labor, Texhong has (1) conducted due diligence to ensure no contacts with entities alleged to be engaged in forced labor, (2) divested its only plant located in XUAR, and (3) increased its use of international cotton, especially U.S. cotton, further solidifying its position as the largest consumer of U.S. cotton in the world. Having taken these steps to ensure full compliance with its customers’ specifications and U.S. Government policies, Texhong categorically denies that it is engaged in “laundering” XUAR cotton.
Notes
