US says it will block palm oil from large Malaysian producer

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Photo credit A little girl holds palm oil fruit collected from a plantation in Sumatra, Indonesia, Nov. 13, 2017. An Associated Press investigation has found many palm oil workers in Indonesia and neighboring Malaysia endure exploitation, including child labor. (AP Photo/Binsar Bakkara)

The United States will block shipments of palm oil from a major Malaysian producer that feeds into the supply chains of iconic U.S. food and cosmetic brands. It found indicators of forced labor, including concerns about children, along with other abuses such as physical and sexual violence.

The order against FGV Holdings Berhad, one of Malaysia’s largest palm oil companies and a joint-venture partner with American consumer goods giant Procter & Gamble, went into effect Wednesday, said Brenda Smith, executive assistant commissioner at the U.S. Customs and Border Protection’s Office of Trade. The action, announced a week after The Associated Press exposed major labor abuses in Malaysia’s palm oil industry, was triggered by a petition filed last year by nonprofit organizations.

“We would urge the U.S. importing community again to do their due diligence,” Smith said, adding companies should look at their palm oil supply chains. “We would also encourage U.S. consumers to ask questions about where their products come from.”

Malaysia is the world’s second largest producer of palm oil. Together with Indonesia, the two countries dominate the global market, producing 85 percent of the $65 billion supply.

Palm oil and its derivatives from FGV, and closely connected Malaysian-owned Felda, makes its way into the supply chains of major multinationals. They include Nestle, L’Oreal, and Unilever, according to the companies’ most recently published supplier and palm oil mill lists. Several huge Western banks and financial institutions not only pour money directly or indirectly into the palm oil industry, but they hold shares in FGV.

Smith said the agency carried out its own year-long probe and combed through reports from nonprofits and media reports, including the AP’s investigation.

AP reporters interviewed more than 130 former and current workers from eight countries at two dozen palm oil companies — including Felda, which owns about a third of the shares in FGV. They found everything from unpaid wages to outright slavery and allegations of rape, sometimes involving minors. They also found stateless Rohingya Muslims, one of the world’s most persecuted minorities, had been trafficked onto plantations and forced to work.

Many of the problems detailed by Smith mirrored those found by The AP. She said the Customs agency found the 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, excessive overtime, and concerns about potential forced child labor.

FGV issued a statement over the weekend outlining its commitment to human rights, including steps it was taking to make sure its workers have access to their passports and wages. Felda and the Malaysian government did not respond to questions from AP about the findings of its investigation.

“Despite ongoing criticism and allegations against FGV, we will continue with our effort to strengthen our practices to respect human rights and uphold labour standards,” it said. “Our commitment to sustainability is clear, and we are determined to achieve the goals and targets we have set as a responsible and sustainable business.”

FGV Holdings has been under fire for labor abuses in the past and was sanctioned by the global Roundtable on Sustainable Palm Oil certification group two years ago. The association promotes ethical production -- including the treatment of workers -- with members that include growers, buyers, traders, and environmental watchdogs.

Though Asian banks are by far the most robust financiers of the plantations, Western lenders and investment companies have poured billions of dollars into the industry in recent years, allowing for the razing and replanting of ever-expanding tracts of land. Some hold shares in FGV itself — including Vanguard Group, BlackRock, Charles Schwab, State Street Global Advisors, HSBC, and even the California Public Employees’ Retirement System — according to the financial data analysis firm, Eikon.

The AP has not yet received a comment from any of those financial institutions, but when asked more broadly about their ties to the palm oil industry last week most responded by noting their policies vowing to support sustainability practices in the palm oil industry, with many also incorporating human rights into their guidelines.