US Customs placed a detention order on imports of products made by subsidiaries of the world's largest medical glove maker, Malaysia's Top Glove Corp Bhd (TPGC.KL) on Wednesday, an action taken against firms suspected of using forced labor.
The bar on Top Glove products comes at a time when demand for the medical gloves and protective gear has skyrocketed due to the coronavirus pandemic, which has hit the United States harder than any other country.
The US Customs and Border Protection (CBP) website showed Top Glove Sdn Bhd and TG Medical Sdn Bhd were placed on its list on Wednesday but there was no statement explaining the action, though its "withhold and release" orders, detaining imported goods, are specific to forced labor issues.
In a filing to the bourse, Top Glove, which also has production facilities in China and Thailand, confirmed the detention order and said it may be related to foreign labor issues, specifically recruitment fees paid by migrant workers to employment agents.
"We are reaching out to the CBP through our office in US, customers and consultants, to understand the issue better and work towards a speedy resolution of the matter, within an estimated 2 weeks," it said.
Top Glove said it had been bearing all recruitment fees since the start of this year, but it had still to resolve an issue regarding retrospective payment of recruitment fees paid, without its knowldege, by workers to agents before January 2019.
"Over the past few months we have been working on this issue which involves extensive tracing, to establish the correct amount to be paid back to our workers, on behalf of the previous agents," the company said.
A Reuters query reached CBP outside its office hours.
By early afternoon on Thursday, Top Glove's share price had slipped 2.57%, a minor blip after a rise of over 350% this year.
Last year, CBP took similar action against another Malaysian glove maker WRP Asia Pacific Sdn Bhd. The detention order on imports of WRP's goods was lifted in March after remedial action was taken.
Independent migrant worker rights specialist Andy Hall said in a note to reporters on Thursday that forced labor amongst foreign workers in Malaysia's gloves industry can only be addressed and reduced when past recruitment fees and related costs, that hold them in debt bondage, are fully repaid.
"Likewise, in order to ensure no future debt bondage of these workers, ethical recruitment practices or zero cost recruitment policies should be put in place in practice, and not only on paper, if the industry moves ahead to recruit more foreign workers in the future," he said.
World consumption of protective gloves is expected to jump more than 11% to 330 billion pieces this year, two-thirds of which are likely to be supplied by Malaysia, according to the Southeast Asian country's rubber glove manufacturers association.
Top Glove's annual glove production is 78.7 billion pieces, and its 45 factories also make face masks, condoms and dental products. During a results briefing last month, the company said it had achieved unparalleled growth, boosted by demand increase from almost everywhere.