Chinese and U.S. flags flutter near The Bund, before U.S. trade delegation meet their Chinese counterparts for talks in Shanghai, China July 30, 2019.
Aly Song | Reuters
BEIJING — China’s Ministry of Commerce said Tuesday it was launching a probe into Calvin Klein-parent PVH Group over alleged business disruptions around its Xinjiang supply chain.
The ministry said the investigation is part of its “unreliable entities” list mechanism. Launched in 2019 shortly after the U.S. blacklisted Huawei, the list is China’s version of the U.S. Commerce Department’s entity list that restricts named companies from accessing items originating in the U.S.
The U.S. Commerce Department on Monday announced plans to ban the import or sale of cars with specific hardware or software linked to China or Russia.
China’s Commerce Ministry on Tuesday did not state why it was probing PVH now, but said the U.S. retail group had 30 days to respond. U.S. defense companies that previously landed on the “unreliable entities” list are barred from China-related imports or exports.
The Chinese probe alleges PVH “targeted Xinjiang suppliers in violation of the principles of normal market transactions, with disruptions to normal transactions with Chinese businesses, individuals and other people, along with other discriminatory measures,” according to a CNBC translation of the Chinese text.
PVH said in a statement to CNBC, “As a matter of company policy, PVH maintains strict compliance with all relevant laws and regulations in all countries and regions in which we operate. We are in communication with the Chinese Ministry of Commerce and will respond in accordance with the relevant regulations. We have no further comment at this time.”
The group, which also owns Tommy Hilfiger, is one of several foreign retail companies that have faced scrutiny in China over efforts to distance themselves from alleged forced labor in China’s Xinjiang region.
In a July 2022 corporate responsibility report, PVH said that Xinjiang is one of the regions where no direct or indirect sourcing is permitted.
International revenue for Calvin Klein and Tommy Hilfiger fell by 4.3% year-on-year to $1.38 billion in the quarter ended Aug. 4, dragged down by a “challenging consumer environment in Asia Pacific, particularly in China and Australia,” PVH said in an earnings release.
That overseas revenue accounted for more than half PVH’s total revenue of $2.07 billion for the quarter.
Xinjiang is home to the Uyghur Muslims, who have been identified by the United Nations, United States, United Kingdom and others as a repressed ethnic group. China has repeatedly denied allegations of forced labor and other abuses in Xinjiang. The government says that facilities there that the U.S., U.K., Canada and human rights groups have characterized as internment camps are actually vocational training centers.
—CNBC’s Sonia Heng contributed to this report.
