U.S. action against palm oil tainted with forced labor has triggered a number of palm oil buyers to block Malaysian palm oil companies, FGV Holdings and Sime Darby Plantations, from their supply chains.
The U.S. ban on palm oil imports from FGV and Sime Darby, officially known as a withhold release order (WRO), was issued in response to a Tariff Act complaint filed over a year ago against FGV by Global Labor Justice – International Labor Rights Forum (GLJ – ILRF), Rainforest Action Network, and SumofUs.
Freedom United also launched a global campaign to bring attention to the problem with over 127,000 supporters successfully calling on U.S. Customs and Border Protection to issue a WRO on shipments of FGV palm oil entering the U.S.
FGV and Sime Darby are two of the largest producers of palm oil and have faced numerous allegations of forced labor and exploitation within the production of their palm oil.
U.S. food company, General Mills, has now issued a global “no buy order” for both FGV and Sime Darby. According to Reuters, buyers have also requested their suppliers to cut ties with FGV and Sime Darby.
Companies such as Hershey, Nestlé and Unilever had suspended FGV from their supply chains in 2018 due to their alleged use of forced labor, however, these companies still have links to Sime Darby.
“Customers are very afraid, and very cautious… They are questioning to what extent we are sourcing from them,” said one source whose firm supplies palm oil products to multinational consumer goods manufacturers.
“Companies are fearing the risk to their own reputation if they buy from Sime Darby and FGV,” the source added.
None of the four sources wanted to be identified as they were not authorised to talk to the media.
“We have instructed all of our suppliers globally to remove both Sime Darby and FGV from our supply chain; and have issued ‘no buy orders’ on both suppliers,” General Mills said in an emailed statement to Reuters.
Malaysia and Indonesia together control nearly 85% of the global production of palm oil. Despite Malaysian palm oil’s reputation “as being more sustainable compared to bigger rival Indonesia”, Malaysian palm oil plantations have been linked to forced labor and deforestation.
Palm oil can be found in almost half of all consumer goods including shampoo, chocolate, lipstick and even ice cream – but the environmental and human costs keep piling up.
“We believe our customers recognise our honest commitment to continuous improvement, and our credibility as the world’s largest producer of RSPO-certified sustainable palm oil, accounting for about 17% of total global CSPO supply,” Sime Darby Oils Managing Director Mohd Haris Mohd Arshad said.
One trader commented:
“Buyers are waiting for proof from CBP (the U.S. customs authority) before taking further action… We are making contingency plans to look for alternative suppliers if the situation worsens,”