Chinese and U.S. flags fly near the Bund before the U.S. trade delegation meets their Chinese counterparts for talks in Shanghai, China, July 30, 2019.
Aly Song | Reuters
BEIJING — China's Commerce Ministry said Tuesday it is launching an investigation into Calvin Klein's parent company. PVH Group due to alleged business disruptions in its supply chain in Xinjiang.
The ministry said the investigation was part of its mechanism for creating a list of “unreliable entities.” The list was launched in 2019, shortly after the US blacklisted Huawei. It is China's version of the US Commerce Department's Entity List, which blocks named companies from accessing goods originating in the US.
The U.S. Commerce Department on Monday announced plans to ban the import or sale of cars with certain hardware or software linked to China or Russia.
China's Commerce Ministry did not explain on Tuesday why it is now investigating PVH, but said the U.S. retailer has 30 days to respond. U.S. defense companies that previously landed on the list of “unreliable companies” are no longer allowed to import or export to China.
The Chinese investigation accuses PVH of “targeting suppliers from Xinjiang, disrupting normal transactions with Chinese companies, individuals and others, and taking other discriminatory measures, in violation of the principles of normal market transactions,” according to a translation of the Chinese text by CNBC.
PVH said in a statement to CNBC: “As part of its corporate policy, PVH strictly complies with all relevant laws and regulations in all countries and regions in which we operate. We are in contact with the Chinese Ministry of Commerce and will respond in accordance with relevant regulations. We have no further comment at this time.”
The group, which includes Tommy Hilfiger, is one of several foreign retailers under scrutiny in China over their efforts to distance themselves from alleged forced labor in China's Xinjiang region.
In a July 2022 corporate responsibility report, PVH stated that Xinjiang is one of the regions where no direct or indirect sourcing is allowed.
International sales of Calvin Klein and Tommy Hilfiger fell 4.3 percent year-on-year to $1.38 billion in the quarter ended August 4. The reason for this was a “difficult consumer environment in the Asia-Pacific region, particularly in China and Australia,” PVH said in an earnings release.
These foreign revenues accounted for more than half of PVH's total revenue of $2.07 billion for the quarter.
Xinjiang is home to Uighur Muslims, who have been designated as a repressed ethnic group by the United Nations, the United States, Britain and others. China has repeatedly denied allegations of forced labor and other abuses in Xinjiang. The government says the facilities there, described by the United States, Britain, Canada and human rights groups as internment camps, are actually vocational training centers.
— CNBC's Sonia Heng contributed to this report.