China investigates Calvin Klein parent company over Xinjiang supply chain issues

Post by : Omar Nasser

China’s Ministry of Commerce has announced a formal investigation into PVH Group, the parent company of Calvin Klein, citing concerns related to alleged disruptions in its Xinjiang supply chain. This investigation is part of China’s “unreliable entities” list mechanism, which was established in 2019 as a countermeasure to the U.S. blacklisting of Chinese tech giant Huawei. The “unreliable entities” list functions similarly to the U.S. Commerce Department’s entity list, which restricts certain companies from accessing U.S. goods and technology.

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While the Ministry did not specify the immediate reasons for targeting PVH Group, it emphasized that the company has a 30-day window to respond to the allegations. Previous companies that have appeared on the unreliable entities list, particularly in the defense sector, have faced prohibitions on imports and exports related to China.

According to translations of the Ministry's statements, PVH is accused of “targeting Xinjiang suppliers in violation of the principles of normal market transactions.” The Ministry claims this has led to disruptions in regular transactions involving Chinese businesses and individuals, along with implementing other discriminatory practices.

In response, PVH Group stated that it adheres strictly to all applicable laws and regulations in all the countries and regions in which it operates. The company confirmed that it is in communication with the Chinese Ministry of Commerce and will comply with relevant regulations, although they refrained from making further comments at this time.

PVH Group, which also owns the Tommy Hilfiger brand, is among several international retail companies that have faced scrutiny in China for their efforts to distance themselves from allegations of forced labor practices in the Xinjiang region. In a corporate responsibility report published in July 2022, PVH indicated that it prohibits any direct or indirect sourcing from Xinjiang.

The investigation comes amid financial challenges for PVH Group, with international revenues for Calvin Klein and Tommy Hilfiger dropping by 4.3% year-on-year to $1.38 billion for the quarter ending August 4. The decline has been attributed to a “challenging consumer environment” in the Asia Pacific region, particularly in China and Australia. This overseas revenue represents over half of PVH's total revenue of $2.07 billion for the same quarter, underscoring the significant impact of market conditions in China on the company’s overall performance.