HLIB Research said the news was an unfortunate negative for Top Glove as all goods found to have been produced by convict, forced or indentured labour will not be permitted to be imported by the US. — Bernama photo
KUCHING: Analysts turned negative on the latest update by the US Customs and Border Protection (US CBP) claiming that certain products by Top Glove Corp Bhd (Top Glove) had been manufactured with the use of forced or indentured labour.
In a notice on Monday, the US CBP alleged that certain disposable gloves had been “produced or manufactured by the rubber glove maker with the use of forced labour, and are being, or are likely to be, imported into the US”.
“This finding applies to any merchandise described in Section II of this notice that is imported on or after March 29, 2021,” the CBP said in the notice. “It also applies to merchandise which has already been imported and has not been released from CBP custody before March 29, 2021.”
Citing Section 307 of the Tariff Act 1930, the US CBP said goods, wares, articles, and merchandise mined, produced, or manufactured wholly or in part in any foreign country by convict labour and/or forced labour under penal sanctions shall not be entitled to entry at any of the ports of the US, and the importation thereof is hereby prohibited.
In July 15 last year, the US CBP had issued a withhold release order on disposable gloves indicated to be manufactured by forced labour in Malaysia by Top Glove.
Top Glove’s yesterday said its US counsels are in the midst of liaising with representatives from the US CBP to obtain clarity on the latest import ban order issued by CBP on all disposable gloves originating from Top Glove factories in Malaysia.
In a filing with Bursa Malaysia, Top Glove said at this juncture, the company was unable to ascertain the quantum of financial and operational impacts arising from the goods seizure.
“The company will take all necessary steps to address the (forced labour) issue and shall make the necessary announcement as appropriate when there are further developments,” it said.
Researchers with Hong Leong Investment Bank Bhd (HLIB Research) said this was an ‘unfortunate negative’ as all goods found to have been produced by convict, forced or indentured labour will not be permitted to be imported by the US.
“Despite this, Top Glove are liaising with the CBP to obtain more clarity on this finding,” it said yesterday. “Since allegations were made against Top Glove in mid-2020, we understand Top Glove have taken extensive remedial action to improve their labour practices, including remediation payments to workers, blacklisting unethical recruitment agents, enhancing labour accommodations and ensuring workers are not tasked with excessive overtime.
“Furthermore, Top Glove have shared that an independent international consultant had concluded on 9 March 2021 that Top Glove’s actions “do not amount systematic forced labour”.”
While this ruling may result in Top Glove being prohibited from exporting product to the US for the time being, HLIB Research noted that Covid-19 cases rebounding recently may provide support for Top Glove’s sales and share price.
From this, AmInvestment Bank Bhd (AmInvestment Bank) estimated that total sales to the US provided roughly 25 per cent of total group sales in FY19.
Additionally, the average selling price (ASP) in the US is estimated to be at a five per cent premium compared to that of other countries.
“While glove demand is projected to remain elevated in the next few years, it is unlikely that the company find viable substitutes for the entire US customer base. This will affect the group’s earnings as glove urgency begins to normalise,” it explained.
“Additionally, this provides local peers as well as China players such as Blue Sail Medical and Intco Medical with additional bargaining power amongst US customers.”