US Clears Biggest Oil Palm Grower of Forced Labor Charges

Palm oil trees grow at the United Plantations Bhd oil palm estate in this aerial photograph taken in Perak, Malaysia, on Tuesday, Nov. 12, 2019. Palm oil, used in everything from pizza dough to shampoo, lipstick and biofuels, is an industry on the rise. But the oil is also increasingly under fire, accused of destroying rainforests and peatlands, driving endangered animals like the orangutan, pygmy elephant and Sumatran rhinoceros toward extinction, and exploiting poor plantation workers, who often come from abroad. United Nations Bek-Nielsen says that while there are "rogue players" in the industry, there are those working to clean up its act. Photographer: Joshua Paul/Bloomberg , Bloomberg

Anuradha Raghu, Bloomberg News

Feb 2, 2023

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(Bloomberg) -- The US Customs said Sime Darby Plantation Bhd., the world’s largest oil palm grower, was found to no longer be using forced labor, allowing the country to restart imports from the Malaysian company.

Palm oil and related products linked to Sime Darby were banned from entering the US since January 2022 on findings of forced labor. Since then, the company has provided additional information, and the US Customs and Border Protection said Thursday it has satisfactory evidence to believe that the products are “no longer mined, produced, or manufactured in any part with forced labor.” The new regulation will apply on any merchandise imported on or after Feb. 3, according to the notice. 

The CBP nod and a lifting of the yearlong ban could give some reprieve to Malaysia’s palm oil and rubber-glove industries that have faced intense scrutiny in recent years over allegations of migrant worker abuse.

While the US is not a major customer for the company, the ban was a risk to its reputation and damped investor sentiment. It spurred Cargill Inc., one of the world’s top agricultural traders, to stop purchasing products from Sime Darby. There was also concern other buyers, especially in Europe, would follow suit. 

The CBP statement drove a slump in US prices of soybean oil, palm’s closest substitute, on expectations of stiffer competition between the two edible oils. Benchmark palm oil futures rallied to close 2.7% higher in Kuala Lumpur on Friday, while shares of Sime Darby fell. 

“We are optimistic that the tremendous strides we have made in bolstering the quality of life for our workforce will soon be recognized by the US Customs and Border Protection and that we will be allowed to resume exports to the US,” Sime Darby said in response to questions from Bloomberg News. The company issued a statement late Friday saying the US can resume imports from Sime Darby immediately.

The planter pledged to ensure the well-being of workers. It submitted a report in April to show that its operations are in “full compliance” with US import regulations and international labor standards. The Malaysian government also formed a working committee with the CBP to address the issue. 

“It took us more than 500,000 man hours to undertake our reviews and to revise what we already had in place,” Group Managing Director Mohamad Helmy Othman Basha said. “Our commitment to all our stakeholders is vigilance and a continuing responsibility to produce palm oil that is free of forced labor.”

(Updates throughout with details from US Customs notice and Sime Darby’s statement)

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