HK apparel giant Esquel Group sues US govt over blacklisting, says reputation harmed

Hong Kong-based textile and apparel manufacturer Esquel Group has filed a lawsuit in the United States district court seeking relief from the economic and reputational harms caused by the placement of its subsidiary, Changji Esquel on the US Entity List.

It said that under the prior US administration, Changji Esquel was added to the Entity List without notice and with no supporting evidence, causing incalculable reputational and economic harms. Despite Esquel’s continued outreach and the sharing of numerous business documents with the Department of Commerce’s end-user review committee since September 2020, Esquel received no meaningful response or evidence from the US government that would support its inclusion on the List.

Esquel said the listing falsely implicated Changji Esquel in using forced labor in China’s Xinjiang region - a conclusion that contradicts the facts, including audits by multiple world-class, third-party independent auditors using internationally recognised industry standards such as the SMETA standard, a widely respected social audit format.

These audits are said to have involved site visits to facilities in the region and independent interviews with randomly selected Uyghur workers. In every instance, the audits found no evidence of forced labor or coercion. Furthermore, the Changji Esquel facility is highly automated and technologically advanced, and it requires highly skilled workers – the inverse of a business model reliant on underpaid labor.

In a statement on its website, the brand said: “Esquel is a recognised leader in responsible labor, sustainability and ethical business practices. The company categorically denies the false allegations that have been made by the Department of Commerce - allegations that are antithetical to everything for which Esquel stands.”

Esquel has had no choice but to take legal action to end the devastating ongoing reputational and commercial damage resulting from this erroneous designation. 

James Tysse, a partner at Akin Gump LLP said the action is completely contrary to Esquel’s proven track-record of ethical labor practices.

 “The Department of Commerce provided no evidence to support its erroneous decision and acted far beyond its limited legal authority,” Tysse added.

Esquel Chairman and CEO Marjorie Yang said, “The use of forced labor or coercive practices is completely contrary to our founding principles and the business we have operated for more than 40 years. Esquel values and respects the dignity of all our people in Xinjiang and actively works to create an inclusive environment free from any kind of discrimination or intimidation. Esquel has never used forced or coerced labor.”

“It is our continued hope that the Department of Commerce will voluntarily address what is clearly an error,” said Yang. “But so far, the ERC has given no meaningful response to the comprehensive materials we have submitted and taken no step to rectify its mistaken inclusion of Changji Esquel on the Entity List.

Accordingly, we have been forced to take legal action in order to protect our business interests and mitigate the devastating harm that is accruing daily to our business, employees and business partners.”