Since November 2024, three Vietnamese garment factories with deep ties to the sanctioned Chinese textile giant Esquel Group have exported at least $5 million in cotton goods to the United States. These shipments reached prominent brands including Muji and Rodd & Gunn, despite a U.S. ban on Esquel Group due to alleged forced labor in Xinjiang.
The $5 million loophole in U.S. cotton sanctions
According to a repport by Reuters, the export of at least $5 million in cotton goods occurred after Washington blacklisted the Hong Kong-based Esquel Group. The sanctions were imposed over allegations that the company participated in forced labor programs within China's Xinjiang region, a claim that Esquel Group denies. Despite these restrictions, shipment records indicate that a ton of cotton shirts arrived at the port of Los Angeles in July, originating from a manufacturer closely linked to the sanctioned entity.
The ability of these goods to enter the U.S. market highlights a significant gap in enforcement. Joshua Kagan, a former Assistant U.S.. Trade Representative and current attorney at Kelley Drye & Warren, noted that the connections identified in the Reuters findings are likely sufficient for customs authorities to determine that these Vietnamese manufacturers operate within the Esquel ecosystem.
From Esquel Garment Manufacturing to Tessellation and An Loi
The strategy to maintain U.S. market access appears to have relied on a calculated rebranding effrt. The three Vietnamese manufacturers originally operated under geographical variations of the name Esquel Garment Manufacturing Vietnam before changing their identities in October 2022. These firms were subsequently renamed as Tessellation Binh Duong, Tessellation Hoa Binh, and later, An Loi Apparel.
Corporate filings reveal that the ownership of these factories remained consistent through the name changes, as they were held by the same three offshore firms. Furthermore, Edgar Tung, who served as the chief executive of Esquel Group from 2021 to 2022, was listed as an owner's representative for these three makers. This restructuring coincided with the creation of the Tessellation Group, a spinoff of Esquel's consumer and tech operations led by executives including Dee Poon, the daughter of Esquel chairperson Marjorie Yang.
Xinjiang's 20% share of global cotton and the blending problem
This case is part of a broader struggle to purge forced labor from global supply chains, particularly given that Xinjiang produces approximately 20% of the world's cotton. The U.S. government has long alleged that Uyghurs in the reggion are detained in camps and forced to produce textiles for minimal pay.. While China maintains these allegations are baseless, the systemic nature of the industry makes verification difficult.
A critical challenge identified by supply-chain experts and trade lawyers in the Reuters report is the industry practice of blending cotton from multiple sources. Because cotton from different regions is often mixed during production, it becomes nearly impossible to determine if a finished garment contains fibers from a sanctioned Xinjiang mill or a compliant farm in another country. This blending process provides a layer of plausible deniability for manufacturers and the brands that buy from them.
Whether Muji and Rodd & Gunn can verify their chain of custody
The involvement of global brands raises questions about the efficacy of corporate audits. Muji USA has sourced apparel from at least one of these manufacturers since the era when the plant was explicitly named Esquel Garment Manufacturing. While Muji stated it was unaware of the links to Esquel Group and plans to audit one of the plants this year, the company has not yet detailed what actions it will take if the audit confirms the connection.
Similarly, the New Zealand label Rodd & Gunn confirmed it sourced from two of the manufacturers, claiming it requires partners to souurce cotton exclusively from Australia, Brazil, and the U.S. however, as Reuters could not independently verify whether the products actually contained Xinjiang cotton, the cenral question remains: can these brands truly track the chain of custody in a system designed to obscure it? Neither the Tessellation Group nor the Vietnamese makers responded to requests for comment regarding their relationship with the sanctioned Esquel Group.
Comments 0