Boohoo faces potential US investigation, import ban over allegations of slave labour in UK

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Boohoo Group PLC (LON:BOO) faces a potential investigation and import ban in the US over allegations of slave labour in the UK.

US Customs and Border Protection has received two petitions by campaign group Liberty Shared over the course of last month.

READ: boohoo builds towards UK’s largest marketplace after Arcadia’s brands acquisition but challenges will ensue

They concern the potential prohibition of imports to the US if “they contain in whole or in part materials made with forced labour” under the Tariff Act of 1930, from Boohoo or if “made by apparel industry businesses based in Leicester… with the exception of two companies, Basic Premier Limited and Ethically Sourced Products Limited”.

Section 307 of the Tariff Act of 1930 “prohibits the importation of merchandise mined, produced or manufactured, wholly or in part, in any foreign country by forced or indentured labour – including forced child labour”, which can lead to “exclusion and/or seizure, and may lead to criminal investigation of the importer(s)”.

Last summer Boohoo saw more than GBP1bn cut from its market value as investors fretted over allegations about working practices at a supplier’s factory in Leicester, where newspaper reports indicated at least one supplier was paying staff as little as GBP3.50 per hour compared to the minimum adult wage in the UK of GBP8.72.

In the six months to August 2020, the online retailer posted 83% revenue growth to GBP202mln in the US, with “exceptional” new customer acquisition in the first quarter.

It recently announced plans to become the UK’s largest marketplace after acquiring Debenhams and Arcadia’s Burton, Dorothy Perkins and Wallis brands out of administration.

boohoo told Proactive that, as of Tuesday, it had not been notified of any investigation by US Customs and Border Protection.

“We are confident in the actions that we are taking to ensure that all of the Group’s products meet and exceed the CBP criteria on preventing the product of forced labour entering the US (or any of our markets). We will work with any competent authority to assure them that products from our supply chain meet the required standard,” it added.

“The evidence of Boohoo and forced labour is quite compelling,” Duncan Jepson, founder and managing director of Liberty Shared, told Sky News.

“I think it will be a wake-up call for British institutions about how they’re handling modern slavery enforced labour… What we’d all like, those of us interested in improving labour conditions, is for Boohoo to really get to grips with governance of their supply chain to ensure there is no wage theft and people have proper contracts.”

The AIM-listed fast-fashion powerhouse came under fire last July after a Sunday Times investigation uncovered poor pay and conditions of workers at certain suppliers’ factories in Leicester.

It then embarked in an ‘Agenda for Change’ programme to improve its governance issues.

Last month, it told Leicester-based suppliers to stop employing sub-contractors although it caused concerns over how they’ll be able to pay new workers and rent space.

Analysts at broker Liberum noted that this is the first time we see a major risk towards revenues following the scandal.

“Concerns are likely to rise at a time when Boohoo is making many acquisitions and management stretch has to be a concern when all focus and attention should be on concerns on its supply chain,” they commented.

Shares dropped 6% to 324.9p on Tuesday morning.

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