U.S. Blocks Palm Oil Imports From One of the Top Producers

(Bloomberg) -- The U.S. has blocked imports of palm oil and palm oil products from Malaysia's FGV Holdings Bhd., one of the world's largest producers.

Shipments from the company and its subsidiaries will be held back at all ports of entry effective Wednesday, the U.S. Customs and Border Protection said in a statement. The order is based on what American authorities say is information that “reasonably indicates” the use of forced labor.

The move is the latest blow to the palm oil industry after the spread of the coronavirus shuttered restaurants, curbing demand for cooking oil. Malaysia, the second-biggest shipper of palm oil to the U.S. and the world's second-largest producer, is also grappling with a chronic worker shortage after the pandemic restricted travel.

The order is the result of a yearlong investigation that revealed labor abuse of vulnerability, deception, restriction of movement, isolation, intimidation and physical and sexual violence, according to the customs statement.

FGV on Thursday said it's been in communication with U.S. customs since August last year and will continue to engage with them to clear its name. The planter also said it had already submitted evidence of its compliance to labor standards, and had taken several, publicly documented steps to correct the situation.

“FGV is disappointed that such decision has been made when FGV has been taking concrete steps over the past several years in demonstrating its commitment to respect human rights and to uphold labor standards,” it said in a statement. The company's shares tumbled as much as 7.8% on Thursday to the lowest since July.

The global palm oil deficit is only likely to amplify after 2025 due to inadequate replanting in recent years and biodiesel mandates in Malaysia and Indonesia, according to Rabobank research.

In 2019, $441 million worth of tropical oils were imported to the U.S. from Malaysia, much of that being refined palm oil, according to U.S. Department of Agriculture data. Through the first seven months of 2020, the volume of such shipments was down 15%.

©2020 Bloomberg L.P.